International Journal of Pharmaceutical and Healthcare Marketing

Measuring service quality in pharmaceutical supply chain – distributor’s perspective

Uma Maheswari Devi Parmata Sankara Rao B Rajashekhar B
Article information:
To cite this document:
Uma Maheswari Devi Parmata Sankara Rao B Rajashekhar B , (2016),"Measuring service quality in pharmaceutical supply
chain – distributor’s perspective", International Journal of Pharmaceutical and Healthcare Marketing, Vol. 10 Iss 3 pp. -
Permanent link to this document:
http://dx.doi.org/10.1108/IJPHM-07-2015-0035
Downloaded on: 19 August 2016, At: 14:41 (PT)
References: this document contains references to 0 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 19 times since 2016*
Users who downloaded this article also downloaded:
(2016),"Strategic issues in pharmaceutical supply chains: a review", International Journal of Pharmaceutical and Healthcare
Marketing, Vol. 10 Iss 3 pp. -
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

(2016),"Consumer trust and physician prescription of branded medicines: an exploratory study", International Journal of
Pharmaceutical and Healthcare Marketing, Vol. 10 Iss 3 pp. -

Access to this document was granted through an Emerald subscription provided by emerald-srm:333301 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service
information about how to choose which publication to write for and submission guidelines are available for all. Please
visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of
more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online
products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication
Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.

*Related content and download information correct at time of download.

 Measuring service quality in pharmaceutical supply chain –distributor’s perspective

1. Introduction: The pharmaceutical industry plays a major role in the manufacturing and
marketing of drugs. The total level of pharmaceutical revenue worldwide is almost one
trillion U.S.dollars (www.statista.com) hence this sector has a vital role in the global
economy. India is the largest provider of generic drugs globally with the Indian generics
accounting for 20 per cent of global exports in terms of volume (Indian Brand Equity
Foundation, sectorial report January 2016). The Indian pharmaceuticals market is the
third largest in terms of volume and thirteen largest in terms of value, as per a report by
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

equity master. By 2020, India is likely to be among the top three pharmaceutical markets
by incremental growth and sixth largest market globally in absolute size. The Indian
pharmaceuticals market is expected to expand at a Compound Annual Growth Rate
(CAGR) of 15.92 per cent to US$ 55 billion by 2020. Branded generics dominate the
pharmaceuticals market, constituting nearly 70 to 80 per cent of the market. The
organized” sector of India's Pharmaceutical Industry consists of 250 to 300 companies,
which account for 70 percent of products on the market, with the top ten firms
representing 30 percent.

The pharmaceutical industry is one of the fastest growing sectors in Indian economy. It
plays an extremely important role in preserving the health of people. It is estimated that per-day
cost in lost sales for a US $ 1 billion drug is US $ 2.74 million (Radjou Navi, Forrester Report,
2001). The importance of proficient logistics for the pharmaceutical space can be understood
from the two facts: - (i) Drugs get delayed by one day to reach the market costs the companies
about US$ 1 million. (ii)Logistics costs shares 45 - 55 percent amidst additional costs in
pharmaceutical supply chain - Confederation of Indian Industry (CII) -Institute of Logistics.
Hence the Pharmaceutical Supply Chain is very composite and extremely answerable to ensure
that the right drug reaches the right person at the right time and in the right condition. The
pharmaceutical industry is macro-economically placed as the fastest growing sectors with a
CAGR of 12 percent since the last five years. Thus India’s share in the global pharmaceutical
market can be further accelerated if the required state-of-the-art logistics infrastructure is
 available in India. But the Pharmaceutical industry in India has not fully exploited their supply
chains because of its profitable heritage and low cost of goods. Because of these reasons many of
the internal issues are not being appropriately addressed in the pharmaceutical supply chain.
Thus, there is an urgent need to provide more supply chain solutions as it poses much superior
intricacies owing to matters like timeliness, expiry, storage and distribution. The regularity and
good condition decide the worth of the medicines. Therefore, an extremely subtle pharmaceutical
supply chain is necessary to protect the health of the people. Hence this is a highly sensitive
supply chain where anything less than 100 percent customer service level is intolerable as it
directly affects the health and welfare. So, many Pharmaceutical industries maintain huge
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

inventory in supply chain to reach 100 percent fill rate. But it is really difficult to ensure 100
percent availability of product at the optimum cost, unless processes of supply chain are focused
on needs and demands of customers. The IBM Global Business Services report (2010) argues
that pharmaceutical supply chains are ill-placed to cope with all the issues that it faces these
days. These supply chains are under enormous financial and competition strains. The biggest
threat to the pharmaceutical industry however comes from issues it has with its customers
concerning quality issues. Hence the quality of service provided in the supply chain plays a
major role in addressing these issues. Service Quality proved its positive effect on performance
of business, Customer Satisfaction and Loyalty (Silvestro & Cross, 2000; Newman, 2001;
Sureshchandar, Rajendran & Anantharaman, 2002; Gurau, 2003). But very few studies have
been done addressing service quality of supply chains especially in the pharmaceutical sector.
This research will thus contribute significantly to reduce the gap existing in the literature. This
study mainly identifies the factors influencing quality of service and its impact on customer
satisfaction at the manufacturer-distributor interface of the pharmaceutical supply chain. Hence
the outcome of this research will be very helpful to the pharmaceutical companies to evaluate
quality of service and thus improve supply chain performance.

1.1: Structure of the paper:

The whole paper is divided into five sections. The first section discusses about the basic issues in
pharmaceutical supply chain and the significance of service quality in pharmaceutical supply
chain. The summary of earlier works done in the area of Service Quality is discussed in the
second section. The methodology adopted in doing the research was discussed in the third
section followed by Data Analysis and Summary and Suggestions.
 1.2: Concept of Supply chain:
A supply chain is a business process which links manufacturers, retailers and customers. The
supply chain processes are defined as “a structured and measured set of activities planned to
produce a particular output for a specific customer or market” (Davenport, 2013). It is also
defined as the network of organizations that are involved, through upstream and downstream
linkages, in the different processes and activities that produce value in the form of products and
services delivered to the ultimate consumer (Christopher, 1992). Hence Supply chain
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

management is “an integrative philosophy to manage the total flow of a distribution channel
from supplier to the ultimate user” (Cooper et al., 1997). Thus none of the supply chain
procedures are certain or are the sole concern of one individual member of chain. The supply
chain network consists of Customers, Retailers, Distributors, Manufacturers and Suppliers who
are interdependent on each other. This overlapping of responsibility across each supply chain
process results in four critical interfaces - Customer-Retailer Interface, Retailer-Distributor
Interface, Distributor-Manufacturer Interface and Manufacturer- Supplier Interface, in a five
stage supply chain. This Study has focused on the Manufacturer –Distributor Interface of the
Pharmaceutical Supply Chain

1.3: Pharmaceutical Supply Chain:

The pharmaceutical supply chain is the means by which prescribed medicines are distributed to
patients. Drugs are manufactured at manufacturing facilities, transported to wholesalers, stored
at retail outlets, distributed by druggist's and eventually provided to end consumers. There are
various changes in this elementary structure, as the performers in the chain are regularly
evolving, and viable relations differ noticeably by location, kind of drug and other factors. The
Products of the drug industry are very different compared to other sectors. Hence, this industry’s
primary dynamic forces are distinctive, resulting in strategic and operational variances with the
rest of the market. So quality of service provided in supply chain plays a very important part in
effecting performance, hence effective management of the quality of service can address these
issues.
 While consumer/physician level behaviors and health expenditures are areas of immense
research interest in the pharmaceutical industry, supply chain management (SCM) research and
development (R&D) have also emerged as significant avenues for research (Narayana et al.,
2012). Recent reviews are also restricted to specific issues in the PSC (Pharmaceutical supply
chain) such as optimization (Shah, 2004), implementation of just-in-time (Jarrett, 2006),
healthcare reforms in specific countries (Yu et al., 2010) and sourcing decisions etc. (Pazirandeh,
2011). Literature depicts an increasing but fragmented interest in supply chains in health services
(De Vries and Huijsman,2011).The complexity of the interactions between players such as
government bodies, healthcare purchasing groups, healthcare providers and manufacturing
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

companies has also resulted in attention towards the value-chain concept in healthcare (Burns et
al., 2002). Apart from health services, supply chains of healthcare products are important
contributors to the healthcare system. Different healthcare products are distributed and traded
differently and vary in their cost, criticality to delivery of patient care and potential impact on
service improvement (Zheng et al., 2006) Among other areas of research, there is a need to
review research efforts on SCM in the pharmaceutical industry (Narayana et al., 2012).

1.4: Service Quality in Supply chain:

Logistics Service Quality (LSQ) is the difference between the expected and the perceived
service (Millen & Maggard, 1997; Sohal, Millen, Maggard & Moss, 1999; Mentzer, Flint &
Hult, 2001). The notion of Logistics Service Quality (LSQ) is explained from two perspectives:
objective and subjective quality. The first approach relates quality with adapting the service to
service provider defined specifications (Thai, 2013). This industrial view of service sees quality
as an accurate evaluation of all the stages and operations necessary to deliver the service,
likening the process to that of manufacturing a product by considering the service as a physical
object which can be observed and with attributes that can be evaluated (Garvin, 1984). The other
approach transfers estimation of quality to customer that is subjective quality. From this
perspective, service quality is “an International judgment or attitude, regarding the superior
nature of the service”. This is of considerable importance because how things are perceived
represents actors “reality”, implying that how chain members perceive the actual quality and
quality requirements will influence the quality they try to obtain. The focus is on one particular
aspect of the flow of products; namely how members at different stages in distribution chain
 perceive product quality. Although, there has been much research on distribution chains (Stern,
El-Ansary & Coughlan, 1996), few studies in the supply chain literature have examined how
members at different stages in the distribution chain perceive the quality of the product. Hence
this study mainly focused on the perceptions of distributors about the quality of service provided
by the company.
Gupta and Singh (2012), define the Service quality in supply chain as how well an
organization meets or exceeds the customer expectations in unidirectional or bidirectional for
each element of a supply chain i.e. supplier, manufacturer, distributor, retailer and customer or
end consumer. The Quality of service in the supply chain context is defined as “the variance
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

amid the expectations and perceptions at every level within the supply chain and for the chain as
a whole”. The loss due to poor sale can be easily assessed, but it is very challenging to compute
the loss caused by poor service quality. Hence, Service quality influences not only on suppliers,
distributors, employees and customers, nevertheless it touches the whole business and
development of organization. The logistics industry currently is a typical illustration of service-
based industry enlargement (Chapman, Soosay & Kandampully, 2003). In the current
International scenario, Individual firms are no longer operating as independent bodies but are
competing as primary part of supply chain links (Seth, Deshmukh & Vrat, 2006). Hence the
competition is between supply chains and not companies (Christopher, 2012). According to
Waters and Waters (2003), when organizations work together they serve as customers when
purchasing supplies from individual suppliers and as suppliers when supplying materials to
personal customers. Hence, every member of the supply chain needs to be satisfied. There is a
variation in the background of supply chain management in present years and satisfaction of
every participant of the supply chain can be improved only by placing away the outmoded arms-
length association and by developing faster partnership type arrangements (Christopher & Lee,
2004). In the expansion of these arrangements, service quality plays a vital role and the
association of service quality with enhanced supply chain performance is extensively recognized
(Mentzer, Flint & Kent, 1999; Perry & Sohal, 1999). Kuei, Madu and Lin (2001), also proved that
organizational performance could be enhanced through improved supply chain quality management
and suggested for further research in understanding quality practices along the supply chain and about
the association between quality practices and a system's overall performance.
 Irrespective of the worldwide appreciation of the position of quality of service in supply
chains, nevertheless it is slightly investigated (Nix, 2001). There is more need for empirical
research of business to business customers in service quality (Madaleno, Wilson & Palmer,
2007). A majority of prior studies in service quality research are focused on end-use customer
(Faulds and Mangold, 1995; Perry and Sohal, 1999). Further, comprehensive studies of logistics
are required with the perspective of supply channel interactions (Lambert, 2004). Only limited
studies are done in the development of service quality measurement scales in supply chains
(Bienstock, Mentzer & Bird, 1996; Mentzer et al. 1999; Rafele, 2004). Most of these studies
are confined to special sectors in developed countries. Additional experimental research is
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

required for generalizing the conclusions of these studies in the International economy (Rafele,
2004). Hence, measurement of quality of service in the context of supply chain management
presents a challenge for the present researchers (Seth et al., 2006). Distribution part plays a
crucial role in the management of a supply chain. Manufacturers manage the actual distribution
of drugs from manufacturing facilities to drug wholesalers, and in some cases, directly to retail
pharmacy chains, specialty pharmacies, and hospital chains. Manufacturers play a very
important role in ensuring that the drug reaches customers timely and safely in the
pharmaceutical supply chain. Manufacturers and Distributors have a very important role in
effecting the supply chain profitability. In this scenario an attempt has been made to study the
factors influencing service quality at the Manufacturer-Distributor Interface. Numerous
researchers advocated for manufacturer- distributor partnership and alliances. Limited Research
is done in supply chain especially focusing on service quality at Manufacturer–Distributor –
interface of the pharmaceutical supply chain. Hence to decrease this research gap our research is
focused on identifying the critical factors effecting service quality at the Manufacturer–
Distributor – Interface of the supply chain.
2. Literature Review: The origins of numerous instruments measuring service quality can perhaps
be traced back to the pioneering work of Parasuraman et al., (1988) who developed the widely
popular scale termed as SERVQUAL to evaluate service quality. According to them, service quality
is derived from a comparison between customer expectations and customer perceptions of actual
service performance. They suggested that five dimensions namely: tangibles, reliability, assurance,
responsiveness and empathy, influence service quality perceptions. The SERVQUAL instrument has
evolved to become the most commonly used service quality measurement instrument. Ladhari
 (2009) reviewed 20 years (1988-2008) of research on the SERVQUAL scale for measuring service
quality and concluded that SERVQUAL remains to be the useful instrument for service-quality
research. Several prior studies have adapted the SERVQUAL Instrument to the context under
investigation. For example, Dabholkar, Thorpe & Rentz (1995), developed a scale for measuring
retail service quality using Confirmatory factor analysis. Bienstock et al., (1996), introduced a tool
for assessing purchasing manager’s perceptions of physical distribution service quality (PDSQ).
Sinha and Subash Babu (1998) developed Depot Service Index( DSI) to measure service quality
from factory to distribution network. Mentzer et al., (1999); Mentzer, Flint & Hult, (2001), identified
major factors of logistics service quality. Bienstock et al., (1996) studied the perceptions of
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

purchasing managers about Physical Distribution Service Quality (PDSQ), and found that timeliness,
availability and conditions significantly influence the managers with timeliness being the most
important of the three dimensions of PDSQ. Kuei, Madu, Lin (2001), studied the middle managers'
perceptions on the association between supply chain quality management practices and organizational
performance. They found that high quality-tendency systems tend to perform better than low quality-
tendency systems on cost savings, also organizational performance could be enhanced through improved
supply chain quality management. Stanley and Wisner (2002) recognized the service quality factors
for purchasing in manufacturing and service organizations. Panayides & So (2005) examined
empirically the influence of relationship orientation in third-party logistics and its impact on logistics
service quality and performance using Structural equation modeling. They found that relational
exchange can have a positive effect on logistics service quality and performance. Seth et al., (2006a,
2006b), proposed a model for evaluating the quality of service using third party logistics at various
interfaces of the supply chain. Huang and Feng (2007) developed the Logistics Service Quality scale
for electronic commerce and specified that service provider have to emphasize on information
quality and ordering. Saravanan and Rao (2007), studied the overall service quality of the
automobile service stations in India. They identified the critical factors of service quality as human
aspects of service delivery, core service, social responsibility, and nonhuman aspects. Clark and
Clark (2007), measured service quality in health care settings and showed that customers decrease
their expectations when confronted with poor quality of service. Rönnbäck & Witell (2008) critically
examined the literature and evaluated the business performance implications of adopting quality
management principles in manufacturing and service organization systems. They suggested
including a supply-chain approach, involving all actors in the strategy of process measurements in
 the co-creation of value for customers. Gil Saura et al., (2008), highlighted the prevalence of
information and communication technologies (ICT) and its importance in logistic service delivery
context in 194 companies. Bakar, Seval Akgün and Al Assaf (2008), assessed the functional quality
of the hospitals in Baskent University Hospitals Network, Turkey, with 472 patients through
SERVQUAL scale. Omar, Azrin & Sarah (2009), studied the perceptions of 413 pharmaceutical
retailers working in the two biggest cities of Pakistan and developed a scale with four dimensions:
reliability, assurance, tangibles, responsiveness and ten items for the measurement of service quality
in the distributor-retailer interface of the pharmaceutical supply chain. Omar et.al (2009), addressed
a notable gap in the literature, namely the lack of an appropriate scale for measuring programmed
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

service quality and recommended that future research in the area of service quality should include a
qualitative study involving program participants. Maruvada and Bellamkonda (2010) identified the
attributes to evaluate the quality of Railway Passenger Services and developed a comprehensive
instrument “RAILQUAL” on the basis of SERVQUAL and Rail Transport quality. Yeap Ai Leen
and Ramayah (2011) confirmed the scale developed by Dabholkar et al., (1995), in apparel stores
and proved that the instrument is applicable in the Malaysian culture. Prakash (2011) developed a
scale for assessing service quality in the supply chain at supplier-manufacturer interface in the
automobile sector. Annamdevula and Bellamkonda (2012) developed HiEdQUAL to assess the
service quality in education sector.
Various studies have been done relating to service quality in pharmaceutical sector. Al-
Shaqha and Zairi (2001a, 2001b), evaluated the concept of pharmaceutical care in many hospital
pharmacy practices. Janković et al., (2001), compared the service quality in public and private
pharmacies. Skyrius et al., (2002), studied the pharmaceutical services rendered in Lithuanian
community pharmacies. They found that Lithuanian pharmacists lack databases of patient
medication records which hinder them to render pharmaceutical services of the best quality.
Volmer et al., (2008), described about the practice and research related to pharmaceutical care in
Estonia. Basak, & Sathyanarayana (2009), evaluated the state of community pharmacies in India.
Nau (2008), described methods for measuring health care quality. Barnett et al., (2009) described
the variations over a seven year period in the major types of MTM (medication therapy
management) services offered by community pharmacies. Smith (2009) reviewed the quality of
professional services in low and middle income countries. Sherilyn, Kelly, Trish Chatterley and
Ross (2014), identified remunerated pharmacist clinical care programs worldwide.
 There have been very few studies on the development of service quality measurement
scales in supply chains (Beinstock et al. 1997; Mentzer et al. 1999, Rafele, 2004). These studies
are confined to specific sectors but very few studies have been done in the area of service quality
in supply chains in pharmaceutical sector. In this scenario this study mainly focused on
identifying critical factors of service quality in pharmaceutical supply chain. The ultimate test for
service quality is satisfaction. Service Quality proved its positive effect on performance of
business, Customer Satisfaction and Loyalty (Silvestro and Cross, 2000; Newman, 2001;
Sureshchandar, Rajendran & Anantharaman, 2002; Gurau, 2003). Hence this study also
examined the impact of service quality on Customer Satisfaction.
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Objectives of the study:

1. To identify the critical factors of service quality in Pharmaceutical Supply Chain from
distributors’ perspective.
2. To revalidate the SERVQUAL scale to measure distributor perceived service quality.
3. To study the Impact of Service quality on Customer Satisfaction.

3. Methodology: The data was collected from both primary and secondary sources. The
Primary data was collected with the help of a structured questionnaire through survey method.
The secondary data was collected from the Pharmaceutical reports, journals and websites. This
data was actually used in the initial stages to get an idea about the distribution practices and
structure of the pharmaceutical industry and also in developing the questionnaire. A sample of
440 distributors from three major Indian cities, namely - Hyderabad (200), Visakhapatnam (120)
and Rajahmundry (120) were purposively selected.
Hyderabad is pharmaceutical and biotechnology hub known as India's pharmaceutical capital.
Visakhapatnam known as Jawaharlal Nehru Pharma City (JNPC) which is the only
Pharmaceutical Special Economic Zone in India, with 38 pharmaceutical companies.
Rajahmundry is the eighth most populous city having many multi-specialty hospitals and huge
number of pharmacies which is catering the health needs of patients of five districts including
highly populated Godavari districts. It is one of the major distribution point for drugs which
serve almost nine million population. Glaxo Smithline Beecham Consumer Healthcare limited
(world leading research-based pharmaceutical company) and “Southern Drugs and
Pharmaceuticals limited” are in Rajahmundry, so these three cities were selected (Appendix 3).
 One major pharmaceutical company (one of the top ten pharmaceutical companies with a
turnover of 618 million US $, third largest in India having Net Profit of 287 million US $, was
selected for our study. This company operates in over 60 countries, worldwide.

The method of “Five subjects for one attribute” was used for the determination of total
number of subjects for the sample of the exploratory survey (Hair, Black, Babin & Anderson,
2010). The method of five subjects for one attribute denotes that the sample size should be five
times as large as the number of total attributes identified, following the attribute refinement
process of the study. Harris and Schaubroeck (1990), proposed a sample size of 200 at least to
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

guarantee robust structural equation modeling. Kline (2010) suggested that a very complicated
path model needs a sample size of 200 or larger while Bagozzi and Yi (2012) proposed that the
sample size should be above 100, preferably above 200. There are 21 attributes identified for the
study, the ideal sample size is 105(= 21X5). The selected sample, n=440 distributors exceeds this
requirement. The data collection took a period of almost six months and the nonresponse was
also high. Out of 600 distributors who were contacted, almost 30 percent of the distributors were
not interested in answering the questionnaire because of their busy timings.
Development of Research Instrument: For this particular study, one of the most acceptable
service quality measurement scale, namely SERVQUAL, proposed by Parasuraman et al.,
(1988), was used for developing the questionnaire. Parasuraman et al., (1988), service quality
measurement scale is applicable to all kinds of service sectors and also supply chains (Rafele,
2004). An initial questionnaire based on the SERVQUAL scale was prepared after focus group
discussions and expert opinions. The focused group consisted of the supply chain managers,
Distributors, Retailers, industry experts and academicians. Several of the items in SERVQUAL
scale were modified to suit the pharmaceutical context after deliberate discussions and analysis.
A preliminary survey was also conducted and the questionnaire was further modified. The
Questionnaire (Appendix 1) was then finalized after ensuring the reliability. On a five-point scale
the respondents were asked to indicate the applicability of each statement ranging from strongly
agree to strongly disagree.

4. Results and Discussion:

 4.1 Factors of functional service quality: Exploratory factor analysis (EFA) using the principle
component and varimax approach was first conducted to identify the critical factors of distributors
perceived service quality. Four factors (named as Responsiveness, Assurance, Reliability and
Communication) having nineteen items were extracted through EFA (see Table 1). The results
showed that the value of Kaiser-Meyer-Olkin (KMO) is 0.905 a measure of sampling adequacy.
The KMO value must exceed 0.50 and the value above 0.8 is considered meritorious (Hair et al.,
2010). The total variance explained by all these four factors was 62 percent. Other statistical base is
Bartlett test of sphericity, which provides the statistical probability that the correlation matrix has
significant correlations among at least some of the variables. The result were significant at 0.05, χ2
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

= 2028.577 (p = 0.000) a clear indication of suitability of factor analysis. Factor loadings more than
+0.40 remained for further analysis in the study. Reliability test for the data collection instrument
indicated that the Cronbach alpha is 0.914 (Appendix 2) satisfying the reliability criteria (acceptable
standard is 0.5).
Table: 1. Exploratory Factor Analysis Results
Components
Responsiveness Assurance Reliability Communication
Company has customer’s interest at heart .737
The company shows keen interest in solving your complaints relating to drugs .714
The company takes regular feedback about the product Performance .710
The Company provides information about potential drug diversion or inappropriate use .687
The company informs you of the changing market requirements regularly .686
The company regularly interacts with you to understand your requirements .645
The Company educates about new drugs, doses or delivery systems associated with
.638
alternative products
Medical Representatives of the companies visit frequently .521
The Company works regularly with distributors to jointly solve problems .725
The Company possesses the necessary information technology .657
The Company works with distributors to jointly plan future activities .654
The Company has good relationships with distributors .618
All distribution members are familiar with the Marketing Code of Ethics .578
Medical Representatives give you reliable information .719
The Company shares demand-related information with distributors .696
The company established supply chain performance rates against competitors .616
The Company puts serious effort into building trust and commitment with all members .567
The company takes your suggestions into consideration with regard to improvement of the .848
product quality
There is no uncertainty involved in the promotion of Company’s Products .595
 Eigen Values 7.662 1.982 1.172 1.040
Cumulative Variance 40.328 50.761 56.930 62.404
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization

4.2 Development and validity of the scale: Confirmatory Factor Analysis (CFA) facilitates to test
how the measured variables represent the construct. In our study we conducted CFA using
AMOS 20 for all the constructs by means of structural equation modeling which was used to
evaluate the underlying (four factor) model where individual items in the model were examined
to see how closely they represent the same construct. Another 200 distributor’s data set was
used to conduct CFA to confirm the factors identified in EFA. The process started with
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

preliminary analysis of the data and developing individual CFA model for each factor of the
theoretical factor structure that was identified in EFA (see Table1). Several runs of CFA were
conducted until satisfactory goodness of fit statistics was obtained. During this process, six items
with low variance were removed. The six items are (The company established supply chain
performance rates against competitors, The Company possesses the necessary information
technology, All distribution members are familiar with the Marketing Code of Ethics, Medical
Representatives of the companies visit frequently, The company regularly interacts with you to
understand your requirements, The Company provides information about potential drug
diversion or inappropriate use). After deletion of six items, a valid scale with four dimensions-
Reliability, Responsiveness, Assurance, and Communication with thirteen items emerged (See
Fig:1). The three dimensions Reliability, Responsiveness and Assurance matched with widely
accepted SERVQUAL dimensions developed by Parasuraman et al. (1988). The findings also
matched with the scale developed by Niaz Ahmad (2009). He developed a valid and reliable
scale with four dimensions - Reliability, Responsiveness, Assurance and Tangibles for
measuring service quality in the distributor-retailer interface of pharmaceutical supply chains in
Pakistan. Communication was the new dimension identified in this study for measuring service
quality in the pharmaceutical sector. It is a well-known fact that for effective performance of the
supply chain, proper communication is essential. Nitin Seth, Deshmukh, Prem Vrat, (2006)
identified Improper communication between functions, and lack of coordination as one of the
major reasons for gaps at intra-organizational level (focal firm to distributor and vice versa).
Ghobadian (1994) and Haywood-Farmer (1988) also identified communication as one of the
 important dimensions of service quality. Hence the identified service quality dimensions
matched with the already established scales.

4.3 Model Fit: The scale was examined for goodness of fit statistics. The p-value of 0.00 for the Chi
square statistics implies good absolute model fit. The recommended value for RMSEA should be
less than 0.05 as an indication of good fit while values between 0.08 - 0.1 indicate reasonable fit
(Hair et al., 1995). The RMSEA value (0.057) is less than 0.08, which indicates an acceptable level
of internal consistency (Hu and Bentler, 1999) and also indicate that the model theory fits the
sample data (Hair et al. 2010). The fit indices –RMR (0.036), GFI (0.928), NFI (0.932), IFI (0.972)
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

CFI (0.972) and TLI (0.963) are all within the recommended tolerances except AGFI (0.889). The
normed Chi-square (97.365) is also within the broader recommended range. The amount of squared
multiple correlations for all dimensions in the model are more than 0.5 thus indicating acceptable
squared factor loadings. All the factor loadings in the developed CFA model are statistically
significant at significance level of 0.001. The fit indices reflect acceptable level of fit and all the
indices are within recommended tolerances (See Table: 2).

Table 2: The CFA Goodness Of Fit Indices Of Scale

Model value Key goodness of fit indices/level of acceptable fit
χ2 = 97.365 1.65 If χ2 /df => 0.05 = good fit, < 2 = over fit, ≤ 5= Good fit,
>5 = adequate fit
df=59
P 0.00 p < 0.001
GFI .928 ≥ 0.9 is Good fit
AGFI .889 ≥ 0.9 is Good fit
NFI .932 ≥ 0.9 is Good fit
CFI .972 ≥ 0.9 is Good fit
RMR .036 0.05 = Good fit, Between 0.05 to 0.1, Reasonable fit
RMSEA .057 ≤ 0.05 = Good fit, Between 0.05 to 0.1,Reasonable fit
IFI .972 ≥ 0.9 is Good fit
TLI .963 ≥ 0.9 is Good fit, Between 0.850 to 0.9 Reasonable fit

4.4 Reliability test: Reliability test for the data collection instrument indicated that the Cronbach
alpha is 0.905 (Appendix 3) satisfying the reliability criteria (acceptable standard is 0.5). Reliability
for all the constructs exceeded the suggested level of 0.60 (Nunnally, 1978). The construct
 reliability of all the latent dimensions ranged from 0.8 to 0.98 which indicate the internal
consistency of the statements (see table3).
4.5 Validity Test: Validity is the extent to which a set of measured items actually reflects the
theoretical latent construct. There are several different forms of validity which serve as criteria, for
assessing psychometric soundness of scale. They include discriminant validity, face validity, and
convergent and concurrent validity (Peter and Churchill, 1986). We conducted face validity, content
validity, convergent validity, discriminant validity tests to validate the four constructs of service
quality.
Face validity and content validity: The questionnaire used was based on the widely used Service
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

quality measurement scale (SERVQUAL-Parasuraman, 1988) so it satisfies Face validity and

content validity.
Convergent validity: All the variables with standardized loading estimates between 0.5 and 0.7
indicate an evidence of convergent validity. Standardized factor loadings of each variable in our
study are above 0.50 which ensure that the model has convergent validity (see Table3).
Average Variance Extracted (AVE): A good rule of thumb for convergent validity is an AVE of 0.5
or higher. Construct reliability (C.R) also one of the indication for convergent validity. The rule of
thumb for a construct reliability estimate is that 0.7 or higher suggests good reliability. High
construct reliability indicates that internal consistency exists. The results of the study in the (table 3)
show that AVE is above 0.5 and C.R is above 0.8 for all the items, so it satisfies the above criteria.
In addition, all Eigen values of constructs are greater than 1.0, which also confirm convergent
validity (Hair et al., 2010).
 Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Figure 1: Distributor Perceived Service Quality Scale

 Table 3: AMOS Results of Measurement Model
Constructs Attributes SE C.R SMC AVE
The Company educates about new drugs, doses or delivery 0.83 .378 .502
.615
systems associated with alternative products
The company informs you of the changing market .547
.740
requirements regularly
Responsiveness
The company takes regular feedback about the product .395
.628
Performance
The company shows keen interest in solving your .485
.696
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

complaints relating to drugs

Company has customer’s interest at heart .840 .706
The Company has good relationships with distributors .798 0.98 .637 0.758
The Company works with distributors to jointly plan future .858
Assurance .926
activities
The Company works regularly with distributors to jointly .780
.883
solve problems
The Company puts serious effort into building trust and 0.83 .659 0.627
.812
commitment with all members
Reliability
Medical Representatives give you reliable information .716 .513
The Company shares demand-related information with
.842 .709
distributors
The company takes your suggestions into consideration 0.8 .420 0.668
with regard to improvement of the product quality .648
Communication

There is no uncertainty involved in the promotion of .916

.957
Company’s Products
Note: SE-Standardized Estimates, CR-Construct Reliability, AVE-Average Variance Extracted, SMC-SquaredMultipleCorrelations

Discriminant validity: Discriminant validity was checked with the comparison of variance
extracted (VE) estimates for each factor with the squared inter-construct correlations (SIC)
associated with that factor. Results of the study indicated that all the extracted variance estimates
 are greater than squared inter-construct correlations, it means that each construct is unique and
capture some experience which other measures do not (Table- 4). Thus, the measurement model
reflects good model fit, construct validity and reliability.
Table 4 - AVE and Squared Inter-Construct (covariance) Correlations (SIC) for
Discriminant validity analysis
Dimensions Responsiveness Assurance Reliability Communication
Responsiveness 0.50
Assurance 0.203*0.203=0.04 0.76
Reliability .238*.238=0.057 .384*.384=0.147 0.627
Communication .150*.150=0.0034 .148*.148=0.022 .237*.237=0.056 0.668
Note: AVE in the diagonal and squared correlations off-diagonal
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Assessment of unidimensionality using goodness of fit statistics, scale reliability and construct
validity (content validity, convergent validity and discriminant validity) together confirmed that the
scale which emerged during CFA (Figure 1) is a good model. It has four dimensions (reliability,
assurance, responsiveness and communication) and thirteen items. This model constitutes a service
quality scale for measurement of service quality at the manufacturer (company) – distributor
(customer) interface of pharmaceutical supply chain.

4.6: Impact of Service Quality on Satisfaction: Customers experience various levels of satisfaction
or dissatisfaction after each service experience according to the extent to which their expectations
were met or exceeded. The main consequences of quality are satisfaction and loyalty. Logistics
research based on marketing principles began to analyze the capacity of logistics to deliver quality
and thus generate greater customer satisfaction and loyalty (Mentzer et al., 2004; Tokman et al.,
2007). Research by Millen et al. (1999) identifies significantly improved customer satisfaction as a
key benefit of Logistics Service. Many studies have shown the impact of quality on satisfaction.
Hence this study also examined the impact of service quality on satisfaction.

CFA of Customer Satisfaction: Customer Satisfaction was measured using a four item scale
derived from the literature review. The Satisfaction dimension consisted of four indicators namely –
satisfaction with quality of the drugs, quality of the service, relationship with the company and
overall satisfaction with the company. Fig: 2 present the schematic representation of the CFA model
for satisfaction. The factor loadings are significantly loaded to the dimension. Absolute fit indices,
such as Goodness of Fit Index (GFI) effectively compare the hypothesized model with null model
 and measure the relative level of variance and covariance (Byrne, 2013). Detailed research by Hu
and Bentler (1995), Marsh et al.,(1988) suggest that GFI performs better than the other absolute fit
indices. A GFI of above 0.90 is generally accepted as indicative of a good fit (Hair et al., 1998;
Hu& Bentler, 1995). The fit indices of the CFA model of satisfaction are in the accepted level. The
absolute fit indices of GFI (0.937), RMR (0.01)) are all within the recommended tolerances except
RMSEA. Hu and Bentler (1999) recommended the test of RMSEA > .05 (or .06) as one of the
alternative tests for detecting model misspecification, although they noted the test tended to over-
reject at small sample size. Marsh, Hau, and Wen (2004) further cautioned researchers about using
the cutoff criteria provided by Hu and Bentler (1999) as “golden rules of thumb,” particularly due to
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

their limited generalizability to mildly misspecified models. Browne and Cudeck (1993) and Steiger
(1989) warned the researchers that these cutoff points were subjective measures based on their
substantial amount of experience. Other researchers echoed the point by suggesting that the use of
precise numerical cutoff points for RMSEA should not be taken too seriously (Hayduk and Glaser
2000, Steiger 2000). Kenny, Kaniskan, and McCoach (2014) argue to not even compute the
RMSEA for low df models. The incremental or comparative fit indices also indicate an acceptable
level of fit with the NFI (0.948) and the CFI (0.950) being above the recommended minimum value
(table-5). The fit indices are all in the accepted level except RMSEA value which is more than the
minimum value. It indicates that the model is sufficiently fit. It may result in a better model fit
when the model is integrated with overall structural model. In the same way, the AVE and C.R
values are 0.66 and 0.88 respectively (Table: 6) which exceed the minimum required level of 0.50
for AVE and 0.70 for C.R (Hair et al., 2010). This indicates that the dimension of satisfaction has
construct validity and reliability.

Table 5-Model Validity Statistics:

GFI NFI CFI RMR RMSEA IFI TLI
0.937 0.948 0.950 0.011 0.270 0.951 0.851
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Figure 2 - CFA Model of Satisfaction

Table 6: – CFA Results of Satisfaction

Attributes Factor Loadings Squared Loadings C.R AVE

Total quality 0.973 0.202

Total service 0.905 0.694

0.88 0.66
Overall opinion 0.833 0.819

Total relationship 0.45 0.946

Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Distributor Perceived Service Quality- Satisfaction Model:

 Figure 3 - DPSQ-Satisfaction Model (DPSQ- Distributor Perceived Service Quality)

DPSQ Final Structural Model:

In this section the structural model was developed to identify the relationships between the
constructs of distributor perceived service quality (DPSQ), and satisfaction. Initially the CFA
for each latent construct was done, after which, these constructs were combined to develop
overall measurement model of latent constructs. Finally, the measurement model of latent
constructs was fixed into structural model to test the relationships between the constructs. The
overall model is examined using Structural Equation Modeling. Structural Equation Modeling
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

has a number of advantages over other multivariate techniques (Anderson and Gerbing, 1988;
Byrne, 2013; Mackenzie, 2001). In particular it can incorporate entire systems of hypothesized
relationships to enable the modeling of a complex series of relationships that are more
representational of complex environments (Mackenzie, 2001).

The full structural model is shown in Fig: 3 this model incorporates the relationships to demonstrate
a direct relationship between distributors perceived Service quality and satisfaction. The impact of
reliability, assurance, responsiveness and communication on distributor perceived Service quality
and satisfaction was tested in this model. The pathway from Responsiveness to DPSQ is significant
(p< 0.001) and the standardized regression weight is 0.51 proving that Responsiveness influences
DPSQ. In the same way the pathway from Assurance to DPSQ is significant (p< 0.001) with the
standardized regression weight of 0.71, the pathway from Reliability to DPSQ is significant (p<
0.001) with the standardized regression weight of 0.79 and the pathway from Communication to
DPSQ is significant (p< 0.001) with the standardized regression weight of 0.28 proving that
Assurance, Reliability and Communication influence Distributor Perceived Service Quality. The
results also indicate that the pathway from Distributor perceived service quality to satisfaction is
significant (p<0.001) with a standardized regression weight of 0.41. Therefore it is proved in this
model that Reliability, Assurance, Responsiveness and Communication influence Distributor
perceived service quality which in turn affects satisfaction. The standardized regression weights in
each pathway are provided in Table 7.
 Table 7 -Standardized Regression Weights for Path Relationships

Construct Relationship Standardized Regression Significance

Weights
Reliability -Distributor perceived service quality 0.790 0.00
Assurance -Distributor perceived service quality 0.712 0.00
Responsiveness -Distributor perceived service 0.508 0.00
quality
Communication -Distributor perceived service 0.281 0.00
quality
Distributor Perceived Service -Satisfaction 0.407 0.00
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Model fit Assessment: The table 8, presents the model fit indices of the model. The χ2 /df value is
2.8, indicates that the model is acceptable. All fit indices are at an accepted level - CFI (0.90), IFI
(0.90) except GFI, NFI and AGFI. The RMR value (0.06) and RMSEA values (0.09) are within the
acceptable level indicating the fitness of the model. Basically, the structural model is considered to
fit the sample data reasonably and can be accepted as a fitting model considering the complexity of
the model and large sample size. More complex models with larger samples should not be held to
the same strict standards and so when samples are large and the model contains a large number of
measured variables and parameter estimates, cut off values of 0.90 on key Goodness of Fit
Measures (GOF) measures are unrealistic (Byrne, 2013; Hair et al., 1998; Tabachnick and Fidell,
2001).

Table 8: Model Validity Statistics of the Structural model

GFI AGFI NFI CFI RMR RMSEA IFI χ2 df χ2 / df

0.85 0.81 0.85 0.90 0.06 0.09 0.90 285.73 103 2.8

Model Fit Assessment (Validity and Reliability): The validity of the model is based on convergent
validity. The table-9, presents the significant standard loadings, average variance extracted (AVE)
 and construct reliability (CR). All the constructs have significant standardized loadings and AVE
values ranging from 0.5 to 0.84. The construct reliability values are also above 0.70 for all the
constructs which indicate that the constructs have convergent validity.

Table 9: AMOS Results of Structural Model

Regression paths Standard loadings SMC P AVE CR
Distributor Perceived Service
Quality(DPSQ)
Responsiveness- DPSQ 0.00 .539 .85
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Doses—Responsiveness .458 .210

Requirements- Responsiveness .847 .717
Interest- Responsiveness .710 .505
Feedback- Responsiveness .904 .817
Complaints- Responsiveness .668 .446

Assurance- DPSQ 0.00 .754 .90

Relationship- assurance .793 .629
Activities- assurance .939 .882
Problems- assurance .866 .751

Reliability- DPSQ 0.00 .78 .91

Reliable- Reliability .895 .801
Demand- Reliability .936 .875
Commitment- Reliability .815 .665

Communication- DPSQ 0.00 .70 .82

Uncertainty- Communication .850 .722
Suggestions- Communication .818 .669

Satisfaction 0.00 .61 .82

Total service- Satisfaction .696 .484
Total relationship- Satisfaction .792 .629
Overall opinion- Satisfaction .844 .712

Note: P-Probability level of 0.001, AVE-Average Variance Extracted, CR-Construct Reliability,

SMR-Squared Multiple Correlations

5. Conclusion: The pharmaceutical sector is playing a very major role in India and any negligence
at any stage of the pharmaceutical supply chain affects the health of the people. This study has been
 conducted to understand the distributors’ perceptions about quality of service provided by the
Manufacturers. Our results concluded that Responsiveness, Assurance, Reliability and
Communication are the critical factors effecting company’s service quality coinciding with
Parasuraman et al., (1988) and Niaz Ahmad et al., (2009) scale except for addition or deletion of
one dimension. The fact that the Distributors’ perceived service quality affects the level of
satisfaction, is supported and proved in this study corresponding with earlier studies of Ieva
Meidutė-Kavaliauskienė et al.,(2014), Yannis et al., (2014) and other works. The proposed
distributor perceived service quality scale will be very helpful for the manufacturing industries to
evaluate and measure the quality of service periodically. The manufacturers can compare their
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

performance with other competitors using the dimensions identified in the scale and fill the lacunae.
The instrument would serve as a diagnostic tool to identify the weak areas in the supply chain
which need attention. This scale will be very helpful for the pharmaceutical manufacturers to
measure service quality because anything less than “100 percent customer service” seriously affects
the customers’ health directly. This study will give new insights to researchers and academicians to
develop more models and concepts where little research has been done in this sector. The Study will
be helpful for practitioners to evaluate their performance and take corrective actions in order to
improve the performance of the supply chain. The study is limited to three Indian cities in southern
region; it can be extended to other regions of the country. The scale was developed only at the
Manufacturer-Distributor Interphase, it can be extended to other phases of the supply chain and
improve the supply chain performance.

References
Al-Shaqha, W. M., & Zairi, M. (2001a). Pharmaceutical care management: a modern approach to
providing seamless and integrated health care. International Journal of Health Care Quality
Assurance, 14(7), 282-301.
Al-Shaqha, W. M., & Zairi, M. (2001b). The role of quality in pharmaceutical care management.
Managing Service Quality: An International Journal, 11(1), 32-39.
Anderson, J. C., & Gerbing, D. W. (1988). Structural equation modeling in practice: A review
and recommended two-step approach. Psychological bulletin, 103(3), 411.
 Annamdevula, S., & Bellamkonda, R. S. (2012). Development of HiEdQUAL for Measuring
Service Quality in Indian Higher Education Sector. International Journal of Innovation,
Management and Technology, 3(4), 2012.
Bagozzi, R. P., & Yi, Y. (2012). Specification, evaluation, and interpretation of structural
equation models. Journal of the academy of marketing science, 40(1), 8-34.
Bakar, C., Seval Akgün, H., & Al Assaf, A. F. (2008). The role of expectations in patient
assessments of hospital care: an example from a university hospital network, Turkey.
International Journal of Health Care Quality Assurance, 21(4), 343-355.
Barnett MJ, Frank J, Wehring H, Newland B, VonMuenster S, Kumbera P, Halterman T, Perry
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

PJ (2009).Analysis of pharmacist-provided medication therapy management (MTM)

services in community pharmacies over 7 years. J Manag Care Pharm. 15(1),18-31.
Basak, S. C., & Sathyanarayana, D. (2009). Community pharmacy practice in India: past, present
and future. Southern med review, 2(1), 11.
Bienstock, C. C., Mentzer, J. T., & Bird, M. M. (1996). Measuring physical distribution service
quality. Journal of the Academy of Marketing Science, 25(1), 31-44.
Browne, M. W., & Cudeck, R. (1993). Alternative ways of assessing model fit. Sage focus editions,
154, 136-136.

Burns, L.R., Wharton School Colleagues, (2002). The Health Care Value Chain Producers,
Purchasers, and Providers. Jossey-Bass, San Francisco, CA.
Byrne, B. M. (2013). Structural equation modeling with AMOS: Basic concepts, applications, and
programming. Routledge.

Chapman, R. L., Soosay, C., & Kandampully, J. (2003). Innovation in logistic services and the new
business model: a conceptual framework. International Journal of Physical Distribution &
Logistics Management, 33(7), 630-650.

Christopher, M. (2012). Logistics and supply chain management. Pearson UK.

Christopher, M., & Lee, H. (2004). Mitigating supply chain risk through improved confidence.
International Journal of Physical Distribution & Logistics Management, 34(5), 388-396.
Christopher, Martin L. (1992), Logistics and Supply Chain Management, London: Pitman
Publishing.
 Clark, W. R., & Clark, L. A. (2007). Measuring functional service quality using SERVQUAL in
a high-dependence health service relationship. The health care manager, 26(4), 306-317.
Cooper, Martha C., Douglas M. Lambert, and Janus D. Pagh (1997), “Supply Chain
Management:More Than a New Name for Logistics,” The International Journal of Logistics
Management,Vol. 8, No. 1, pp. 1-14.
Crosby, P. (1991), La calidad no cuesta. El arte de cercionarse de la calidad, CECSA, Me´jico.
Dabholkar, P. A., Thorpe, D. I., & Rentz, J. O. (1995). A measure of service quality for
retail stores: scale development and validation. Journal of the academy of Marketing
Science, 24(1), 3-16.
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Davenport, T. H. (2013). Process innovation: reengineering work through information

technology. Harvard Business Press.
De Vries, J., Huijsman, R., 2011. Supply chain management in health services: an overview.
Supply Chain Management: An International Journal 16 (3), 159–165.
Faulds, D. J., & Mangold, W. G. (1995). Service quality in the distributor-retailer dyad:
empirical results. Journal of Marketing Channels, 4(3), 95-112.
Garvin, D. A. (1984). What does product quality really mean. Sloan management review, 26(1).
Ghobadian, A. (1994), “Service quality concepts and models”, International Journal of Quality &
Reliability Management, Vol. 11 No. 9, pp. 43-66.
Gil Saura, I., Servera Frances, D., Berenguer Contri, G., & Fuentes Blasco, M. (2008). Logistics
service quality: a new way to loyalty. Industrial Management & Data Systems, 108(5), 650-
668.
Gupta, T. K., & Singh, V. (2012). Service Quality in Supply Chain: A Review. International
Journal of Engineering and Technology, 2(8), 1395-1404.
Gurau, C. (2003). Tailoring e-service quality through CRM. Managing Service Quality: An
International Journal, 13(6), 520-531.
Hair J, Anderson RE, Tatham RL, Black WC. Multivariate data analysis. 4th ed. NewJersey:
Prentice-Hall Inc; 1995
Hair, J. F, Anderson, R. E., Tatham, R. L., and Black, W. C., (1998), Multivariate Data Analysis,
Macmillan, New York.
Hair, J. F. Black, WC, Babin, BJ, & Anderson, RE (2010). Multivariate data analysis, 7.
 Harris, M. M., & Schaubroeck, J. (1990). Confirmatory modeling in organizational
behavior/human resource management: Issues and applications. Journal of Management,
16(2), 337-360.
Hayduk, L. A., & Glaser, D. N. (2000). Jiving the four-step, waltzing around factor analysis, and
other serious fun. Structural Equation Modeling, 7(1), 1-35.
Haywood-Farmer, J. (1988), Ghobadian (1994), Johnston (1995) “A conceptual model of service
quality”, International Journal ofOperations & Production Management, Vol. 8 No. 6,
pp.19-29.
Hu, L. T., & Bentler, P. M. (1999). Cutoff criteria for fit indexes in covariance structure analysis:
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Conventional criteria versus new alternatives. Structural equation modeling: a multidisciplinary

journal, 6(1), 1-55.

Hu, L. T., & Bentler, P. M. (1999). Cutoff criteria for fit indexes in covariance structure analysis:
Conventional criteria versus new alternatives. Structural equation modeling: a
multidisciplinary journal, 6(1), 1-55.
Huang, Y. K., & Feng, C. M. (2007, September). Modeling the determinants of logistics service
quality on retailing delivery service for online shopping. In Wireless Communications,
Networking and Mobile Computing, 2007. WiCom 2007. International Conference on
(pp.3343-3346). IEEE.
IBM Global Business Services, Pharma (2010). The value-creating supply. Retrieved from
http://www-935.ibm.com/services/de/bcs/pdf/2006/pharma_2010_supplychain.pdf
Ieva Meidutė-Kavaliauskienė, Aranskis, A., & Litvinenko, M. (2014). Consumer satisfaction
with the quality of logistics services. Procedia-Social and Behavioral Sciences, 110, 330-
340.
Janković, S. M., Maksimović, M. R., Vusanović, A., Kostić, I. R., Kovačević, Z. N., & Mitrić,
M. (2001). Service quality in public and private pharmacies in the city of Kragujevac, FR
Yugoslavia. Croatian Medical Journal, 42(1), 88-91.
Jarrett, P.G., (2006). An analysis of international health care logistics: the benefits and
implications of implementing just-in-time systems in the health care industry. Leadership in
Health Services 19 (1), 1–10.
Kenny, D. A., Kaniskan, B., & McCoach, D. B. (2014). The performance of RMSEA in models
with small degrees of freedom. Sociological Methods & Research, 0049124114543236.
 Kline, R. B. (2010) Principles and Practice of Structural Equation Modelling. (3rd ed.), The
Guilford Press, New York.
Kuei, C. H., Madu, C. N., & Lin, C. (2001). The relationship between supply chain quality
management practices and organizational performance. International Journal of Quality &
Reliability Management, 18(8), 864-872.
Ladhari, R. (2009). A review of twenty years of SERVQUAL research. International Journal of
Quality and Service Sciences, 1(2), 172-198.
Lambert, D. M. (2004). The Eight Essential Supply Chain Managament Processes. Supply Chain
Management Review, V. 8, No. 6 (Sept. 2004), P. 18-26: Ill, 8(6).
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

MacCallum, R. C., Browne, M. W., & Sugawara, H. M. (1996). Power analysis and
determination of sample size for covariance structure modeling. Psychological methods,
1(2), 130.
Mackenzie,SB., (2001), Opportunities for improving consumer research through latent variable
structural equation modelling, Journal of Consumer Research, 28(1) pp 159-166.
Madaleno, R., Wilson, H., & Palmer, R. (2007). Determinants of customer satisfaction in a
multi-channel B2B environment. Total Quality Management & Business Excellence, 18(8),
915-925.
Marsh HW, Hau K, Wen. Z. In Search of Golden Rules: Comment on Hypothesis-Testing
Approaches to Setting Cutoff Values for Fit Indexes and Dangers in Overgeneralizing Hu
and Bentler's 1999 Findings. Structural Equation Modeling. 2004; 11: 320–41.
Marsh, H. W., Balla, J. R., & McDonald, R. P. (1988). Goodness-of-fit indexes in confirmatory
factor analysis: The effect of sample size. Psychological bulletin, 103(3), 391.
Maruvada, D. P., & Bellamkonda, R. S. (2010). Analyzing the passenger service quality of the
Indian railways using railqual: Examining the applicability of fuzzy logic. International
Journal of Innovation, Management and Technology, 1(5), 478-482.
Mentzer, J. T. (2004). Fundamentals of supply chain management: twelve drivers of competitive
advantage. Sage publications Millen, R., & Maggard, M. (1997). The change in quality
practices in logistics: 1995 versus 1991. Total Quality Management, 8(4), 173-179.
Mentzer, J. T., Flint, D. J., & Hult, G. T. M. (2001). Logistics service quality as a segment-
customized process. Journal of marketing, 65(4), 82-104.
 Mentzer, J. T., Flint, D. J., & Kent, J. L. (1999). Developing a logistics service quality scale.
Journal of Business, 20(1), 9-32.
Narayana, S.A., Pati, R.K., Vrat, P., 2012. Research on management issues in the pharmaceutical
industry: a literature review. International Journal of Pharmaceutical and Healthcare
Marketing 6 (4), 351–375.
Nau, D. P. (2008). Measuring pharmacy quality. Journal of the American Pharmacists
Association: JAPhA, 49(2), 154-163.
Newman, K. (2001). Interrogating SERVQUAL: a critical assessment of service quality
measurement in a high street retail bank. International journal of bank marketing, 19(3),
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

126-139.
Niaz Ahmad, Muhammad Usman Awan and Abdul Raouf, Development of a service quality
scale for pharmaceutical supply chains, International Journal of Pharmaceutical and
Healthcare Marketing, Vol. 3 No. 1, 2009,pp. 26-45, Emerald Group Publishing Limited.
Nitin Seth, S.G. Deshmukh, Prem Vrat, (2006),"A framework for measurement of quality of
service in supplychains", Supply Chain Management: An International Journal, Vol. 11
Iss:1 pp. 82 – 94.
Nix, N. (2001). Customer service in supply chain management context. Mentzer, JT
(Ed.)//Supply Chain Management.–Sage, New York, NY.–2001.–358 р.
Nunnally, J.C, (1978), Psychometric theory, 2nd ed., Mc-graw Hill, NewYork,NY.
Omar, N. A., Azrin, M., & Sarah, H. (2009). What Customers Really Want: Exploring Service
Quality Dimensions in a Retail Loyalty Programme. Unitar E-Journal, 5(1), 68.
Panayides, P. M., & So, M. (2005). The impact of integrated logistics relationships on third-party
logistics service quality and performance. Maritime Economics & Logistics, 7(1), 36-55.
Parasuraman, A., L.L. Berry, and V.A. Zeithaml (1988), SERVQUAL: a multiple-item scale for
measuring customer perceptions of service quality, Journal of Retailing, 64(1), 12-40.
Pazirandeh, A., (2011). Sourcing in global health supply chains for developing countries:
literature review and a decision making framework. International Journal of Physical
Distribution and Logistics Management 41 (4), 364–384.
Perry, M., & Sohal, A. (1999). Improving service quality within the supply chain: an Australian
study. Total quality management, 10(4-5), 673-678.
 Peter, J. P., & Churchill Jr, G. A. (1986). Relationships among research design choices and
psychometric properties of rating scales: a meta-analysis. Journal of Marketing Research, 1-
10.
Prakash, G. (2011). Service quality in supply chain: empirical evidence from Indian automotive
industry. Supply Chain Management: An International Journal, 16(5), 362-378.
Rafele, C. (2004). Logistic service measurement: a reference framework. Journal of
Manufacturing Technology Management, 15(3), 280-290.
Rönnbäck, Å., & Witell, L. (2008). A review of empirical investigations comparing quality
initiatives in manufacturing and service organizations. Managing Service Quality: An
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

International Journal, 18(6), 577-593.

Saravanan, R., & Rao, K. S. P. (2007). Service Quality from the Customer's Perspective: an
empirical investigation. Quality Management Journal, 14(3).
Seth, N., Deshmukh, S. G., & Vrat, P. (2006a). A conceptual model for quality of service in the
supply chain. International Journal of Physical Distribution & Logistics Management,
36(7), 547-575.
Seth, N., Deshmukh, S. G., & Vrat, P. (2006b). A framework for measurement of quality of
service in supply chains. Supply chain management: An international journal, 11(1), 82-94.
Shah, N., (2004). Pharmaceutical supply chains: key issues and strategies for optimization.
Computers and Chemical Engineering 28, 929–941.
Sherilyn K. D. Houle, Kelly A. Grindrod, Trish Chatterley, Ross T. Tsuyuki.(2014), Paying
pharmacists for patient care;A systematic review of remunerated pharmacy clinical care
services, Can Pharm J (Ott). 147(4), 209–232.
Silvestro, R., & Cross, S. (2000). Applying the service profit chain in a retail environment:
Challenging the “satisfaction mirror”. International Journal of Service Industry
Management, 11(3), 244-268.
Sinha, R. K., & Subash Babu, A. (1998). Quality of customer service in supply chain system: a
diagnostic study. International Journal of Quality & Reliability Management, 15(8/9), 844-
859.
Skyrius, V., Radziūnas, R., Barsteigiene, Z., Baranauskas, A., & Grincevicius, J. (2002).
[Analysis of possibilities of pharmaceutical care elements implementation in Lithuanian
community pharmacies]. Medicina (Kaunas, Lithuania), 39, 143-147.
 Smith, F. (2009). The quality of private pharmacy services in low and middle-income countries:
a systematic review. Pharmacy world & science, 31(3), 351-361.
Sohal, A. S., Millen, R., Maggard, M., & Moss, S. (1999). Quality in logistics: a comparison of
practices between Australian and North American/European firms. International Journal of
Physical Distribution & Logistics Management, 29(4), 267-280.
Stanley, L. L., & Wisner, J. D. (2002). The determinants of service quality: issues for
purchasing. European Journal of purchasing & Supply management, 8(2), 97-109.
Steiger JH. Causal modeling: a supplementary module for SYSTAT and SYGRAPH. SYSTAT;
Evanston, IL: 1989.
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Steiger, J. H. (2000). Point estimation, hypothesis testing, and interval estimation using the RMSEA:
Some comments and a reply to Hayduk and Glaser. Structural Equation Modeling, 7(2), 149-
162.

Stern, L. W., El-Ansary, A. I., & Coughlan, A. T. (1996). Marketing channels (Vol. 5). Upper
Saddle River, NJ: Prentice Hall.
Sureshchandar, G. S., Rajendran, C., & Anantharaman, R. N. (2002). The relationship between
service quality and customer satisfaction-a factor specific approach. Journal of services
marketing, 16(4), 363-379.
Tabachnick, BG. And Fidell, LS, (2001), Using multivariate statistics. 4th Edition, New York:
Harper Collins College.
Thai, V. V. (2013). Logistics service quality: conceptual model and empirical evidence.
International Journal of Logistics Research and Applications, 16(2), 114-131.
Tokman, M., Banu Elmadag, A., Uray, N., & Glenn Richey Jr, R. (2007). Exploring the
development of supply chain international joint ventures. International Journal of Physical
Distribution & Logistics Management, 37(6), 442-453.
Volmer, D., Vendla, K., Vetka, A., Bell, J. S., & Hamilton, D. (2008). Pharmaceutical care in
community pharmacies: practice and research in Estonia. Annals of Pharmacotherapy, 42
(7-8), 1104-1111.
Waters, C. D. J., & Waters, C. D. J. (2003). Logistics: an introduction to supply chain
management. New York City: Palgrave Macmillan.
 Yannis Politis , Apostolos Giovanis , Spyridon Binioris , (2014) "Logistics service quality and its
effects on customer satisfaction in the manufacturing companies’ supply chains: Empirical
evidence from Greece", Journal of Modelling in Management, Vol. 9 Iss: 2,pp.215 - 237
Yeap Ai Leen, J., & Ramayah, T. (2011). Validation of the RSQS in apparel specialty stores.
Measuring Business Excellence, 15(3), 16-18.
Yu, X., Li, C., Shi, Y., Yu, M., 2010. Pharmaceutical supply chain in China: current issues and
implications for health system reform. Health Policy 97 (1), 8–15.
Zheng, J., Bakker, E., Knight, L., Gilhespy, H., Harland, C., Walker, H., (2006). A strategic case
for e-adoption in healthcare supply chains. International Journal of Information
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Management 26, 290–301.

Zheng, J., Knight, L., Harland, C., Humby, S., James, K., (2007). An analysis of research into the
future of purchasing and supply management. Journal of Purchasing and Supply
Management 13, 69–83.
www.forrester.com
www.ibef.org/industry/pharmaceutical-india.aspx
 Appendix 1 - Questionnaire

Please indicate the extent to which you agree or disagree with the following statements

regarding company’s performance by ticking the appropriate choice. (SA- Strongly Agree,

A- Agree, N- Neither Agree nor Disagree, D- Disagree, SD- Strongly Disagree)

S.NO Particulars SA A N D SD

1 The company takes regular feedback about the product

Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Performance
2 The company regularly interacts with you to understand your
requirements
3 The company informs you of the changing market requirements
regularly
4 The Company provides information about potential drug
diversion or inappropriate use
5 The Company educates about new drugs, doses or delivery
systems associated with alternative products
6 The company shows keen interest in solving your complaints
relating to drugs
7 Medical Representatives of these companies visit frequently

8 Company has customer’s interest at heart

9 The Company works regularly with distributors to jointly solve

problems
10 The Company works with distributors to jointly plan future
activities
11 The Company has good relationships with distributors

12 The Company possesses the necessary information technology

13 All distribution members are familiar with the Marketing Code

 of Ethics
14 Medical Representatives give you reliable information

15 The Company shares demand-related information with

distributors
16 The company established supply chain performance rates against
competitors
17 The Company puts serious effort into building trust and
commitment with all members
18 The company takes your suggestions into consideration with
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

regard to improvement of the product quality

19 There is no uncertainty involved in the promotion of Company’s
Products
20 The company provides information about the latest products

21 The Company provides information about adverse drug reactions

that have caused a problem

Appendix 2- Reliability Statistics-1

Reliability Statistics(EFA)

Scale Cronbach’s
Mean If Scale Corrected Cronbach's Alpha
Item Variance If Item-Total Alpha If Item Of 19 Items
Deleted Item Deleted Correlation Deleted
Interest 52.5318 97.647 .763 .903 0.913

Complaints 52.4364 101.361 .657 .907

Feedback 52.6545 100.693 .619 .907

Diversion 52.6273 98.701 .635 .907

 Requirements 52.7591 98.595 .649 .906

Interacts 52.6000 102.049 .512 .910

Doses 52.6500 100.813 .665 .906

Visit 52.3091 100.826 .602 .908

Problems 52.1227 99.935 .616 .907

Information
51.8682 108.051 .286 .914
technology
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Activities 52.1773 100.128 .604 .908

Relationship 52.1864 99.604 .618 .907

Code 52.0409 110.679 .102 .918

Reliable 52.4409 99.590 .628 .907

Demand 52.3182 99.597 .588 .908

Competitors 51.8864 106.686 .519 .911

Commitment 52.4227 98.939 .658 .906

Suggestions 52.5500 105.171 .399 .913

Uncertainty 52.4909 100.434 .608 .908

 Reliability Statistics-II(CFA)

Scale Cronbach’s
Mean If Scale Corrected Cronbach's Alpha
Item Variance If Item-Total Alpha If Item Of 13 Items
Deleted Item Deleted Correlation Deleted
Doses 33.9550 58.506 .562 .900 0.905
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

Requirements 34.0600 55.976 .601 .899

Feedback 33.8950 58.416 .524 .902

Interest 33.8550 55.914 .689 .895

Complaints 33.7200 58.243 .590 .899

Relationship 33.6900 56.426 .678 .896

Activities 33.4050 55.498 .697 .894

Problems 33.0850 54.973 .685 .895

Commitment 33.7500 55.374 .683 .895

Reliable 33.4700 55.275 .629 .898

Demand 33.5700 54.789 .670 .896

Suggestions 33.6450 59.718 .426 .906

Uncertainty 33.7200 56.735 .589 .899

 Appendix 3

Profile of three Pharma Cities

Hyderabad is recognized as the bulk drug capital of India, accounting for one-third of India’s
total bulk drug production. A large number of bulk drug units are located in and around
Hyderabad with good infrastructure and trained manpower. Hyderabad almost accounts for
nearly 20 per cent of pharma exports from India. The Hyderabad city is a model for IT industry,
and is also known as Cyber Abad or as Hitech City of India, Besides Hyderabad, other major
cities such as Visakhapatnam and Rajahmundry are also emerging as potential IT hubs because
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

of cost advantage and other enabling factors. The history and growth of the drugs and
pharmaceutical industry in Andhra Pradesh can be traced to the establishment of Indian Drugs &
Pharmaceutical Ltd by the Government of India with the objective of providing essential drugs at
a competitive cost. Telangana has proposed to set up India's largest integrated pharmaceutical
city spread over 11,000 acres near Hyderabad, complete with effluent treatment plants and a
township for employees, in a bid to attract investment of Rs 30,000 crore (US$ 4.5 billion) in
phases. Hyderabad, accounts for nearly a fifth of India's exports of drugs, which stood at Rs
95,000 crore (US$ 14.3 billion) in 2014. Six pharmaceutical parks are to be approved and
established this year which will have sufficient infrastructure and facilities for testing and
treatment of drugs and also for imparting training to industry professionals.

Rajahmundry Town is the biggest town in East Godavari and it is a Divisional Head Quarters.
Howrah Madras railway line passes through the town longitudinally and has two railway Stations
Road cum Rail Bridge was constructed on river Godavari linking Kovvur and Rajahmundry is
considered to be an engineering feat. It is Asia's Second largest Road cum Rail Bridge. The
Town is connected with all Centers of the State. Glaxo Smithline Beecham Consumer Healthcare
limited has a major facility at Rajahmundry, Andhra Pradesh. GlaxoSmithKline (GSK) is a
world leading research-based pharmaceutical company with a powerful combination of skills and
resources. The southern Drugs and Pharmaceuticals limited is also near to Rajahmundry. The
Rajahmundry is the eighth most populous city having many hospitals and pharmacies with
patients from Godavari districts
 Vizag (Visakhapatnam) offers an ideal climate for the industry with facilities like the Pharma
City, common effluent treatment facilities, availability of an international airport and sea ports.
Already a host of global and national players have made Vizag their manufacturing hub,
especially for bulk drug exports. These include Japanese Sumos like Eisai and Ajinomoto
group's Omnichem, US giant Hospira as well as Hyderabad-based players like Dr Reddy's
Laboratories, Aurobindo Pharma, Hetero Drugs are located at Visakhapatnam, Eisai Knowledge
Centre India is the only manufacturing and the research facility of Japanese pharma sumo Eisai
in Asia outside Japan and manufactures drug substances (APIs), formulations and also carries out
research on APIs. The Jawaharlal Nehru Pharma City (JNPC) situated in Visakhapatnam in
Downloaded by Cornell University Library At 14:41 19 August 2016 (PT)

2,400 acres, of which 611 acres fall under the ambit of Special Economic Zone (SEZ), has
attracted major investments from Hospira, Mylan, Eisai, Reddy’s Lab and Aurobindo Pharma.
Lupin Ltd has launched works with an investment of Rs.500 crore on its new venture in the
JNPC. Further, Hospira has already invested huge amount on its facility and Johnson & Johnson
has shown interest in investing on a greenfield project Approval of an air cargo complex at
Visakhapatnam airport and the decision of Pharmaceutical Council of India to open its campus
with testing and buyer-seller facilities in two acres adjoining the JNPC are two major
developments to boost pharma exports. Apart from these, the other important factors that
contribute to the success of these cities as a whole and are excellent road and rail connectivity
with the major metros.