Managing product quality risk and visibility in multi-layer supply chain

Abstract

The Chinese melamine milk recall and a series of product harm scandals ranging from milk powder to chocolate bar indicate that firms and consumers alike are vulnerable to quality risks in a global supply chain. Supply chains are extended by outsourcing and stretched by globalization, which greatly increase the complexity of supply network and decrease the visibility in risk and operation process. It is hard for firms to manage the product quality of such a multi-layer supply chain which has a low traceability of material origin. In this paper, we argue that better visibility of risk in supply chain could minimize the threat of product harm. A supply chain product quality risk management framework, integrating both the incremental calculus and marginal analysis, is proposed. Case study results indicate that the proposed approach has the following benefits: (i) providing evaluation of the product quality risk in supply chain layers; (ii) allowance for firms to have a better 'visibility' of product quality risks in supply chain; and (iii) a traceable justification path for multi-sourcing decision. © 2010 Elsevier B.V. All rights reserved.