The Impact of Service Quality on Business Commitment in Contract Manufacturing Services: An Exploratory Study of F&B Industry in Malaysia

Abstract

Business environment is highly competitive for food & beverage(F&B)industry due to the low entry barrier. In order to improve their financial performances, F&B manufacturers opt to offer contract manufacturing services (CMS).There is a formal relationship established between the service provider and the buyer. However, the impact of service quality on retaining the business relationship particularly has not been empirically investigated. To fill this gap, this study explores the determinants of contract manufacturing service quality (CMSQ) and the interrelationship between CMSQ, customer satisfaction and loyalty of the F&B CMSs’ customers in Malaysia. Four focus group interviews (28 participants) were held in this study and they comprised 12 contract manufacturers and 16 business customers. Three new dimensions were discovered from the focus group interviews; product development capability, Halal certification and outcome quality in addition to the SERVQUAL dimensions. Relevantinformation via structured questionnaires were collected via online survey and drop-off method. 146 usable questionnaires were analysed using partial least squares. The results indicate that CMSQ consists of eight dimensions namely empathy, assurance, reliability, responsiveness, tangibles, outcome quality, Halal certification and product development capability. The Empathy dimension is the most important dimension influencing customers’ decision to stay with the contract manufacturers.CMSQ was found to have a small effect size on loyalty while customer satisfaction largely influenced loyalty. The result implies that CMSQ is a complement in the formation of customer loyalty while customer satisfaction is a significant predictor of behavioural intention.The findings also provide empirical evidence that the contextual specific service quality is essential particularly for contract manufacturing in F&B.

Relationship between Service Quality and Customer Satisfaction in Academic Affairs Unit

“…Thus, it can be said that the customer will feel valued when they are being entertained to assist them in something that may be difficult for them to operate or understand. This was consistent with the past study conducted by Rahim et al (2020) in which the study explained that empathy is the most influential dimension in preserving the customer in the contract manufacturing business model. It was also stated that contract manufacturing services should pay more focus to the element of empathy by retaining a good relationship with the clients by solving the customer's problem/issues, understanding the customer's needs and wants as well as ensuring various channels of communication.…”