Quality of a product is affected not only by the company's internal quality, but also by the supplier's quality. To achieve the required quality level, a company must decide where to implement the quality improvement program and what should be the appropriate inspection policy. In this paper, we have provided an integrated framework to investigate the relationship between quality improvement and inspection and to determine the optimal discussion so that a balance of the investment in quality improvement, inspection cost and failure cost can be achieved. With the result, we conclude that quality improvement and inspection are complementary in supply chains, where quality improvement can be viewed as an active approach to reduce the cost due to imperfections, while inspection as a passive...[ Read more ]

Quality of a product is affected not only by the company's internal quality, but also by the supplier's quality. To achieve the required quality level, a company must decide where to implement the quality improvement program and what should be the appropriate inspection policy. In this paper, we have provided an integrated framework to investigate the relationship between quality improvement and inspection and to determine the optimal discussion so that a balance of the investment in quality improvement, inspection cost and failure cost can be achieved. With the result, we conclude that quality improvement and inspection are complementary in supply chains, where quality improvement can be viewed as an active approach to reduce the cost due to imperfections, while inspection as a passive approach to avoid this cost. Managerial insights are drawn based on the properties of the resulted quality levels and inspection policy.