Customer and Supplier Interaction - Trust MeasurementGan Chun ChetMSc (UMIST) (UK), BSc (Hons) (UK)

Trust Measurement TRUST BASED MEASUREMENT A QUANTITATIVE APPROACH TO IMPROVE THE

TRUST LEVEL YOU HAVE IN YOUR SUPPLIERS FROM “LOW” TRUST LEVEL TO “HIGHER” TRUST LEVEL.

TO KNOW THE TREND PERFORMANCE BETWEEN YOU AND YOUR SUPPLIERS.

Trust Measurement A QUANTITATIVE APPROACH TO QUANTIFY AND TO KNOW WHAT TO

IMPROVE. THIS METHOD NEED TO BE SUITABLE TO YOU, OTHERWISE THIS MIGHT NOT BE THE TOOL TO BE USED TO IMPROVE YOUR SUPPLIER’S PERFORMANCE

TO MEASURE THE VARIABLES.

Trust Measurement A SYSTEM DYNAMICS

REPRESENTATION TRUST IN CUSTOMER AND SUPPLIER

INTERACTION

TRUST LEVEL

CONTROL

+

FEEDBACK

+

DISTURBANCE

-

DELAY

-

DISTANCE

-

+

CO-OPERATION

+

SUPPLIER’S COMMITMENT

Trust Measurement THE TRUST EQUATION THE PERFORMANCE (LINKED TO TRUST)

CONSISTS OF THE SUMMATION OF ALL THE WEIGHTED COMPONENTS OF TRUST.

PERFORMANCE, P = CONTROL (C1) + FEEDBACK (F) – DISTURBANCE (D1) – DELAY (D2) – DISTANCE (D3) + CO-OPERATION (C2) + SUPPLIER’S COMMITMENT (C3)

Trust Measurement BY ADDING A WEIGHTED FACTOR (F), THE

EQUATION IS NOW P = (F1 * C1) + (F2 * F) - (F3 * D1) - (F4 * D2) –

(F5 * D3) + (F6 * C2) + (F7 * C3)

Trust Measurement THE EQUATION IT IS A RIGID EQUATION, AND THE FACTORS

THAT YOU PUT IN IT, WILL BE BASED ON THE ABOVE EQUATION

THE EQUATION WILL ONLY HELP YOU IN KNOWING WHICH COMPONENTS OF TRUST IS THE LOWEST, IMPROVING IT FROM THE LOWEST COMPONENT UNTIL AN ACCEPTABLE LEVEL TO YOU.

Trust Measurement THE INFLUENCES OF TRUST AND THE

EFFECTS CO-OPERATION, SUPPLIER’S COMMITMENT,

CONTROL AND FEEDBACK HAS POSITIVE RESULT ON TRUST LEVEL

DISTANCE, DISTURBANCE AND DELAY HAS NEGATIVE RESULT ON TRUST LEVEL

Trust Measurement THE INFLUENCES OF TRUST AND THE

EFFECTS (CON’T) THE COMPONENTS OF TRUST WILL

DETERMINE WHETHER THE SUPPLIER IS NOT PERFORMING IN WHICH AREAS

IMPROVING THESE COMPONENTS TO A SATISFACTORY LEVEL WILL INCREASE THE TRUST LEVEL

Trust Measurement QUANTITATIVE APPROACH IS MORE

ACCURATE FOR EXAMPLE, THE NUMBER OF REJECTS IS

10 IN A SHIPMENT. THE TOTAL ORDER QUANTITY IS 100. THIS MEANS THAT THE PERCENTAGE OF REJECT IS (10/100)*100 = 10 % FOR A MAXIMUM MARKS OF 100% GIVEN FOR CONTROL, THE ACTUAL TRUST LEVEL ACHIEVED IS 90% (WHICH MEANS THAT TOTAL MARKS - REJECT MARKS = 100% - 10% = 90%.

Trust Measurement QUALITATIVE APPROACH IS

SUBJECTIVE SUPPLIERS' RESPONSE IS LATE. HOWEVER,

THE INFORMATION REQUIRED IS NOT CRITICAL. MARKS GIVEN FOR LATE RESPONSE WILL BE BASED ON OWN JUDGEMENT, WHICH MIGHT NOT BE ACCURATE. FOR EXAMPLE, RESPONSE IS 3 MONTHS LATE. ALTHOUGH THE INFORMATION IS NOT REQUIRED URGENTLY, THE TRUST LEVEL ACHIEVED IS APPROXIMATELY 80%. 20% IS TAKEN OUT WITHOUT ANY CALCULATED JUSTIFICATION.

Trust Measurement PREDICTING TRUST LEVEL (OR A TIME

SERIES FORECASTING TECHNIQUE) SIMPLE MOVING AVERAGES

T = (P-N) … + (P-1) + (P0) / N+1 - (1) EXPONENTIAL SMOOTHING

T = (α * T0) + (1 – α) * P0 - (2)

T = TRUST LEVEL P = PERFORMANCE α = SMOOTHING FACTOR

Does this mean T = P? T = f(P) –(1), f(P & T0)-(2)

Trust Measurement PREDICTION ERROR (SUM OF

ERRORS) PREDICTION ERROR = SUMMATION OF PAST

PREDICTION – SUMMATION OF ACTUAL ENTERED VALUE

TOTAL ERROR Te , PREDICTION Tp, ACTUAL Ta Te =| Σ Tp - Σ Ta |

Trust Measurement PREDICITON ESTIMATE IT IS NOT POSSIBLE TO PREDICT AN ACTUAL

VALUE AN ESTIMATE DEVIATION OF THE ACTUAL

VALUE CAN BE DETERMINED A REASONABLE AMOUNT DATA IS SUFFICIENT

TO ESTIMATE THE PREDICTION

Trust Measurement THE COMPONENTS OF TRUST ARE: CONTROL (A POSITIVE EFFECT ON TRUST) FEEDBACK (POSITIVE) DISTURBANCE (NEGATIVE) DELAY (NEGATIVE) DISTANCE (NEGATIVE) CO-OPERATION (POSITIVE) SUPPLIER’S COMMITMENT (POSITIVE)

Trust Measurement CONTROL THE INPUT VARIABLES ASSURES

THE QUALITY OF GOODS OR SERVICES - CONTROL THE INPUT VARIABLES

CONFORMING TO THE REQUIREMENTS

FEEDBACK FROM THE SUPPLIERS LINKS YOU AND YOUR SUPPLIERS- FEEDBACK TO SUPLIERS ON OFF-SPECIFICATION TO INPUT VARIABLE OR A CHANGE IN DESIGN REQUIREMENT FOR CORRECTIVE ACTION

Trust Measurement DISTURBANCE FROM EXTERNAL FACTORS

IMPAIR THE OPERATIONS - DISTURBANCE IS UNCONTROLLABLE. IT IS AN

EXTERNAL FACTOR THAT NEED TO BE CONSIDERED

DELAY IN RESPONDING TO CUSTOMER QUERY WILL DISTORT THE FLOW OF INFORMATION- DELAY IS SOMETHING THAT THE SUPPLIER IS NOT ABLE TO RESPOND TO THE FEEDBACK

Trust Measurement THED PHYSICAL DISTANCE BETWEEN YOU

AND YOUR CUSTOMER AFFECTS THE POWER OF COMMUNICATION

- DISTANCE IS THAT THE SUPPLIERS ARE LOCATED FAR AWAY. IT AFFECTS PERSONAL INTERACTION

CO-OPERATION STRENGTHENS THE RELATIONSHIP

- SUPPLIER’S WILLINGNESS TO CO-OPERATE. WORK TOGETHER TOWARDS A DIRECTION

Trust Measurement SUPPLIER’S COMMITMENT ASCERTAIN THE

INTERACTION - SUPPLIERS COMMITMENT THEIR

RESOURCES AND EFFORT, ETC.

Trust MeasurementWHAT MAKE UP THE COMPONENTS? 1 CONTROL A) ARE THE PARTS ARRIVED ON TIME? B) ARE THERE A LOT OF REJECT IN THE

SHIPMENT?

2 FEEDBACK A) DOES YOUR SUPPLIER REPLY TO THE

THINGS THAT YOU ASK B) DO YOU FEEDBACK TO YOUR SUPPLIERS?

Trust Measurement 3 DISTURBANCE A) UNCERTAINTIES THAT AFFECTS YOUR

RELATIONSHIP B) MARKET IS UNCERTAIN DUE LACK OF

KNOWLEDGE IN THE AREA OF VENTURE

4 DELAY A) LATE RESPONSE FROM SUPPLIERS ON

YOUR REQUEST B) DELAY IN DETECTING A FAULT

Trust Measurement 5 DISTANCE A) DID THE SUPPLIER RESPONDED TO AN

INCREASE ORDER QUANTITY? B) CHANGE IN DESIGN WAS TAKEN CARE BY

THE SUPPLIER PERFECTLY

6 CO-OPERATION A) THE PRICE OF THE PARTS ARE CORRECTLY

VALUED. B) HOW'S THE PRICE?

Trust Measurement 7 SUPPLIER’S COMMITMENT A) BETTER SALES VOLUME AS COMPARED TO

PREVIOUS B) NEW COMPETITOR EXIST

Trust Measurement

THE SIGNIFICANCE OF COMPONENTSAN AUTHORITY EXEMPLIFIED – CONTROL THE

SITUATION

INFORMATION AND ITS FLOW – MOVEMENT OF INFORMATION

UNCERTAINTY OF THE EXTERNAL – TO COPE WITH THE UNKNOWNS

THE ATTITUDE OF THE INTERACTION PARTIES – A BEHAVIOURAL SCIENCE

Trust Measurement GROUP QUESTIONNAIRES GROUP ANALYSIS

Trust Measurement INTERACTIVE SOFTWARE TRENDING SOFTWARE (IN THE PROCESS OF DEVELOPING) (ABOUT 2 TO 3

MONTHS)

Personal Slide1) Trust Based Measurement

2) System Dynamic Diagram

3) The Equations

4) Components of Trust

5) Qualitative vs. Quantitative

6) Forecasting Technique

7) An Estimate

8) What Constitute Trust? What Affects a Relationship?