Supply chain efficiency and security: Coordination for collaborative investment in technology (Lee et al. 2011)

Summary

Information technologies often provide significant benefits for companies in terms of better logistics efficiency and security. But despite of this fact, many companies in the logistics sector have not adopted such technologies to a high extent as one would expect. In their research paper, Lee et al. (2011) investigate coordination problems and related incentive mechanisms between manufacturers and retailers in a two-echelon supply chain, when companies are investing in ICT technologies that have potential to improve both logistics efficiency and security. Using mathematical modeling, they find that relative strengths of efficiency and security concerns result in different coordination problems when implementing a technology. To increase overcome coordination problems and reach the optimal level of ICT investments, the authors propose imposing penalties on parties, that are responsible for security breaches, and introducing tax incentives. They conclude that IT-based supply chain security solutions have a high potential for increasing both security and logistics performance through higher supply chain visibility. The abstract is available at: http://www.sciencedirect.com.

Review by Toni Männistö (CBRA) based on his doctoral thesis.

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Full review

Lee et al. (2011) consider the SCS performance rather narrowly as the organization’s ability to locate and eliminate the source of a product contamination. This is a rather unorthodox approach: scholars commonly consider SCS performance in terms of capability to prevent, detect and recover from crime that takes place in the supply chain context. But regardless of the narrow scope, the paper provides useful information how about to protect cargo from hostile tampering cost-effectively. This is particularly relevant for the CORE demonstrator with fast-moving consumer goods of Procter & Gamble (WP17). Also partners involved in the development of educational and training material are going to benefit from the findings of this research paper.

Reference

Lee, J., Palekar, U. S., & Qualls, W. (2011). Supply chain efficiency and security: Coordination * for collaborative investment in technology. European Journal of Operational Research, 210(3), 568-578.

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