This presentation is about a theoretical model developed to understand trust in customer and supplier relationship. The model developed considers seven variables in an interaction between a customer and a supplier. These influencing factors suggest here affect customer’s trust towards their suppliers. These factors are (1) Control, (2) Feedback, (3) Delay, (4) Disturbance, (5) Co-operation, (6) Supplier’s Commitment and (7) Distance. The model proposes that a supplier’s performance in a high volume with repeated transactions environment is dynamic. It is written here that making decision (investment) based on past supplier’s repeated performances are possible links to trust. Simulation of supplier dynamic performance proofs the links possible, making prediction possible of what is known.

1. Trust Measurement
(Part 2)
– based on Trust Model
(or Modelling Trust)
By Gan Chun Chet (Mr.)
MSc in Operations Management (UK)
BEng (Hons) Mechanical Engineering (UK)

2. What is Trust Measurement?
• Consists of components that means trust, in customer and supplier
interaction.
• Components are weighted, total to 1.0
• Normally 7 components… in this situation, by limiting to 6
components, the weightings are 0.3 x 1 , 0.2 x 1, 0.1 x 4 sum to 1.0
(if 7 components, weightings would be 0.3 x 1 , 0.2 x 1, 0.1 x 5 sum to
1.0 as well)

3. Trust Model

4. Components are Variables
- The Seven Variables of Trust in Customer and Supplier Interaction consists of the followings:-
… is about ensuring that
your products and services
do not have high number of
rejects or complaints. It is
about having some control
over your products and
services by knowing the
characteristics/behaviour of
your production line or your
resources.
Control
is about constant flow of
information to and from
your customers to your in-
house staffs and thereafter
to your suppliers. These are
the requirements in the
form of information from
customers required to be
incorporated and included
in product design in your
new batch of products or
services.
Feedback

5. Components are Variables (con’t)
- The Seven Variables of Trust in Customer and Supplier Interaction
Delay – is about late incorporation of
vital information that would affect a late
launch of design requirements in the
new products or services. This is not
advisable, as it will not capture a new
market in where end customers that are
waiting to purchase new products or
services.
Disturbance - are uncontrollable events
that exist or occur in instances unknown
until they happen. These are caused by
change in market requirements or an
emergence of new product from a rival
company. When this occurs, the
companies affected will have difficulty in
selling their product.

6. Components are
Variables (con’t)
- The Seven
Variables of Trust
in Customer and
Supplier
Interaction
Cooperation - is the ability to work together with
the suppliers, to tap the knowledge of the resource
at the supplier to produce saleable products that
the market requires. There is another cooperation
based on internal ability of a company. By working
together with the suppliers, the product is
produced.
At the end of the day, supplier’s commitment is
important because if the suppliers are not
committed to delivering the product or the service
to the end customers, it will certainly damage the
outcome of the project. Commitment is an
agreement between two parties to dedicate time
and effort in delivering a job well done.

7. Components are Variables (con’t)
- The Seven Variables of Trust in Customer and Supplier Interaction
…is about your suppliers being
near to your customer. Near could
be the location of your suppliers’
office, or it could be near for close
proximity of discussion to allow
exchange of information and know
how to ensure that a product or
service launch is and can be
delivered, based on distinctive
mutual trust between you and
your suppliers.
Distance

8. POINTS/FACTORS
GOVERNING THE VARIABLES
• AUTHORITY – CONTROL SIGNIFIES THE AUTHORITY OF THE
CUSTOMER. KEEPING TRACK OF THIS MEASURABLE
COMPONENT WILL SHOW THAT THE SITUATION IS UNDER
CONTROL
• INFORMATION – THE FEEDBACK AND DELAY COMPONENTS ARE
CLASSIFIED UNDER THE MOVEMENT OF INFORMATION
BETWEEN CUSTOMER AND SUPPLIERS
• UNCERTAINTY – DISTURBANCE IS DUE TO UNCERTAINTIES THAT
ARE UNKNOWN TO THE CUSTOMER DISTANCE, DUE TO THE
LOCATION OF THE END CUSTOMER. THE FURTHER THE END
CUSTOMER, THE HIGHER THE UNCERTAINTIES.
• ATTITUTE – CO-OPERATION AND SUPPLIER’S COMMITMENT ARE
BEHAVIOURS THAT STRENGTHEN THE RELATIONSHIP.

9. The Constituents
of Trust?
<Data Entry : By Score>
The Seven Variables of Trust are
• Control
• Feedback (Delay)
• Disturbance
• Co-operation
• Supplier’s Commitment
• Distance
To fill-in individual cell
Weighting are sum to 1

10. What is the
Trust Level?
(with individual trust weightings)
1 2 3 4 5 6
WHAT
CONSTITUTE
TRUST?
E.G. REJECT,
COMPLAINTS
CONTROL
FEEDBACK /
DELAY
DISTURBANCE CO-OPERATION
SUPPLIER'S
COMMITMENT
DISTANCE
WHAT ARE THE
INDIVIDUAL
TRUST
WEIGHTINGS
BETWEEN 0 TO 1
(TOTAL = 1)
0.1 0.3 0.1 0.2 0.1 0.2
ARRIVAL DATE TRUST LEVEL INDIVIDUAL TRUST LEVEL
1-Dec-07 62 72 76 66 48 49 56
9-Dec-07 62 98 95 68 63 40 2
15-Dec-07 69 40 96 30 62 49 80
1-Jan-08 46 64 7 62 69 98 36
2-Feb-08 60 15 86 91 4 97 64
3-Mar-08 37 98 13 20 8 75 62
21-Apr-08 23 19 5 31 54 13 22
22-May-08 34 17 5 10 59 54 62
23-Jun-08 55 86 15 41 73 48 93
15-Jul-08 33 22 37 15 56 58 5
1-Aug-08 42 57 54 14 71 34 3
15-Aug-08 43 13 28 36 96 76 13
1-Sep-08 53 80 6 85 91 49 58
1-Oct-08 64 67 97 11 69 8 65
1-Nov-08 41 7 72 61 28 54 6
1-Dec-08 63 74 99 8 72 90 11
1-Jan-09 45 81 29 64 8 71 68
1-Feb-09 27 11 34 46 43 16 5
1-Mar-09 35 34 82 24 5 30 3
1-Apr-09 47 15 61 95 61 26 14
1-May-09 52 46 56 28 29 49 84
12-Jun-09 80 80 80 80 80 80 80
weightings on the factors total to 1.0
generated from random numbers =RAND() in Excel

11. 10 18
10
10
16
10
10
0
2
4
6
8
10
12
14
16
18
Control
Feedback
Delay
Disturbance
Co-operation
Supplier's
Commitment
Distance
Data Modeling

12. Trust Level – Past and Current
01-
Jan-
00
02-
Jan-
00
03-
Jan-
00
04-
Jan-
00
05-
Jan-
00
06-
Jan-
00
07-
Jan-
00
08-
Jan-
00
09-
Jan-
00
10-
Jan-
00
11-
Jan-
00
12-
Jan-
00
13-
Jan-
00
14-
Jan-
00
15-
Jan-
00
16-
Jan-
00
17-
Jan-
00
18-
Jan-
00
19-
Jan-
00
20-
Jan-
00
21-
Jan-
00
22-
Jan-
00
TRUST LEVEL 50 23 47 77 45 53 43 33 37 64 59 54 62 53 76 35 32 55 41 72 39 80
WARNING LEVEL 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50
50
23
47
77
45
53
43
33
37
64
59
54
62
53
76
35
32
55
41
72
39
80
0
10
20
30
40
50
60
70
80
90
TRUST
ARRIVAL DATE
GRAPH 1 : PAST AND CURRENT TRUST LEVEL
TRUST LEVEL
WARNING LEVEL

13. Trust Level – By Component
0
5
10
15
20
25
30
06-Aug-07 14-Nov-07 22-Feb-08 01-Jun-08 09-Sep-08 18-Dec-08 28-Mar-09 06-Jul-09
TRUST
ARRIVAL DATE
GRAPH 2 : PAST AND CURRENT TRUST LEVEL BY COMPONENTS
CONTROL
FEEDBACK
DISTURBANCE
DISTANCE
CO-OPERATION
SUPPLIER'S COMMITMENT

14. Trust Level – Future Prediction
-60
-40
-20
0
20
40
60
80
00-Jan-00 05-Jan-00 10-Jan-00 15-Jan-00 20-Jan-00 25-Jan-00
TRUST
LEVEL
ARRIVAL DATE
GRAPH 3 : FUTURE TRUST LEVEL MOVING AVERAGE
EXPONENTIAL SMOOTHING
PROBABILITY OF OCCURANCE BY CHANCE
AVERAGE BETWEEN UPPER AND LOWER LIMIT
AVERAGE BETWEEN UPPER AND LOWER LIMIT
(MOVING)
MOVING AVERAGE ERROR
EXPONENTIAL SMOOTHING ERROR
PROBABILITY OF OCCURANCE BY CHANCE ERROR
AVERAGE BETWEEN UPPER AND LOWER LIMIT ERROR
AVERAGE BETWEEN UPPER AND LOWER LIMIT
(MOVING) ERROR

15. THE TRUST EQUATION
performance
level
trust

16. THE TRUST EQUATION
(performance)
• THE PERFORMANCE (LINKED TO TRUST)
CONSISTS OF THE SUMMATION OF ALL
THE WEIGHTED COMPONENTS OF TRUST,
CAN BE DEFINED AS FOLLOWS:-
• PERFORMANCE, P = CONTROL (C1) +
FEEDBACK (F) – DELAY (D1) –DISTURBANCE
(D2) + CO-OPERATION (C2) + SUPPLIER’S
COMMITMENT (C3) – DISTANCE (D3)
• P = (F1 * C1) + (F2 * F) – (F3 * D1) – (F4 *
D2) + (F5 * C2) + (F6 * C3) – (F7 * D3)

17. REPORT ON THE
ANALYSIS
REPORT 1 : Moving Averages
and Exponential Smoothing,
indication of trust level
• 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 )* 𝑃0) + (1 – α) * 𝑇0 - (2)
• T = TRUST LEVEL
• P = PERFORMANCE
• α = SMOOTHING FACTOR

18. THE TRUST EQUATION
(Prediction Error)
• 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 |

19. Limits of Prediction (Indicative)
Upper Limit
Lower Limit
Prediction Value (based on MV
or ES)
Upper/Lower Limit :
Moving Average MV
Exponential Smoothing ES
Actual Performance
Prediction Value

20. REPORT ON
THE ANALYSIS
• REPORT 2 : CATEGORIZATION
OF TRUST LEVEL BY CHANCE
IN FOUR QUADRANTS
CATEGORY 1 CATEGORY 2
TREMENDOUS INCREASE IN
TRUST LEVEL POSITIVE TRUST LEVEL
SUPPLIER HAS SHOWN
EXCEPTIONAL INTEREST.
RELATIONSHIP IS WORKING ON
WELL.
INCREASE IN TRUST LEVEL. SUPPLIER
HAS MAINTAIN AND OUTPERFORMED
THE PREVIOUS.
CATEGORY 3 CATEGORY 4
SUPPLIER TO BE INFORMED OF
NEGATIVE TRUST LEVEL
NEGATIVE TRUST LEVEL, SOME
UNKNOWN REASONS
THIS COULD BE CAUSED BY A
SLIGHT DECREASE IN THE
COMPONENTS. KEEP A CLOSE
LOOK TO IT.
IF THIS HAPPEN, LOOK INTO THE
COMPONENTS TO INCREASE THE
COMPONENTS MARKS.

21. REPORT 2 : CATEGORIZATION OF TRUST LEVEL
BY CHANCE IN FOUR QUADRANTS
• WHAT IS THE CUT OFF POINT?
• WHEN THE DIFFERENCE BETWEEN TWO (2) PAST FIGURES IS GIVEN BY THE
VALUE Y, FOR EVERY INCREMENT(S)/INSTANCE(S)
ABOVE Y % IN THE POSITIVE QUADRANT
MEANS CATEGORY 1
BETWEEN 0 TO POSITIVE Y % IN THE POSITIVE QUADRANT
MEANS CATEGORY 2
BETWEEN 0 TO NEGATIVE Y % IN THE NEGATIVE QUADRANT
MEANS CATEGORY 3
BELOW Y % IN THE NEGATIVE QUADRANT
MEANS CATEGORY 4

22. REPORT 2 : CATEGORIZATION
OF TRUST LEVEL BY CHANCE
IN FOUR QUADRANTS (CON’T)
Example (of calculation):-
Let Y % is 30
𝑇−1 = 80
𝑇−2 = 90
Difference 1 = (𝑇−1 ) minus (𝑇−2)
= 80 – 90
= -10
Define herein as Category 2, because it is
between 0 to 30 (positive quadrant)
+
-
Actual Performance
t+1
Time
Predicted Value

23. Item T_(-1) T_(-2) Difference Category
1 52 10 41 CATEGORY 1
2 34 75 -41 CATEGORY 4
3 91 77 14 CATEGORY 2
4 24 50 -25 CATEGORY 3
When Y = 30%
EXAMPLES OF MODELLING TRUST : SLOPE

24. SUMMARY OF MODELLING TRUST (1)

25. SUMMARY
OF
MODELLING
TRUST (2)

26. THANK YOU
FOR YOUR KIND
ATTENTION