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Any time you buy a product, you expect it to meet a certain level of quality. In some cases, you may need to have formal inspection and quality assurance processes in place to make sure that the products you receive from suppliers and the products you send to your customers meet these requirements. Any product that doesn’t meet these standards costs you money, and the more closely you have to look for quality problems, the more money you spend. Reducing the variation in manufacturing and distribution processes through techniques such as Lean and Six Sigma, which are discussed in Chapter 4, can reduce the quality costs in a supply chain.

Figure 3-2 shows that the four supply chain cost drivers are interdependent; changes in any of the buckets can affect the others.

FIGURE 3-2: Supply chain cost drivers.