A QUANTITATIVE CASE STUDY

A QUANTITATIVE CASE STUDY

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A Quantitative Case Study

Introduction

Sustainability awareness and related issues are increasingly becoming the point of concern for organizational managers, mainly in the industrial sector. Increased governmental efforts for sustainability in terms of policies and regulations have forced many organizations to embrace sustainability in order to sustain their competitive advantage in the markets (Kannan et al. 2014, p.195). Currently, organizational managers have prioritized actions related to sustainability in almost every operational sector, and it is becoming part of the administrative objectives. The automobile industry is one of the industries that have embraced the idea of sustainability due to enormous pressure from environmental policies and standards (Kremer et al. 2016, p.2071). The need for sustainability in supplies has increased the level of competition and, consequently, the performance level of most business organizations. Thus, organizational managers should conduct sustainable supplier selection as an effective way of minimizing cost, improving the attention given to the workers, enhancing environmental protection measures, among others. Sustainable supplier selection allows the system of the company to control and develop permanent relationships with the suppliers.

Taking a case of automobile manufacturer “the Renault Group of Iran,” the company has a lot of hurdles in its attempt to comply with the regulations on achieving sustainability due to the dynamic nature of the rules within the last ten years. The conditions for sustainability as the role of human rights care and greening have been considerably tightened within the past decade hence affecting the strategic objectives of the company. It is also noted that sustainability matters have had significant challenges on the entire strategy of the company, competition tactics, and organizational performance. Renault Group has both local and international suppliers, but it has restricted criteria for selecting suppliers in terms of quality, cost, and architectural designs (Renault, 2016). The compare now faces a challenge in selecting sustainable supplier evaluation criteria and the best method of ranking the supplier. Therefore, the company needs to conduct the supplier sustainability evaluation criteria to develop a comprehensive and most suitable model that will help in combating sustainability issues facing the company. This paper seeks to develop a multi-criteria model that is considered most suitable for evaluating sustainable performance and ranking of the suppliers in the Renault Group Company.

Literature Review

Different research studies have been evaluated under different pressures and from a different point of view to achieve a more reliable model for decision-making. The multi-criteria decision-making models (MCDM) are utilized in decision making alongside conflicting, multiple, and criteria approach (Kumar 2017, p.598). It is considered that any car bought by the customer is qualified in terms of price, safety, size, comfort, and design, taking from a personal point of view. In a business organization, the problems associated with MCDM are complex and profound; for example, in continents like Europe, most organizations carry-out self-assessment using the criteria and sub-criteria approach in the European Foundation for Quality Management to establish quality supplier ranking and evaluation models. Most of the industrial organizations such as Renault Group procure departments so as to satisfy the requirements of suppliers (Govindan et al. 2013, p. 69). It is achieved using extensive criteria based on quality administration, financial stability, and after-sale revenues.

There exist several strategies and models that researchers have put forward to help in the ranking and evaluation of suppliers. A research conducted by Ho et al., (2010)indicates that most of the sustainability models applied by businesses generated through DEA, TOPSIS, ANP and other comprehensive models based on MCDM and AI models. Mohammed et al. (2018) and Aouadni, Rebai and Turskis (2017) developed a model based on the TOPSIS criteria to evaluate suppliers and selecting the best performing among them. The close association between cost, quality, and delivery were established as the best evaluation criteria for assessing the suppliers. The outcomes showed that fuzzy models are the most suitable approach to containing uncertainties.

In a quantitative study conducted by Rezaei et al., (2014) on AHP criteria for choosing the best performing supplier in the retail airline sector. The model generated was considered beneficial in two ways; first, it used as a conjunctive screening method and second in the selection of the best supplier. Govindian et al. (2013) postulated that a TOPSIS model applicable in a Fuzzy setting to help in the selection of sustainable suppliers. First, the model assessed the mechanisms and metrics associated with each sustainability attribute. Second, the ranking of the suppliers was made possible through the collection of a set of data. A research conducted by Büyüközkan et al. (2011) led to the proposition of a model to evaluate and rank the sustainability performance of the suppliers based on the ANP criteria in a fuzzy environment. The framework not only evaluates the performance of the suppliers but also sustains the degree of consistency in the assessment.

Sustainable supplier criteria model is a criterion that assists procurement managers to control and carry out payment of the supplied materials, acquire information on cash inflow and outflow. The evaluation criteria for supplier sustainability are the primary concern for companies like the Renault group that aspires change to green procurement management. SSCM is achieved through minimization and alleviation of the negative impacts that the procurement process has on the environment. It is also achieved through the organization’s sustainability and environmental performance, as indicated by the suppliers.

The research conducted by Govindan et al. (2013) through a survey on the literature review indicated that the environmental sustainability model is the most applied criterion to achieve green supply. Based on social sustainability, a range of criteria from different research findings were evaluated and summarized as long-working hours, human rights, discrimination, information disclosure, health and safety, employment practices and the rights of the company’s stakeholders (Ghadimi et al., 2014; Amindoust et al., 2012; Azadi et al., 2015).

Research by Vahdani et al. (2012) claims that ranking the suppliers is the practice of evaluating their performance using the best supplier evaluation criteria. The outcomes of this process is an independent and objective evaluation of the performance of the supplier and whether they satisfy the conditions of the company in acceptable ways. Additionally, Govindan et al. (2013) asserted that the ranking of the suppliers is based on the supplier evaluation model. Suppliers are ranked based on their satisfaction with the conditions required by the company, for example, in terms of cost, quality, delivery period, green production, and social privileges of the employees. The suppliers are usually ranked by their respective companies from the worst to the best according to the performance level required by the company. Reviewed literature shows that suppliers’ ranking could be realized in the form of rewards or some form of clearance of certification. Ranking of the suppliers is a crucial managerial process that is useful in decision making. Decision –making processes needs the application of different qualitative and quantitative analysis. However, the main aim of the process is to determine the best supplier that is able to fulfill the needs of the company based on the most appropriate criteria. The Decision-making problem is a critical issue for the procurement department, a type of MCDM issue which needs MCDM techniques to achieve an effective solution. The best solution to a decision-making issue is also considered to contribute positively to the performance of the entire supply chain of the company.

Research Methodology

A survey was carried out to assess the credibility and performance of supplier sustainability criteria and the sub-criteria proposed in various research findings. A formal questionnaire was created with the main aim of establishing the most suitable sustainability criteria and sub-criteria in supply chain management. The questionnaire used to entail some open as well as closed questions. The closed questions were aimed at giving the respondent a directive on how to answer specific questions. The open questions aimed to provide the respondent with a room for giving personal opinions about the subject. The questionnaire developed was made up of three major parts, namely: environmental, social, and economic criteria, including the sub-criteria of each category. The environmental category was made up of five main criteria and twenty sub-criteria. The social category was made up of four main criteria and thirteen sub-criteria. The economic category consisted of six main criteria and fifteen sub-criteria. The questionnaire required the interviewees to give a number to every sub-criterion highlighted to evaluate their significance and suitable SSCM. The significance level indicates the magnitude of the perceived significance given to a particular sub-criteria, whereas suitability indicates if the level of suitability in their application or performance. A Likert scale was created with numbers ranging between 1 and 5, with 5 representing the highest score and 1 is the lowest score.

In terms of ranking the suppliers, a qualitative research method was used to analyze the most suitable MCDM model. This method entails a secondary research method whereby information given by other authors, and research expert is applied in the review of the topic. To conduct this type of research, a qualitative method of analysis consisting of four procedures is adopted to make use of the literature review content that was accessed. The four procedures applied in the research methodology can be explained as follows:

Step 1: The extent of the review on this section is restricted to scholarly articles, peer-reviewed journals, educational websites, and other online published works. Academic articles with information on the MCDM model and its application were also utilized. The online search for contents related to the topic was searched using a keyword search strategy. Keywords such as MCDM methods, SSCM methods, supply chain sustainability, and supplier evaluation criteria were used. The application of official databases such as EBSCO, ProQuest allowed for easy access to the required content. The application of method-specific and non-specific terms like MCDM and SCM was also given due consideration.

Step 2: The choice of the articles and information to be applied in the study should range within the required time-frame. In this study, the articles and online materials used were produced within the last ten years. The consideration of the content’s year of production helps in ensuring the credibility and relevance of the information provided.

Step 3: Not all online materials accessed by the search engines are relevant to the objectives of the study. Therefore, it is good to select only those that match the objectives of the study. In this study, however, only those that deal with supplier sustainability evaluation on SSCM and MCDM models are considered relevant.

Step 4: This final stage comprises of the review of the ideas and contents provided by research and online articles. Paying attention to every detail provided by the material is essential to ensure the quality, credibility, and suitability of the information reviewed.

The case study of this quantitative research is the Renault Group Company. It is a vehicle automobile manufacturing company based in Iran, although the mother company was located in France. The company’s procurement department was chosen as the sample population for this research study. The reason for choosing this company is; first, because of the accessibility of information concerning the company’s supply chain. Second is because the procurement department conducts all the sourcing operations of the company.

Case study Findings and Analysis

The Renault Group (company) is a France based manufacturer of automobile which was founded by Louis Renault, Fernand Renault, and Marcel Renault in 1899. The company is involved in the manufacture of several types of vehicles ranging from motor cars to trucks and electric rail cars (Renault 2016). Renault formed an alliance in 1999 with Nissan Motor Company, and Renault took over 54% of Nissan’s stock, which is now rated as the fourth largest automobile company. Renault has also formed alliances with many other companies from across the world. Renault’s operations in Iran began more than four decades ago after the production of the first model in 1976. After that, Renault experienced numerous challenges in local production and ultimately stopping its operations until 1990, when a regional manufacturer began manufacturing Renault 5 and Renault 21(Renault 2016). Since Iran’s vehicle industry is an upcoming market, Renault took the step of forming more strong alliances with Iranian electric car makers to take advantage of this market opening and also to transfer modern technology to Iran.

The survey conducted in the form of a questionnaire was directed towards interviewing three top managers of the Renault Group Company. The managers interviewed through this questionnaire include the general manager, corporate managing director, and the procurement manager. The main aim of interviewing the top management is to acquire their views about the relative significance of a particular criterion and the performance of the suppliers with regard to every criterion being tested. After conducting the questionnaire to determine the best supplier sustainability criteria, four managers from the Renault Group in Iran were used as the respondents for evaluating the criteria. Additionally, a weighted mean value was applied for every criterion to help indicate their level of significance and applicability.

Figure 1: Important Sustainable supplier Evaluation Criteria

The results from the data obtained through the questionnaires suggest that organizational managers placed more significance on the economic factors in carrying out suppler evaluation instead of social and environmental factors. It is evident from the results collected that the aspect of economic costs is given the highest score, unlike the green product, which had the lowest score. Under the social factors, workers’ rights were granted the highest score meaning that it possesses a high level of significance among managers. Factors concerned with environmental management had more significance in the list of environmental aspects. Green technology and Eco design were given approximately the same level of significance.

In the analysis of the findings collected for the most suitable sustainable supplier evaluation criteria, it is evident that cost is the most applicable. It was followed by quality, service, delivery, and lastly, the flexibility of the supply chain. Therefore, the best SSCM criteria for the Renault Group in Iran are cost and factors related to social and environmental sustainability are less applicable. However, for Renault Group to focus on Mann-Whitney U-test Criteria to achieve a comprehensive model of evaluating supplier sustainability.

Mann-Whitney U-test

Table 1: The results of the Mann-Whitney U-test for Importance and applicability

Mann-Whitney U-test was utilized to determine if the mean scores of two types of data, that is, significance and applicability, vary. SPSS software was used to carry out this non-parametric test. Because the Mann-Whitney U-test is applied on ranked scores, it is not necessary to two types of data are typically distributed (Olugu et al. 2011, p.570). All the main criteria of the factors (economic, social, and environmental) were evaluated using this test, and the p-value for all the factors was more than 0.05. The outcomes indicate no substantial difference between the mean values of the two types of data.

In an attempt to find out the most appropriate MCDM technique for performance evaluation, the first step taken was analyzing the experience of others by studying the existing literature. In essence, literature findings show that mathematical models such as DEA, AHP, and others are only applicable to solving problems with specific sets of data (Vahdani et al. 2012 p. 1417). It implies that they cannot be used in handling qualitative information. AI-generated models which are computer-supported, require in-depth knowledge to operate and resolve the problems. Through the research, it can be noted that MCDM models are not complex in terms of understanding and implementation. The existing on decision-making shows that TOPSIS is one of the best models as an optional choice among other MCDM strategies (Govindane et al. 2013, p.71).

When compared with other MCDM techniques like AHP, DEMATEL, SAW, and ANP, TOPSIS is the easiest and less time-consuming. However, other techniques such as ANP and AHP require extra pairwise correlation matrixes for an optional choice. Because of this limitation, ANP and AHP techniques are less applicable in comparison to TOPSIS as a solution for MCDM problems (Kumar 2017, p.598). Additionally, ELECTRE is perceived as a sophisticated technique when compared to TOPSIS. The application process and results of the ELECTRE technique can be hard to describe in simple terms. Multi-Attribute Utility Theory (MAUT), TOPIS, and Case-Based Reasoning (CBR) have challenges with weighting the data. Even though the TOPSIS method has the limitation of weighting data, the process is not complicated, which easy to apply and program, unlike Case-Based Reasoning (CBR) and Multi-Attribute Utility Theory (MAUT). Generally, the cited literature shows that TOPSIS is the most suitable MCDM method in ranking the suppliers in comparison to other MCDM methods.

Conclusion

A comprehensive study of the SSCM and its sub-criteria for conducting supplier’s performance evaluation was established based on literature. Similarly, the significance and applicability of the criteria used were assessed with regard to the information collected from the managers of the Renault Group of Iran. A set of 15 main criteria and 48 sub-criteria were evaluated alongside their significance and applicability that was assessed by the use of questionnaire-based research. The outcomes of this analysis indicate that the economic criteria are the most suitable criteria for determining the sustainability performance in procurement, followed by environmental and, finally, the social criteria.

The Mann-Whitney U-test is employed by the study to illustrate whether the mean values of the two sets of data, that is, significance and applicability, are related to each other based on the manager’s perception about the company. The findings indicate no substantial variation between the mean values of the two sets of data. Thus, the designed list of SSCM and their respective sub-criteria can be utilized by the Renault Group Company for testing suppliers’ sustainability now and in the future. The Multi-criteria decision-making model (MCDM) is regarded as the most appropriate method for solving complex issues such as the ranking of the suppliers in terms of performance. There are several types of multi-criteria decision-making methods, which include MUIT, Case-based reasoning, ANP, AHP, among others. However, TOPSIS is regarded as the most suitable technique for ranking suppliers. However, more research needs to be conducted to obtain a more comprehensive and yet easy model for evaluating the performance and ranking of the suppliers. The model should be able to incorporate all aspects related to sustainability in the easiest way possible.

References

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