The Impact of Quality Management

Tools on Performance:
An Exploratory Study on SMEs
Lakhwinder Pal Singh*, Arvind Bhardwaj** and Anish Sachdeva***
The present work is an empirical study on the impact of quality management
techniques, such as Just-In-Time (JIT), 5Ss tools, suggestion schemes,
workers participation, Quality Circles (QC) and ISO certification, on the
performance of Small and Medium Enterprises (SMEs). The performance
parameters considered in the study are human resource, inventory management,
quality aspects and cost aspects. On the basis of preliminary survey and
literature review, a comprehensive questionnaire was developed and circulated
to different firms and the responses were collected for analyzing the data.
The correlation was obtained between the quality/productivity management
systems and the output parameters of firms. The impact of these on the output
parameters was validated on the basis of correlation values.

Introduction
The intense competition in the current marketplace has forced firms to re-examine
their methods of doing business. Economic liberalization and globalization of the
economy is becoming a worldwide phenomenon. However, survival of industry and its
economic growth is dependant on the productivity level. This is very true in developing
countries like India because of higher population growth, higher interest rates, rising
inflation, domestic and international competition, scarcity of raw materials, fiscal deficit
etc. Some of these problems can be overcome by paying greater attention to managing
productivity. Small-scale industry plays a greater role in the Indian economy, which is
largely responsible for creating opportunities. According to a report (2001-02) published
by Small Industries Development Organization (SIDO), there are 3.46 million small
units in India, and employment provided by these units accounts to 19.30 million.
The report shows a total export of $14.8 bn during the year 2000-01. Total contribution
to the GDP is about 6.29% and share in industrial production is 39%, whereas share in
exports is 34%. The report also indicated that industrial growth rate is 2.7%, while the
*

Lecturer, Department of Industrial & Production Engineering, NIT, Jalandhar 144011, India.
E-mail: lakhi_16@yahoo.com

** Professor and Head, Department of Industrial Engineering & Production Engineering, NIT,
Jalandhar 144011, India. E-mail: bhardwaja@nitj.ac.in
*** Lecturer, Department of Industrial & Production Engineering, NIT, Jalandhar 144011, India.
E-mail: asachdeva@nitj.ac.in
The2009
Impact
Quality
Management

IUP.ofAll
Rights
Reserved. Tools on Performance:
An Exploratory Study on SMEs

61

growth rate of small-scale industries is 6.08%. But at the same time, Small and Medium
Enterprises (SMEs) are lagging behind in implementing the Quality Management
Tools (QMTs). However these small-scale units are being pressurized by large scale
units to implement total quality management tools. Since, small-scale industry (SSI)
are either supplying/vending to the large manufacturers, or they are exporting, therefore
SMEs are bound to have certification of QMTs and further are under the impression
that a mere certification will improve the productivity and quality. In the last few
years, there has been a kind of race to acquire such certifications. Now the question
arises as to what is the extent of effectiveness of certification and implementation of
QMTs and what are the real benefits that they have fetched from the same. Thus, there
is a need to study the impact of productivity improvement measures upon the
performance of the firms. Therefore, the present study focuses on the identification of
performance parameters, extent of improvement in the systems of SMEs and the
correlation of performance improvement with the number of QMTs implemented.
The study includes the literature review of previous studies done in India and
abroad, methodology, parameters for the study, results and discussion, followed by
the conclusion.

Literature Review
Nicholas et al. (2004) concluded that profitability increases when a significant proportion
of work is outsourced and employee numbers are minimized. A positive correlation
was found on the one hand, between a firms Total Quality Management (TQM) level
and the use of tools and techniques for quality improvement, and on the other hand,
between TQM results and such tools and techniques. In another study, there was a
moderately positive linear relationship with a correlation coefficient of 0.604 between
practice and performance (Ismail et al., 1998). Manufacturing performance was
found to be associated with the level of implementation of both socially and
technically-oriented practices of TQM, Just-In-Time (JIT) and Total Productive
Maintenance (TPM) (Kristy et al., 2001). Despite the existence of obstacles to its use
in Mexico, JIT manufacturing was found to be significantly and positively correlated
with performance in terms of productivity, quality, lead time, and customer service.
A case-based research methodology was used for theory testing at six plants, which
claimed to be implementing JIT manufacturing. The results also indicated that
employee involvement plays a central role in JIT implementation. In another survey,
the results revealed that TQM and JIT firms had a better understanding of the
importance of top management commitment, quality training and communication to
ISO 9000 implementation. Results of a study demonstrated that understanding and
recognition of the value of quality initiatives increased as firms expand the breadth of
their quality efforts (Barbara et al., 1997). A positive relationship existed between firm
profitability and the degree to which waste-reducing production practices, such as
reduced setup times, preventive maintenance programs and uniform workloads,
62

The IUP Journal of Operations Management, Vol. VIII, Nos. 3 & 4, 2009

were implemented. In a survey of 500 ISO 9000 registered companies in the US the
key reasons identified for seeking ISO 9000 registration were: meeting corporate
objectives and increasing market share, the major expected benefits of ISO were
improving product design, process design, product quality, public image and supplier
relations (Ebrahimpour et al., 1997). It has been concluded that ISO 9000 certification
can benefit a company by allowing it to enter new markets that were previously closed
to them. A study carried out by Romano (2000) on a sample of 100 ISO 9000 certified
firms had highlighted how, during the certification period, both internal and external
quality performance improved and consequently, associated costs fall. ISO 9000 certified
firms tended to trade with each other more than with uncertified firms. Consequently,
the positive impact of these standards on trade was more pronounced among ISO
9000 abundant countries.
In the Indian context also, many researchers have discussed various aspects like
effectiveness of quality management tools like ISO etc. Empirical studies on ISO and
non-ISO organizations in India indicated that ISO and non-ISO organizations did
differ on at least four aspects, i.e., technology management, quality management
programs, causes of poor quality and quality control techniques used. In terms of
quality management programs, team building and training turned out to be significant
(Gupta, 2000). The organizations have been able to improve their performance
(significant to marginal on a four-point scale) in four major areasquality, cost of
quality, external quality, time performance and purchasing (Sachdeva et al., 2007).
Some studies demonstrated that ISO implementation had significantly improved some
of the output parameters, except inventory levels of finished goods, R&D activity, lead
time of R&D, total production cost, cost due to customer complaints and cost due to
rework out of the total 19 output parameters were selected (Singh et al., 2007).

Methodology
A preliminary survey of six firms was carried out to identify the range of various
productivity improvement tools being used by the SMEs. Table 1 shows the number of
persons interviewed at various levels. Personnel from the top management were more
productivity conscious with more enthusiasm for improving the system. The shop floor
workers were little skeptical and middle level personnel were of mixed response
regarding the same. In the survey, the prevailing tools identified were: ISO, 5Ss
Techniques, JIT, Quality Circles (QC), Suggestion Schemes and Workers Participation.
A simple, relevant, comprehensive and a structured questionnaire covering various
issues to study the impact of the certification (of the selected tools) was designed to
carry out the survey. The questionnaire was divided into three sections. Part-A was
framed to get the general information about the organization. Part-B seeks the specific
information regarding the level of productivity awareness of the organization and
about readiness to get the certification. Part-C includes the questions related to
performance indicator for various output parameters.
The Impact of Quality Management Tools on Performance:
An Exploratory Study on SMEs

63

Table 1: Number of Employees Interviewed for Preliminary Survey

S. No.

Number of Persons
Contacted at Top
Management
Level

Number of Persons
Contacted at
(Supervisor) Middle
Management Level

Number of Persons
Contacted at
(Workers) Shop
Floor Level

Total
Number

1.

2.

3.

4.

5.

6.

Total

14

Parameters Used in the Study

Inputs from the literature review and preliminary visits to industries were used for
identifying the parameters for the study. Different quality and productivity management
systems were selected as input parameters of the study, and they included: ISO 9000,
QC, 5S, JIT, Workers Participation and Suggestion Schemes. The various output
parameters selected for studying the effect of QMTs were: manpower attitude towards
organization, manpower and assets utilization, inventory level indicators (such as raw
materials, work in progress and finished goods inventory), reduction in rejection level
at work in progress stage and final inspection of finished goods and cost aspects (such
as cost due to customer complaints, cost of reprocessing and re-inspection and total
production cost).

Sample Selection
Convenience sampling method was used to select the respondents. This sampling
method involves purposive or deliberate selection of particular units of the universe
for constituting a sample, which represents the universe, and the population elements
are selected for inclusion in the sample based on the ease of access. The small and
medium scale firms in Punjab (India) have been surveyed. Though the questionnaire
was circulated to 60 different firms, the response obtained was very poor. Therefore,
further information was collected by making personal visits to the organizations and
by having discussions with the senior-level officials. In all, 31 responses were collected
for carrying out the research. Most of the firms selected for the survey were in the
business of manufacturing hand tools, sports goods, pipe fittings and valve
manufacturing. A four-point linear scale varying from 1 to 2 was used (Table 2).
Table 2: Four-Point Scale for Weightage to Subjective Response
Parameter
Scale Point Weight
64

Significant

Marginal

No Impact

Adverse Impact

+2

+1

The IUP Journal of Operations Management, Vol. VIII, Nos. 3 & 4, 2009

Correlation coefficients were established between quality and productivity improvement

measures and output parameter.

Results and Discussion

The survey revealed that a majority of the firms preferred and have ISO certification,
however, other tools were also implemented by some firms but in relatively very less
percentage (Figure 1). The performance of firms was found to be directly proportional
to the number of tools implemented by the firms, i.e., the more the number of tools
implemented by the firm, the more is the output parameters score. The average score
increases proportionally till the firms have implemented five QMTs and then it decreases
for firms having six tools but the overall score increases in comparison to single tool
(Table 3 and Figure 2).

330
0

28

225
5
220
0

18

115
5

10

110
0

9
6

QMTs

Number of Organizations/
Firms

40

Figure 2: Average Output Parameters Score versus

Number of QMTs Implemented
34

35
35
30
30

21.85

25
25
20
20
15
15

Workers
Participation

JustInTime

5S

00

Quality
Circles

Suggestion
Schemes

55

ISO

Number of Organizations

Figure 1: Distribution of QMTs Among Different Firms

25.67
20

13.27

15

Average
output
parameter
score

10
10

55
00

Number of
tools used
by a firm

3
4
Number of QMTs

The Impact of Quality Management Tools on Performance:

An Exploratory Study on SMEs

65

Table 3: Total Score Obtained in All Selected Output Parameters

by Each Firm w.r.t. Number of Measures Implemented
S. No.

No. of Tools Adopted by the Firm

Total Output Parameter Score from

Subjective Responses

1.

26

2.

17

3.

21

4.

15

5.

30

6.

23

7.

8.

38

9.

28

10.

31

11.

16

12.

13.

14.

16

15.

16.

14

17.

14

18.

19.

26

20.

22

21.

17

22.

22

23.

24.

25.

31

26.

27.

19

28.

34

29.

30.

21

31.

20

Manpower and Assets Utilization

Implementation of ISO has contributed significantly to improve the employees attitude
towards the organizations. ISO and QC both have significantly improved the manpower
66

The IUP Journal of Operations Management, Vol. VIII, Nos. 3 & 4, 2009

and assets utilization with strong correlation coefficients (Table 4). This can be attributed
to increased awareness of the quality and productivity among the workers and effective
involvement of workers towards implementation tools. At the same time, JIT was found
Table 4: Pearson Correlation Coefficient Between Productivity Improvement
Measures (Input Parameters) and Output Parameters
S.
No.

Description of
Input/Output
Parameters

ISO

5Ss

Quality JustSuggestion
Workers
Circles In-Time Schemes Participation

1.

Improvement in
0.432* 0.153
attitude of
manpower towards
organization

0.164

0.229

0.033

0.372*

2.

Improvement in
manpower and
asset utilization

0.523**

0.249

0.414*

0.142

0.239

0.229

3.

Reduction in
inventory levels
of raw materials

0.428*

0.030

0.362*

0.044

0.113

0.264

4.

Reduction in
inventory levels
of WIP

0.362*

0.039

0.340

0.042

0.149

0.064

5.

Reduction in
rejection levels
at WIP stage

0.430*

0.000

0.290

0.107

0.087

0.304

6.

Reduction in
inventory levels
of finished goods

0.292

0.085

0.238

0.033

0.022

0.140

7.

Reduction in
0.489** 0.192
rejection levels
of finished goods
at final inspection

0.123

0.287

0.015

0.244

8.

Reduction in
cost due to
customer
complaints

0.289

0.100

0.356*

0.053

0.150

0.349

9.

Reduction in
cost due to
rework/
re-inspection

0.320

0.369* 0.355*

0.037

0.359*

0.252

Reduction in
total production
cost

0.286

0.227

0.124

0.098

10.

0.017

0.393*

Note: N = 31; Standard value of correlation coefficient is 0.355 at 95% and 0.456 at 99%
confidence level.
* Significant at 95% confidence level and ** Significant at 99% confidence level.
The Impact of Quality Management Tools on Performance:
An Exploratory Study on SMEs

67

to have insignificant impact on manpower utilization, which could be attributed to lack

of availability of materials and other consumables. The small-scale units are always
accorded the least priority by the large scale suppliers. Also, SSI are supposed to follow
the instructions of these large suppliers and thus the materials are generally delayed.

Inventory Management
In case of inventory level indicators like inventory levels of raw material, ISO and QC
have been found to be the most significant tools (Table 4). 5Ss was found to be insignificant
in this case. There was also significant correlation of ISO with Work in Progress (WIP)
inventory (Table 4). Therefore, it was concluded that implementation of ISO has
significantly reduced WIP inventory levels. In the case of finished goods inventory,
none of the systems was found to have a significant contribution. This can be attributed
to the fact that firms were bound to have finished goods inventory to meet uncertain
demand from the customers and tendency to meet the stringent delivery schedules.

Quality Aspects
The quality aspects have also been affected significantly by the ISO implementation.
Rejection level at WIP stage and rejection at the final inspection stage have been
significantly reduced. Rejection levels at WIP stage had significant correlation with ISO
implementation. Correlation between rejection of finished goods at the final inspection
stage and ISO was also significant. Therefore, it could be concluded that implementation
of ISO has also reduced rejection level of finished goods. This can be attributed to the
setting up of quality objectives to reduce rejections to a specified percentage. Proper
records were maintained regarding the rejection levels. The objectives were thoroughly
reviewed and compared to the next lots and immediate corrective actions were taken.
JIT again was found to be the least significant tool in this case.

Cost Aspects
As far as the cost aspects were concerned, ISO had not contributed significantly in
reducing the cost due to customer complaints, total production cost and cost due to
rework and re-inspection. The reason for the same is that firms could not implement
the tool physically, as it was more in documents rather than at work stations. Practically,
the managements of small-scale units have a misconception that mere certification of
ISO could change the system without changing the attitude and approach towards the
organization. QC had a significant impact on these parameters (Table 4). 5S and
suggestion schemes also have a significant impact on reducing the cost due to rework
and re-inspection respectively. JIT was found highly insignificant in this case.
The results of this study establish that the implementation of the multiple tools
enhances the performance output of the firms. Although very few firms had implemented
tools such as JIT, 5S and QC as compared to the firms having ISO, but the strategic
implementation of quality appears to be recognized by all the firms. Most of the firms
were trying to put efforts to achieve higher customer satisfaction level. The firms had
also prepared themselves to meet the stringent delivery deadlines from their customers.
68

The IUP Journal of Operations Management, Vol. VIII, Nos. 3 & 4, 2009

The results indicated that a few firms were showing adverse impact of input parameter
like ISO 9000, but the overall impact of ISO is definitely positive. Figure 3 exhibits
that the percent of average score pertaining to significant impact was 28%, and the
percent of the average score pertaining to marginal impact was 41%; on the other
hand, percent of average score for no impact was 28% and percentage of average
score for negative impact was 3%.
Figure 3: Overall Average Output Parameters Score
Reduced 3%

Remained the same 28%

Marginally improved

Significantly improved
28%

41%

Conclusion
The crux of the above analysis is that ISO has significantly affected all the parameters,
except inventory level of finished goods, total production cost, cost due to customer
complaints and cost due to rework.
QC was found to be the second most important tool as it had significant impact on
inventory levels of raw materials, total production cost, cost due to customer complaints,
cost due to rework/re-inspection, and performance of the suppliers.
5S, suggestion schemes and workers participation have been found to be the least
significant tools, as these tools had affected only a few parameters. JIT was found to be
highly insignificant or with inverse correlation (Table 4). The reasons for the same are
that the employees of the firms were not properly educated and trained to implement
JIT. Moreover, the small firms are owner-managed and they try to implement the tools
within their own constraints and not according to the requirement of the tools.
Though the improvement was observed in cost aspects by most of the firms, the
results were moderate. The impact of tools on cost parameters (cost due to customer
complaints and cost due to rework and total production costs) was found to be adverse
in only one case; otherwise, it had a positive impact on all other firms. This could be
due to the reluctance of the employees towards the implementation of the tools and
lack of effective monitoring or control of the production processes by the middle
management. There were also cases of marginal and significant improvements in case
of cost aspects which could be due to the streamlining of the production processes
assisted by the proper documented procedures. The implementation of tools like ISO
The Impact of Quality Management Tools on Performance:
An Exploratory Study on SMEs

69

forces the firms to streamline their production processes. As a result, the cost of reworking
and cost due to customer complaint have been reduced.
Acknowledgment: The authors express their sincere thanks to the management of small and
medium scale firms in and around Jalandhar who have actively participated in the survey and
provided the valuable inputs for assessing the impact of the quality management tools.

References
1. Barbara E Withers, Maling Ebrahimpour B V and Neset Hikmet B (1997),
An Exploration of the Impact of TQM and JIT on IS0 9000 Registered
Companies, Int. J. Production Economics, Vol. 53, No. 2, pp. 209-216.
2. Ebrahimpour M, Barbara Withers E and Hikmet N (1997), Experiences of US
and Foreign-Owned Firms: A New Perspective on ISO-9000 Implementation,
International Journal of Production Research, Vol. 11, pp. 569-576.
3. Gupta Atul (2000), Quality Management Practices of ISO vs Non ISO
Companies: A Case of Indian Industry, Industrial Management & Data
Systems, Vol. 100, No. 9, pp. 263-577.
4. Ismail M Y, Baradie M EI and Hashmi M S J (1998), Quality Management
in The Manufacturing Industry: Practice Vs. Performance, Computer &
Industrial Engineering, Vol. 35, Nos. 3-4, pp. 519-522.
5. Kristy O Cua, Kathleen E McKone and Roger G Schroeder (2001), Relationships
Between Implementation of TQM, JIT, and TPM and Manufacturing
Performance, Journal of Operations Management, Vol. 19, pp. 675-694.
6. Nicholas ORegan, Martin Sims and Abby Ghobadian (2004), The Impact of
Management Techniques on Performances in Technology-Based Firms, Centre
for Interdisciplinary Strategic Management Research, Middlesex University,
London, UK.
7. Romano P (2004), ISO 9000: What is its Impact on Performance?, IEEE
Engineering Management Review, Vol. 28, No. 4, pp. 54-68.
8. Sachdeva Anish, Arvind Bhardwaj and Vishal S Sharma (2007), Impact of ISO
9000 Certification on Performance of SMEs: A Study of Indian Industry,
Int. J. Management Practice, Vol. 2, No. 3, pp. 226-239.
9. Singh L P, Bhardwaj A and Sachdeva A (2007), The Impact of ISO
Implementation on Output Parameters in SMEs in India, PICMET Proceedings,
August 5-9, Portland.
Reference # 07J-2009-08/11-04-01

70

The IUP Journal of Operations Management, Vol. VIII, Nos. 3 & 4, 2009