Executive Summary 1 Introduction 1.1 Purpose The purpose of this report is to identify current practices, issues and future trends of quality management within the service industry. It will also explore the influence of quality management within the aspect of customer service and satisfaction. Lastly, this report will provide recommendations on methods of improving customer satisfaction within the service industry. 1.2 Methodology To complete this report, research has been conducted from secondary sources and inferences have been made to apply practices and theories to the service industry. 1.3 Scope This report explores current practices, issues and future trends in the service industry. Secondary research has been analysed to identify these practices, issues and future trends and has been deconstructed to align with customer satisfaction within the service industry. Lastly, recommendations are provided to improve quality within the industry. 2.1 Current Practices in the Retail Industry Within any industry, successful quality management practices are important for creating and maintaining a competitive advantage over competitors within the market. This is particularly so within the retail industry due to the competitive environment. Currently the retail industry utilises a variety of practices to maintain quality management, the one discussed in this report are; supply chain management, traceability and transparency of goods and quality assurance. The first quality practice used within the industry is supply chain management. This is the practice of coordinating the activities that occur along the supply chain of a good to maximise the quality, allowing consumers to have maximum perceived value. Li, S and Lin, B (2006) found that businesses that work closely with their suppliers in information sharing and maintaining open communication have higher levels of quality in the end products. These higher quality products also serve as a competitive advantage for the business over other competitors within the retail industry. Kannan, V and Tan, K (2005) also showed that businesses increasingly are utilising supply chain management, and those that understand the practice and strategy offer higher quality goods. Traceability and transparency for businesses allow for the public to view where they source materials from, who they do business with and how they operate. By allowing the public insight into their business, they are opening themselves up to integration and incentivising themselves to focus on quality. Mittal, D and Agrawal, S (2016) research reflected that businesses that operate in this way on average have a higher quality of goods than businesses that don’t, additionally It serves as providing assurance and reliability which gives the added benefit of a stronger competitive advantage to the business. Clemons, E and Hitt, L (2000) explain that through technology within society, consumers can easily find information about business practices by going online or through reviews, and through this it is encouraged that business just operate with transparency as a gesture that they have nothing to hide. Quality assurance is a practice used to provide peace of mind and increase satisfaction in quality of products. Youngdahl, W and Kellogg, D (1997) found that active methods of quality assurance allow for perceived increased in quality to consumers, and serves as a tool and incentive for the business to manage the quality of their own products. Additionally, Saeidi, S, Sofian, S, Saeidi, P, Saeidi, S and Saaeidi, S (2015) showed a direct link between customer satisfaction and competitive advantage, reporting that customers feel more secure with brands that offer assurance. The trend of quality assurance within the retail industry has become more of an expectation than an added benefit over the years, this is due to consumer expectations and the competitive, crowded nature of the retail environment. 2.2 Current Issues in the Retail Industry Even through practices currently used within the retail industry, there are still issues that need to be addressed. These issues are always evolving as consumers develop different wants, needs and reactions to existing practices. The key issues being addressed within this report are increasing consumer expectations over quality and cost specifically, and consumer desire for innovation and new products. Consumer expectation is always an evolving state, especially in an era where communication is made readily available to the public where they can share ideas and experiences with each other. Failure to meet these expectations can lead to consumers sharing their dissatisfaction online and deterring other possible consumers to go elsewhere, Almsalam, S (2014) research showed the link between quality and sating consumer expectations. Consumer expectations are something any retail business must focus on and strategize around to fulfil. The other issue being discussed is the consumer desire for innovation and new products. Customers always want new things, and businesses want competitive advantage, and as such a logical step for most businesses is to innovate and bring out new products that are not otherwise threatened by competition, this is an issue that leads businesses to creating things often without testing or focusing on quality in favour of rushing it into the market. Velazquez, B, Blasco, M, Frances, D and Saura, I (2017) wrote about the link of innovation as a key strategic tool to win over consumers and additionally explain how the action of innovation is quickly becoming an almost expectation. A competitive environment where new products can quickly engage a large market share encourages businesses to focus on speed or quantity over quality. This is an issue within the retail sector and will continue to be so as innovation becomes more of an expectation. 2.3 Future Trends in the Retail Industry Predicting the future trends and adapting practices to compensate for these trends is one of the successes to maintaining a competitive advantage. By looking at existing trends within the industry, future trends can be identified and prepared for. Rodriguez, M, Paredes, F and Yi, G (2016) give examples to such future retail trends, saying that customer experience will be a driving force, and by extension businesses will need new practices to maximise customer experience and value. As aforementioned in the report, industry quality is a reliable way to improve customer experience with your goods and business, by providing them with quality goods they are more likely to remain as consumers. With these expectations shaping the future trends, businesses require a new practice to meet these expectations. Oakland, J (2014) provides insight into one such practise that is currently rarely used within the retail industry, which is total quality management. The reasons provided why this practice is rarely used is due to the cost and culture required on behalf of the business to make it work, as the practise itself is an all or nothing approach to quality. Oakland, J and Morris, P (2013) describe total quality management as a practise that requires staff from all hierarchal levels of a business to commit to maintain high standards of work across the businesses many operations. This is often achieved by the implementation of new roles within an organisation such as a quality manager or quality overseer. By having the entire businesses focused on the goal of quality, the final goods created are of a much higher calibre than if the business continued with traditional, current practices. Sadikoglu, E and Oclay, G (2014) researched that organisations that utilised total quality management practices were more successful with the quality of their products, and by extension held a much higher percentage of customer satisfaction, showing a successful practise to combat a future trend of increased expectations. 3.1 Customer Satisfaction The customer satisfaction is closely related to total quality management. Total quality management is applied in organizations would increase the experience of customer and obtain highly comments from customers. It is the result of delivering a service that reach customers’ expectations. For decades, researchers have studied customer satisfaction. Our research find three main impacts of quality management practices in improving customer satisfaction. Firstly, Kobylanski et al. (2011) stated that satisfied customers could be perceived as an enterprise’s assets. A number of investigations show that customer satisfaction as a necessary condition for customer retention and loyalty that can help secure future profitability. Bain and Co. had a 5% increase in customer retention which help to increase a profitability by 75%. And Gartner Group’s statistic shows 80% of future revenue will come from just 20% of existing customers (Lawrence, 2012). Secondly, improve customer satisfaction will deepen the brand image in customer’s mind. In other words, the image and reputation of company will have positive influence on customer satisfaction (Lahap et al., 2016). Onyancha (2013) proposed that positive brand image exceed the customer’s expectation and enhance the organization’s goodwill and value. This result stimulates the customer’s loyalty. Besides, customer satisfaction is a measure of success, which can create more sustainable competitive advantages. Woolworths slogan ‘ Australia’s fresh food people’ build a deep impression for its customer. Australian will remember Woolies when they want more fresh groceries for their family. Woolworths established a brand image of high quality product in its consumers’ mind. This is a foundation step for future development (Ward, 2014). Therefore, Woolworths establish marketing strategies which promote brand image among customers for enhancing the satisfaction and loyalty of customers as well as further promoting performance. A positive brand image of an organization improves perceived service quality. Consumers are not purchase product and service, also buy the reputation and meanings of the brand. Thirdly, sometime the company is pay more attention on enhance product quality, but forget to build and maintain the relationship with customers. Kobylanski et al. (2011) showed that the company ignore the importance of customer satisfaction, believing with a good product, satisfaction will follow. ISO 9001:2015 pointed that a number of quality management principles including a strong customer focus, the motivation and implication of top management, the process approach and continual improvement(ISO, 2015). Due to this condition, Woolworths not only produce its high quality products, but also develop its relevant department of maintain the relationship with customers. Woolworths has the Voice of Customer investigation to track the degree of customer satisfaction after consumers purchase in store. In the Woolworths Group Financial Year 2017 Third Quarter Results, VOC scores improved significantly compared to the same quarter in the last year. Overall Customer Satisfaction increased to 77% in the quarter and Store-Controllable VOC increased to 80%, broadly consistent with Q2’2017 (Woolworths group, 2017). Customer satisfaction investigation could show which aspect of the purchasing is disappointed. Woolworths Group learned from VOC that on-shelf availability and Fruit & Vegetables need to be improved, which would attract more benefits in future. Customer-oriented marketing is more popular in nowadays. 3.2 Service performance Total quality management has a positive impact on overall service performance. However, measures of service quality for retail stores, like Woolworths, are scare. Because of the characteristics are intangibility, heterogeneity, inseparability, and perishability. High quality service could keep better communication and maintain reliable relationship with customers, which lead to recommendations and repeat purchases. First of all, TQM engages and involves employee, and focuses on training are important factors in improve service performance. Effectively encouraged employees are participate actively in teamwork can help them achieve organization’s goal quickly (Agus, 2004). Trained employees have more professional knowledge to help customers’ behavior. Depth of staff knowledge will influence consumers’ experience and expectation in store. Woolworths provides some meal recipes and new product introduce in store, this is a good way to encourage customers participate in the activities and improve purchase experience. Moreover, a various of service strategy leads to more safety and interest, such as traceability. Woolworths traceability service assists customers to understand that unaccepted product recall to be implemented quickly and effectively when something goes wrong. Customers are prefer to purchase in a secure environment. The degree of customer satisfaction will impacts their further purchasing behaviors. Customers’ expectation before purchase and perception about performance after purchase (Onyancha, 2013) will help them to make a decision whether come back to Woolworth again or go to Coles and Aldi. MetricStream is a method Woolworths used to monitor supplier compliance with sustainability guidelines, and optimize the performance. Woolworths Group use MetricStream's Quality Audit Management solution to optimize their Total Quality Management (TQM) program (Prnewswire, 2014). Woolworths use official website and mobile application for online sales. New sale type is more convenient for clients, even for disability customers. In the Woolworths Group Financial Year 2017 Third Quarter Results, it shows online sales grew strongly in the quarter increasing by approximately 20% (Woolworths group, 2017). 3.3 Organisational performance Total quality management is an organization’s managing method, which is not only focus on quality, but also concern about organization’s growth and development. To increase organization’s performance, company needs to provide customers with highly valued products, and eliminating waste, reducing lead times at all stages of the production process, reducing costs, developing people (Gharakhani et al., 2013). TQM also assist organization understanding customers’ needs, improved customer satisfaction, improved internal communication, better problem solving and fewer errors (Demirbag et al., 2006). Therefore, TQM changed the way many organizations around the world now and manage their operations. For example, the large scale retailer, Woolworths, has selected MetricStream as the enterprise-wide platform for managing its Total Quality Management (TQM). Woolworths uses MetricStream to operate internal management. For instance, streamlining processes and reducing the cost of compliance by build electronic framework and central repository instead of paper-based files. Julian Novak, divisional director foods at Woolworths, said “The implementation of MetricStream across our operations will result in increased efficiency, greater quality, and more strategically, a harmonization of quality processes throughout our foods organization” (Metricstream, 2009). Furthermore, Woolworths used MetricStream to track sustainability initiatives across over 900 suppliers worldwide (Prnewswire, 2014). Thus, total quality management could improving efficiency of operation process and supporting organization’s long-term success. Besides, another scholar stated that to “determine the extent of TQM implementation and measure its impact on business performance” (Demirbag et al., 2006), is a foundation to improve organizational performance, . Due to organizational performance generally is measured by financial indicators, financial result is an important role represents the performance after TQM impelled in a organization. TQM implement properly, it could provide a potential for organizations to enhance their competitiveness. In the Woolworths Group Financial Year 2017 Third Quarter Results, it shows profitability keeps increasing after top management continuously innovate and improve their tactical initiatives in TQM. Compare with 2016 sales $8.8 billion, strong sales momentum in Q3’2017 with Australia Food sales up 5.1% to $9.3 billion. Otherwise, Woolworths’ new Customer-Led Rostering tool was used in all states, it assists to match team hours to customer shopping times (Woolworths group, 2017). Innovation method in TQM makes Woolworths stand out from its competitors, such as Coles and Aldi. These high profits and new tools are driven from TQM’s application. Therefore, TQM increases the financial results of organization and enhances the strength in the competitive environment. 4. Recommendations (SMART framework) 5. Conclusion