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Total quality managementpractices in manufacturingcompanies in Malaysia: Anexploratory analysisArawati Agus & Mokhtar AbdullahPublished online: 25 Aug 2010.

To cite this article: Arawati Agus & Mokhtar Abdullah (2000): Total qualitymanagement practices in manufacturing companies in Malaysia: An exploratoryanalysis, Total Quality Management, 11:8, 1041-1051

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TOTAL QUALITY MANAGEMENT, VOL. 11, NO. 8, 2000, 1041 ± 1051

Total quality management practices in

manufacturing companies in Malaysia:

An exploratory analysis

Arawati Agus & Mokhtar AbdullahUniversiti Kebangsaan Malaysia, Bangi, 43600, Malaysia

abstract The article reviews total quality management (TQM) practices in public listed manufac-

turing companies in Malaysia. It also explores ISO certi® cation of the companies as well as some

other related issues. Our ® ndings indicate that the length of TQM implementation has a signi® cant

impact on the companies’ ® nancial performance. Long-term TQM adopters are found to outperform

short-term adopters. The industrial manufacturing companies exhibit higher TQM scores than the

consumer manufacturing companies. In addition, the quality index ranking suggests that more

stringent quality measures are being carried out in automotive and gas industries.

Introduction

To compete in the global market and with the competition, Malaysian manufacturers havelong realized that they need to produce quality goods. Now, due to an economic crisis inMalaysia that has also aþ ected other countries in this part of the region, Malaysians areurged to buy Malaysian products. A `Buy Malaysian’ campaign was launched as an eþ ort toincrease the con® dence of Malaysia citizens towards Malaysian products. Its objective was toovercome scepticism about the quality of Malaysian-made products in favour of importedones ( Jayasankaran, 1994).

Total quality activities have long been practised in the more developed countries such asJapan and the US. However, total quality management (TQM) is a new concept introducedin Malaysia with the objective of improving the quality of goods and services as well as toimprove productivity among employees. Now many Malaysian manufacturers have startedimplementing TQM and producing quality goods to strengthen their competitive positionand to ful® l the needs of both local and foreign consumers (Chandra, 1993).

Many claim that the successful implementation of TQM could generate improvedproducts and services, reduced costs, more satis® ed customers and employees, and improved® nancial performance (Garvin, 1983, 1984, 1988; Hendriks & Singhal, 1997; Phillips et al.,1983; Walton, 1986). Research carried out by Buzzell and Wiersema (1981) focused on therelationship between advertising, price, product quality and market share. Their study showedthat changes in product quality had the strongest relationship to changes in market share.Businesses that improved quality increased their market share ® ve or six times more than

Correspondence: A. Agus, Universiti Kebangsaan Malaysia, Bangi, 43600, Malaysia. Tel: (603) 89293721; Fax:(603) 89293310 (Malaysia); E-mail: araa@pkrisc.cc.ukm.my

ISSN 0954-4127 print/ISSN 1360-0613 online/00/081041-11 � 2000 Taylor & Francis Ltd

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1042 A. AGUS & M. ABDULLAH

those whose products declined in quality. Furthermore, a reputation for high quality alsodecreases the elasticity of demand. Companies that produce high-quality products can chargehigher prices and earn higher pro® t margins.

Strong competitive pressure has forced many manufacturers to embrace TQM activelyin order to survive and succeed in business (Goh & Ridgway, 1994; Gunasekaran et al.,1994; Hawkes & Adams, 1995). In their study of manufacturing industry, Oliver andWilkinson (1989) indicated that almost all of the major British manufacturing companiesapproached and all Japanese-owned ® rms were either introducing some form of total qualityor considering it. To meet the challenges of the new global environment, many manufacturingcompanies in Malaysia have also started considering quality as an integral part of theirbusiness plans. Without quality, few companies can remain competitive in the constantlychanging global and local market-place.

Methodology

The research was carried out on public-listed manufacturing companies in Malaysia. Thesecompanies were chosen because the TQM practices were likely to be sophisticated andestablished, and many of these companies had been certi® ed with ISO 9001 or ISO 9002.The sampling frame was chosen due to the availability of the ® nancial data and annualreports. This research needed strong ® nancial measurements to test the hypotheses that weredeveloped, especially those hypotheses related to ® nding the relationships of the TQMpractices with the companies’ ® nancial performance. These data (such as net pro® t andcurrent assets) were otherwise considered con® dential for most companies in Malaysia.

Thirty companies were selected on the basis of strati® ed random sampling from thesampling frame of 51 consumer products companies and 76 industrial products companies(N 5 127). The strata were formed based on the types of industries or products manufactured(refer to strata formation shown in Table 1). In the strati® cation process, 12 companies wereselected from consumer product companies and 18 from the industrial product companies

Table 1. Sample strati® cation

Sample strati® cation Total Per cent n 5 30 Stratum size

A. Consumer product Co. (51) 51/127 5 40% 0.40%30 5 12 12B. Industrial product Co. (76) 76/127 5 60% 0.60%30 5 18 18

Figure 1. ISO certi® cations.

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TQM PRACTICES IN MANUFACTURING COMPANIES 1043

Figure 2. Types of ISO.

Figure 3. Types of quality programmes.

(n 5 24% of total population). The sample companies were further chosen proportionatelyin both sections according to the types of products manufactured.

Since the primary objective of the research is to measure managers’ perceptions of thequality management practices in their organizations, managers at the top level were appro-priate subjects. The highest ranking quality oý cial managers of an organization were likelyto be the s̀uitable resource persons’ (respondents) with respect to quality managementpractices in their organizations. If this person could not be identi® ed, the survey would becarried out among the CEOs or other quality-related managers.

After the design and the development stages of the questionnaire were completed, thequality managers of the selected companies were contacted by phone to make appointmentsfor interviews. Some of the managers insisted that the questionnaire be mailed ® rst beforethe researcher could conduct the interview. Each manager assessed the degree or extent ofquality management practice in his/her organization by rating each measurement item usinga 10-point Likert scale measurement. The purpose of this research was to determine thequality practices implemented by the publicly-listed manufacturing companies as well as totest the hypotheses developed. For each TQM practice, the actual level of constructs was

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1044 A. AGUS & M. ABDULLAH

Figure 4. Duration of quality programmes implemented.

Figure 5. TQM introducer.

represented by the median of the measurement items (Malhotra, 1993). The objectives ofthis article can be summarized as follows:

(1) To determine the ISO certi® cations and quality programmes of the companiesselected in the survey.

(2) To determine whether the long-term TQM adopters outperform short-term adopters.(3) To explore the segmentation of the companies through cluster analysis.(4) To calculate the quality index and determine the quality rankings of the manufactur-

ing companies.

Results

Pro® le

The ® rst part of the survey focused on issues relating to the ISO certi® cations and otherrelated issues. ISO 9000 is a series of standards and guidelines developed by the International

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TQM PRACTICES IN MANUFACTURING COMPANIES 1045

Figure 6. The models adopted.

Figure 7. Quality tools.

Organization for Standardization, which requires companies to document their qualityassurance operations and procedures. It is aimed at the organization in its role as a supplierof goods and services, consistently meeting customer requirements. When working proceduresand practices reach required ISO standards, the company receives a certi® cate. This involvesthe development of three documents:

(1) a quality handbook, which describes the company structure and its quality policy;(2) a procedures handbook, which describes procedures according to required processes;(3) a written document containing work instructions for speci® c tasks (Anonymous,

1995).

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1046 A. AGUS & M. ABDULLAH

ISO certi® cation. Most (73%) of the companies surveyed indicated that they had appliedfor ISO certi® cation. About 73% of the companies that had applied had at least one divisionthat was ISO 9000 certi® ed. About 75% of those companies which had not applied indicatedthat they were preparing to apply for the accreditation of the ISO standard, while 25% werenot in the process of applying because they had been accredited with other types ofcerti® cation, namely QA 2000 and IEC Guide 25. The ISO certi® cation process can be usedas an opportunity to link quality assurance and process improvement within a TQMframework. TQM implementation can improve the eý ciency and eþ ectiveness of processes,while compliance with ISO 9000 can minimize variability and control the processes that havebeen improved. This sets the scene for further improvements based on changing customerrequirements.

About 73% of the manufacturing companies were certi® ed with ISO. Almost all (91%)of these manufacturing companies were certi® ed with ISO 9002 standards and only about9% were accredited with ISO 9001.

About 36% of the companies had been certi® ed with the ISO standard for the durationof 1± 3 years. Approximately 41% had been certi® ed between 4 and 6 years and about 23%had been accredited for a duration of more than 6 years. The ® rst and most obvious bene® tin today’s business climate is the marketing advantage. Having ISO 9000 tends to indicatethat you are more likely to meet requirements than someone without registration. This willlead you to gain a marketing advantage over your competitors.

There is a strong relationship between ISO 9000 and TQM. ISO 9000 is touted asproviding a basis for continuous improvement. It allows clearer understanding of the presentsystem and ensures that this understanding is common to all and is in documented form.The principal bene® ts of ISO 9000 are to give the system structure and formality in place ofthe chaos which currently represents the approach of most companies to quality assurance(Anonymous, 1995). The companies were also asked about the quality programmesimplemented.

Quality programmes. There were many types of quality programmes that had been imple-mented and some of the programmes that were mentioned were TQM (57%), QCC (60%),5S (47%), kaizen (17%), JIT (7%), kanban (7%) and others (7%).

The average duration of TQM was 6.33 years, QCC was implemented on average for 7years, while JIT was about 3.5 years and 5S was slightly longer, about 6 years. Kanban andkaizen were about 3 and 2.5 years, respectively.

About 80% of the managers who responded indicated that the quality programmes wereintroduced by top management, 33% by consultants, about 27% by the parent companiesand 10% by others. Slightly more than half (53.3%) of the respondents mentioned that theyhad adopted the company-owned model (which could be combinations of several models orphilosophies). Other types of models (teachings) that were popular were the Deming, Juranand Japanese models (see Crosby, 1979, 1984; Deming, 1986; Ishikawa, 1985; Juran,1974).The respondents were also asked about the quality tools that they were using. Some of thetools most frequently mentioned were cause and eþ ect diagrams (® shbone), control charts,Pareto analysis, histograms, sampling, brainstorming, ¯ ow charts, check sheets and statisticalmethods.

The relationship between the length of TQM implementation and ® nancial performance

In this study, the long-term TQM adopters outperformed short-term TQM adopters. Long-term adopters have higher means for both the net pro® t and current assets (Table 2). The F

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TQM PRACTICES IN MANUFACTURING COMPANIES 1047

Table 2. Summary of statistics

Summaries of the means of the company net pro® t by year of TQM implementation

Mean net pro® tVariable label (RM ’000) SD n F Sig F t Sig t

Short term (1± 5 years) 15 368.71 20 959.99 14 12.795 0.001 4.144 0.000Long term (> 5 years) 116 315.6 103 536.0 16

Summaries of the means of the company current asset by year of TQM implementation

Mean current assetVariable label (RM ’000) SD n F Sig F t Sig t

Short term (1± 5 years) 86 064.64 51912.18 14 9.125 0.005 3.542 0.001Long term (> 5 years) 755 889.20 826 404.0 16

values and t-tests indicate that the diþ erences in the means are signi® cant. This ® ndingsupports the hypothesis that long-term TQM companies would outperform the short-termTQM companies.

Companies’ segmentation

Table 3 shows the average scores of the TQM practices according to the types of manufactur-ing companies. These practices were adapted from Saraph et al. (1989) and others (Crosby,1979; Deming, 1986; Powell, 1995). Obviously we can see that the industrial productcompanies score higher in most of the TQM practices compared to the consumer productcompanies. The t-test scores also indicate that the diþ erences in the mean of the scores ofthe TQM practices are signi® cant. This suggests that more stringent quality implementationsand requirements are carried out in the industrial products companies compared to theircounterparts. In addition, Table 4 shows the average scores of TQM practices based on thetypes of products manufactured. The gas and oil industries have the highest average score ofTQM practices followed by the tobacco, automotive and other industries.

A cluster analysis based on the segmentation of the types of manufacturing companieswas carried out for this study. Hierarchical, Euclidean, single-linkage clustering over the sixTQM variables was employed (SPSS, 1990) and the results of the average of each clusterrating on the practices and cluster centre co-ordinates are shown in Table 5. The ® rst cluster,`Strong TQM adopters’ , consists of oil and gas industries and has a raw average score ofabout 9.45 for the TQM practices. The authors believe that stringent quality measures are amust for the oil and gas industry because of the nature of the product, which is combustibleand could cause hazards to the users, and also its activities have an impact on the environment.With seven types of manufacturing companies, the second cluster (`Good TQM adopters’ ) is

Table 3. Average score of TQM practices according to types of companies

Executive Custo- Em- Qualitycommit- mers’ Suppliers’ Quality ployees’ Measure-

Types of companies ment focus relations training focus ment t Sig.

Consumer productscompanies 7.750 7.667 6.750 6.875 6.112 7.083 28.18 0.00

Industrial productscompanies 8 7.889 7.333 7.194 6.028 7.736 24.85 0.00

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1048 A. AGUS & M. ABDULLAH

Table 4. Average scores of TQM practices according to types of products manufactured

Executive QualityTypes of commit- Customers’ Suppliers’ Quality Employees’ measure- Averageindustries ment focus relations training focus ment score

1. Food 7.88 8.13 7.63 7.00 5.71 7.13 7.242. Textile/garment 7.50 8.75 3.50 6.50 5.17 6.25 6.283. Automotive 8.33 8.00 8.00 7.67 7.44 8.83 8.054. Beverages 8.25 7.50 7.50 7.00 6.67 8.00 7.495. Cement/ceramic 7.38 7.13 6.13 6.63 4.17 7.63 6.516. Timber/wood 8.17 8.50 8.00 7.67 6.06 7.50 7.657. Steel/iron 8.17 6.67 8.00 7.33 6.39 7.50 7.348. Gas 8.00 10.00 10.00 9.00 9.67 10.0 9.459. Chemical/plastic 8.25 8.75 7.25 7.50 7.16 8.50 7.90

10. Electric 6.00 6.25 4.50 5.00 5.50 7.00 5.7111. Tobacco 8.00 9.00 8.00 8.00 8.00 8.00 8.17

Table 5. Raw average score of TQM practices and cluster centre co-ordinates

Executive Custo- Em-Raw commit- mers’ Suppliers’ Quality ployees’ Quality

Clusters average ment focus relations training focus measures

1. Strong TQM adopters 9.45 10.00 9.67 8.00 10.00 10.00 9.002. Good TQM adopters 7.69 8.11 6.77 8.15 7.92 7.77 7.453. Fair TQM adopters 6.17 7.38 4.95 6.96 6.96 4.71 6.04

the largest. Food, wood-based, beverages, steel, automotive, chemical and tobacco industriesconstitute this second cluster, with TQM centre co-ordinates between 6.77 and 8.15. `FairTQM adopters’ characterizes three types of industries which consist of the textile, cementand electrical industries. This ® nal cluster has a raw average score of 6.17 and the clustercentre co-ordinates are between 4.71 and 7.38.

To explore further the TQM taxonomy, the average years of TQM adoption, averagecurrent pro® t, average turnover and average number of employees for the three clusters arecalculated as shown in Table 6. Cluster 1 consists of medium high technology companies,long-term TQM adopters (median 5 8 years) with average total asset of over RM1 billion,net pro® t of more than RM 90 million and average turnover of about RM2 billion.Cluster 2 consists principally of medium-sized companies (median employees 5 1344) withconsiderable TQM experience (median years since adoption 5 6) and ® nancial performance(mean total assets 5 RM850 million, mean net pro® t 5 RM80 million and meanturnover 5 RM959.5 million). Cluster 3 companies are mostly medium-sized with median

Table 6. Comparisons between the clusters

Median Average Average Average Medianyears of total assets net pro® t turnover number of

Clusters TQM adoption (RM ’000) (RM ’000) (RM ’000) employees

1. Strong TQM adopters 8 years 1 013 422 90 644.40 2 136 723 1 0012. Good TQM adopters 6.73 years 850 175.8 67 678.42 792 468.0 1 3443. Fair TQM adopters 5.00 years 569 125.6 37 031.49 424 116.30 1 241

Note: 1 US Dollar 5 RM3.8; 1 Pound Sterling 5 RM6.18.

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TQM PRACTICES IN MANUFACTURING COMPANIES 1049

Table 7. The quality index for manufacturing companies according to types of products

Types of product produced Quality index (average) Ranking

1 Gas 53.2 12 Tobacco 45.7 23 Vehicles/autmotive 44.9 34 Chemical/plastic 44.0 45 Timber/wood/furniture 42.5 56 Beverages 41.7 67 Steel/Iron 41.1 78 Food 40.3 89 Cement/concrete/ceramic 36.3 9

10 Textiles/garment/apparel 35.5 1011 Electric/electronic 32.8 11

employees of 1241, slightly less experience in TQM (median years since adoption 5 5)and relatively low ® nancial performance (mean total assets 5 RM569 million, mean netpro® t 5 RM39.9 million and mean turnover 5 RM536.4 million). These ® ndings suggest thatthe more experienced TQM companies have better ® nancial performance.

The quality index ranking of manufacturing companies

Table 7 shows the quality index ranking for manufacturing companies based on the type ofproducts manufactured. The quality index is based on the following formula (MokhtarAbdullah, 1997):

qi 51

p ! +P

j 5 1

Z2i j

where I 5 1, . . . n; j 5 1, . . . p, standard score Zi j 5 xi j/xÅ j , qi 5 quality index, p 5 number ofvariables, xj 5 independent quality indicators and xÅ j 5 (1/n) R n

i 5 1xi j, the sample mean xij. Thus,the qi value can be regarded as an index of performance that takes into account the meanand variance among TQM variables. The result of the ranking indicated that the oil and gasindustry topped the ranking, with the quality index of 53.2, followed by the tobacco (45.7),automotive (44.9), chemical, timber/wood-based, beverages, steel, food, cement/concrete,textile and electronic industries.

Table 8 also lists the top ® ve individual consumer product companies and industrialproduct companies. Owing to the con® dentiality of respondents’ identities, only the types ofcompanies are indicated (none the less, the researchers are happy to be contacted if anyoneis interested). An automotive company emerges ® rst in the ranking of consumer productcompanies, while a gas company tops the ranking for industrial product companies.

Summary and conclusions

The objective of this article is to improve understanding of the TQM practices and itseconomic bene® ts, especially to the manufacturing companies. Most of the manufacturingcompanies surveyed had at least one division that received ISO 9000 certi® cation. About41% of the manufacturing companies had been certi® ed with ISO 9000 standard for aduration of between 4 and 6 years. The most popular TQM programmes implemented wereTQM, QCC and 5S. Most of the companies claimed that the quality programmes were

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1050 A. AGUS & M. ABDULLAH

Table 8. The quality index for manufacturing companies according to industries

Top ® ve companies (names of companies withheld) Quality index Ranking

Consumer product companies

1. Company A (an automotive company) 50.11 12. Company B (a tobacco company) 47.74 23. Company C (a food company) 47.70 34. Company D (a food company) 46.44 45. Company E (an automotive company) 45.14 5

Industrial product companies

1. Company F (a gas company) 53.43 12. Company G (a chemical company) 47.18 23. Company H (a steel company) 46.38 34. Company I (a wood-based company) 45.92 45. Company J (a cement/concrete company) 45.17 5

introduced by their top management. About 53% adopted their companies own modelswhich could be combinations or modi® cations of several models or teachings. Other qualitymodels that were mentioned included Deming’s, Juran’s and Japanese models.

If the publicly-listed manufacturing companies are role models for other manufacturingcompanies, several conclusions can be made from the ® ndings. The long-term adopters ofTQM practices are expected to outperform new users of the quality tools and practices. Thecluster analysis produced three groups named according to their degree of involvementtowards quality practices. It also gave insight into a segmentation pattern of quality emphasisamong the types of industries. In addition, the quality index analysis indicated that theautomotive and gas industries have better rankings compared to other types of industries.Companies with ISO certi® cation as well as long-term TQM adopters were seen as beingbetter quality implementers and this could give them an edge over their competitors. Thisarticle oþ ers quality practice insights not only for manufacturing companies but also for theservices industry (see Parasuraman et al., 1985). New adopters of TQM practices also standto bene® t from the results of this work, which would give them ideas of what the qualitypractices are all about and the bene® ts that would be realized from their implementation.The elaboration in the analysis of the TQM practices permits managers to obtain a betterunderstanding of quality management practices and identify those area of quality managementwhere improvements should be made as well as to allow researchers to proceed with the taskof developing and testing theories of quality management.

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