HIGHER SUPPLY CHAIN SECURITY WITH LOWER COST: LESSONS FROM TOTAL QUALITY MANAGEMENT

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



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

Background

After September 11, 2001, the security of a supply chain has become a major concern to the public and private sectors. In particular, the ocean segment of a supply chain is most vulnerable to security threats. More than 90% of world trade involves containers aboard ships, amounting to about 20 million containers trips annually (Cuneo, 2003). For the US, 17,000 containers arrive at US ports each day. Both the government and industries have begun to examine ways to address the threat of terrorism and the potential of having weapons of mass destruction (WMD) in materials flowing through a supply chain. “Every container destined to enter or pass through the US should be treated as a potential weapon of mass destruction”, Rob Quartel, chairman and CEO of Freightdesk Technologies, told the Senate Committee on the Judiciary's Subcommittee on Technology, Terrorism, and Government Information on February 26, 2002 (Mottley, 2002). WMD can result in significant loss in human lives, destruction of infrastructure, and erosion of the public and business confidence. Ultimately, global trade and prosperity are threatened.

Research Problem

The public sector is of course concerned about the potential of having WMD embedded in the shipments through the supply chain. In addition, the private sector is concerned about the costs of assuring security, and the potential disruptions associated with real or potential terrorist acts. Governments and industry have both responded with proposals to create more confidence in supply chain security, while maintaining smooth flows of the goods and services in a global supply chain management. Some of these proposals call for increased information exchange among trading partners, ports, shipping companies, and the governments. Some call for heightened inspection and scrutiny of the goods flowing through a supply chain. These measures can add cost, delays, and uncertainties in the supply chain. At the same time, supply chain disruptions resulting from security breaches, can be disastrous. For example, if ports and border crossings were closed for a meaningful time after a major terrorist attack, the economic impact would be devastating. It is not possible to quantify the full direct costs of damages and casualties, recovery measures, congestion, and disruption to business and daily life.

Research Questions

Does Higher supply chain security leads to lower cost?

Objectives of the Research

1. Quality assurance by final product inspection is the last resort. Inspection does not improve quality. Screening is expensive, and it is subjected to the usual Type I (labeling a conforming item as non-conforming) and Type II (missing a non-conforming item) errors.

2. In-process control, to assure that the process is functioning in an in-control state, is preferable to final product inspection. A process that is out-of-control will produce many more non conforming items.

3. Quality assurance requires total organizational focus. Everyone should be aware of the quality problem and each one is trained to be responsible for ...