Higher Supply Chain Security with Lower Cost: Lessons from Total Quality Management

Supply chain security has become a major concern to the private and public sector, after the disastrous event of September 11, 2001. Prior to September 11, 2001, supply chain security concerns were related to controlling theft and reducing contraband such as illegal drugs, illegal immigrants, and export of stolen goods. But after September 11, 2001, the threat of terrorist attacks has heightened the need to assure supply chain security. The public is of course concerned with the potential of having weapons of mass destruction embedded in the shipments through the supply chain. In addition, the private sector is concerned with the costs of assuring security, and the potential disruptions associated with real or potential terrorist acts. Governments and industry have all responded with proposals to create more confidence in supply chain security, while maintaining smooth flows of goods and services in a global supply chain. One of the most effective strategies may be to apply the lessons of successful quality improvement programs. In this paper, we describe how the principles of total quality management can actually be used to design and operate processes to assure supply chain security. The central theme of the quality movement – that higher quality can be attained at lower cost by proper management and operational design – is also applicable in supply chain security. By using the right management approach, new technology, and re-engineered operational processes, we can also achieve higher supply chain security at lower cost. We will demonstrate how this can be done with a quantitative model of a specific case example. Acknowledgment: The authors would like to thank the inputs from Steve Lambright and Larry Trebesch of Savi Technology in writing this article. The government initiatives are drawn from Lee and Wolfe (2003) and we are grateful to Michael Wolf of North River Consulting Group for sharing his knowledge.