1. Customer and
Supplier Interaction -
Trust Measurement
Gan Chun Chet
MSc (UMIST) (UK), BSc (Hons) (UK)

2. 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.

3. 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.

4. Trust Measurement
 A SYSTEM DYNAMICS
REPRESENTATION
 TRUST IN CUSTOMER AND SUPPLIER
INTERACTION
TRUST LEVEL
CONTROL
+
FEEDBACK
+
DISTURBANCE
-
DELAY
-
DISTANCE
-
+
CO-OPERATION
+
SUPPLIER’S
COMMITMENT

5. 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)

6. 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)

7. 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.

8. 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

9. 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

10. 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%.

11. 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.

12. 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)

13. 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 |

14. 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

15. 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)

16. 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

17. 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

18. 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

19. Trust Measurement
 SUPPLIER’S COMMITMENT ASCERTAIN THE
INTERACTION
 - SUPPLIERS COMMITMENT THEIR
RESOURCES AND EFFORT, ETC.

20. Trust Measurement
WHAT 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?

21. 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

22. 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?

23. Trust Measurement
 7 SUPPLIER’S COMMITMENT
 A) BETTER SALES VOLUME AS COMPARED TO
PREVIOUS
 B) NEW COMPETITOR EXIST

24. Trust Measurement
THE SIGNIFICANCE OF COMPONENTS
AN 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

25. Trust Measurement
 GROUP QUESTIONNAIRES
 GROUP ANALYSIS

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

27. Personal Slide
1) 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?