Linking process quality with performance: an empirical study of New Zealand manufacturing plants

Abstract

This study was conducted to assess the impacts of quality on operational and business performance in manufacturing firms. Data were provided by 184 diversified New Zealand manufacturing plants- Quality is defined as the degree of conformance to specifications. The first phase of the research was the construction of a theoretical model to incorporate the impacts of quality on manufacturing performance, manufacturing productivity and business performance. The relationships of the model are based on the quality management literature. The second phase of the research was the design and administration of a survey instrument for the collection of empirical performance data. The data were then used to evaluate the relationships represented in the model. The final phase of the research used structural equations modelling in order to evaluate the relationships of the model. Quality was found to have significant and positive impacts on operational performance measures for process utilization, process output, production costs, work-in-process inventory levels and on-time delivery rate. The analysis found that change in quality level was most strongly associated with change in process utilization. The findings for the impacts of quality on operational performance were compatible with the quality management literature. The impacts of quality on business performance given by structural equations analysis were significant and positive for productivity-induced improvements of quality. Generally, the support for the impacts of quality on business performance which occur through other aspects of, operational performance was not significant. The limitations of the study were specified. The implications of the findings of the study for manufacturers were reviewed, along with the directions for future research.