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

Stanford GSB Research Paper No. 1824

29 Pages Posted: 9 Jan 2004

See all articles by Hau L. Lee

Hau L. Lee

Stanford Graduate School of Business

Seungjin Whang

Stanford Graduate School of Business

Date Written: October 19, 2003

Abstract

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.

Suggested Citation

Lee, Hau L. and Whang, Seungjin, Higher Supply Chain Security with Lower Cost: Lessons from Total Quality Management (October 19, 2003). Stanford GSB Research Paper No. 1824, Available at SSRN: https://ssrn.com/abstract=465626 or http://dx.doi.org/10.2139/ssrn.465626

Hau L. Lee

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Seungjin Whang (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-4756 (Phone)
650-725-0468 (Fax)

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