Information sharing in a supply chain with a make-to-stock manufacturer

We study ex ante information sharing in a supply chain consisting of a downstream retailer and a make-to-stock upstream manufacturer. The retailer has imperfect demand information and may choose to share it with the manufacturer. Based on the information sharing arrangement, the manufacturer makes the wholesale price and the stocking level decisions. Then the retailer decides the order quantity and the manufacturer fulfills the order up to the available stock level. We find that the retailer has an incentive to voluntarily share the information with the make-to-stock manufacturer if the magnitude of demand uncertainty is intermediate. This stands in sharp contrast with the existing studies which show that the retailer never shares information when the manufacturer is make-to-order. Our results highlight the interdependence between the retailer׳s incentive to share information and the manufacturer׳s operational and marketing decisions.     

The value of VMI beyond information sharing in a single supplier multiple retailers supply chain under a non-stationary (Rn,Sn) policy

This study aims to determine the value of vendor-managed inventory (VMI) over independent decision making with information sharing (IS) under non-stationary stochastic demand with service-level constraints. For this purpose, we utilize mixed-integer linear programming formulations to quantify the benefits that can be accrued by a supplier, multiple retailers and the system as a whole by switching from IS to VMI. More specifically, we investigate the incremental value that VMI provides beyond IS in terms of expected cost savings, inventory reductions, and decrease in shipment sizes from the supplier to the retailers by conducting a large number of computational experiments. Results reveal that the decision transfer component of VMI improves these performance measures significantly when the supplier׳s setup cost is low and order issuing efficiency is high. The benefits offered by VMI are negligible under the problem settings where the supplier׳s order issuing efficiency is low and the production setup serves solely a single replenishment under IS.     

Price competition,cost and demand disruptions and coordination of a supply chain with one manufacturer and two competing retailers

This paper studies the coordination of a supply chain with one manufacturer and two competing retailers after the production cost of the manufacturer was disrupted. We consider two coordination mechanisms: an all-unit quantity discount and an incremental quantity discount. For each mechanism, we develop the conditions under which the supply chain is coordinated and discuss how the cost disruption may affect the coordination mechanisms. For the all-unit quantity discount scheme, we find that the manufacturer charges the lower-cost retailer for a lower unit wholesale price in order to induce him to order more products. If the costs of two retailers have a remarkable difference, then the all-unit quantity discount scheme cannot coordinate the supply chain with disruptions. While the cost disruption may affect the wholesale prices, order quantities as well as retail prices, it is optimal for the supply chain to keep the original coordination mechanism if the production cost change is sufficiently small. The model is also extended to the case with both cost and demand disruptions. The equilibrium strategies of the retailers are investigated when the manufacturer cannot timely react to the disruptions such that she has to keep the original mechanism. We illustrate the results by numerical examples.     

Sharing shipment quantity information in the supply chain

This paper evaluates the benefit of a strategy of sharing shipment information, where one stage in a supply chain shares shipment quantity information with its immediate downstream customers—a practice also known as advanced shipping notice. Under a periodic review inventory policy, one supply-chain member places an order on its supplier every period. However, due to supplier's imperfect service, the supplier cannot always exactly satisfy what the customer orders on time. In particular, shipment quantities arriving at the customer, after a given lead-time, may be less (possibly more) than what the customer expects—we define this phenomenon as shipment quantity uncertainty. Where shipment quantity information is not shared with customers, the only way to respond is through safety stock. However, if the supplier shares such information, i.e. customers are informed every period of the shipment quantity dispatched, the customer may have enough time to adapt and resolve this uncertainty by adjusting its future order decisions. Our results indicate that in most circumstances this strategy, enabled by information technologies, helps supply-chain members resolve shipment quantity uncertainty well. This study provides an approach to quantify the value of shared shipment information and to help supply-chain members evaluate the cost-benefit trade-off during information system construction. Numerical examples are provided to indicate the impact of demand/shipment parameters on strategy implementation. While previous studies mainly focus on the information receiver's perspective, we evaluate a more general three-tier linear supply chain model via simulation, studying how this strategy affects the whole supply chain: the information sender, the information receiver and the subsequent downstream tier.     

Supply chain coordination using revenue-dependent revenue sharing contracts

A typical single period revenue sharing contract specifies a priori a fixed fraction for the supply chain revenue to be shared among the supply chain players. Over the years, supply chains, especially in the movie industry, have adopted multi-period revenue sharing contracts that specify one fraction for each contract period. These revenue sharing contracts are of revenue-independent type such that the revenue sharing fractions are independent of the quantum of revenue generated. Motivated by the recent events in Bollywood – one of the popular arms of the Indian movie industry – in this paper we develop and analyze a game theoretic model for revenue-dependent revenue sharing contracts wherein the actual proportion in which the supply chain revenue is shared among the players depends on the quantum of revenue generated. Our aim is to understand why revenue-dependent revenue sharing contracts are (or not) preferred over revenue-independent contracts. We also examine if supply chains can be coordinated over multiple periods using both types of revenue sharing contracts. We build a two-period model characterizing supply chains in the movie industry and highlight the implications of the multi-period contractual setting for the supply chain coordinating revenue sharing contracts. We show that supply chains can be perfectly coordinated using both types of revenue sharing contracts; however, there exist situations in which revenue-dependent contracts outperform revenue-independent contracts. Using revenue-dependent revenue sharing contracts supply chains can be coordinated while providing positive surplus to the supply chain players that is otherwise not possible under certain situations in revenue-independent contracts. We also demonstrate how revenue-dependent contracts enhance supply chain coordination and highlight their significance when the drop in the revenue potential from one period to another is moderate.     

Incentives for information sharing in duopoly with capacity constraints

We study the ex ante incentives for firms to share their private information in a Cournot duopoly with capacity constraints. In both demand and cost information sharing games, we show that the incentives can be reversed when some equilibrium solutions are binding on capacity. Especially, we identify some conditions under which partial information sharing is the dominant strategy under both games. Numerical examples are provided for illustration. In addition, we show that information sharing does not necessarily increase social welfare.     

Critical factors affecting information sharing in supply chains

Abstract

The aim of this paper is to empirically examine a comprehensive list of factors that are anticipated to affect information sharing (IS) in supply chains (SC) in the context of a landlocked developing country Nepal. A survey questionnaire was developed and data were collected from 131 supply chain participants in Nepal. Exploratory factor analysis and path analysis were conducted to examine the fitness of the proposed model and the relationships between the identified factors and information sharing. The results suggest that interaction routines and personal connection influenced both operational and strategic information sharing while organisational compatibility, incentives, project payoffs, commitment (inter-organisational), top management commitment and supply network configuration affected operational IS and government support and monitoring were associated with strategic IS. The paper provides empirical evidence on how information sharing is affected in the context of a landlocked developing country. The paper also identifies and discusses the similarities and differences in the importance of these factors on information sharing between developed and developing countries. The main limitation is the moderate sample size as compared to the large number of variables contained in the study which may have limited the use of analytical tools. The study provides a better understanding of information sharing behaviours of supply chain participants in Nepal which will help firms to develop strategies accordingly to enhance information sharing.     

Coordinating a supply chain for deteriorating items with a revenue sharing and cooperative investment contract

In this study, a one-manufacturer–one-retailer supply chain model for deteriorating items with controllable deterioration rate and price-dependent demand is developed, in which both players cooperatively invest in preservation technology to reduce deterioration. Algorithms are designed to obtain the pricing and preservation technology investment strategies in both integrated and decentralized scenarios. It is shown that cooperative investment strategy benefits the manufacturer but damages the profits of the retailer and the whole supply chain. A revenue sharing and cooperative investment contract, which combines revenue sharing and cost sharing mechanisms, is thus designed to coordinate the supply chain. Numerical simulations and sensitivity analysis of the equilibrium strategies and coordinating results on key system parameters are given to verify the effectiveness of the contract, and meanwhile get some managerial insights. The results show that only when the revenue sharing rate lies roughly between 1/2 and 3/4 can the contract perfectly coordinate the supply chain in most cases, which has an important guiding significance for the supply chain coordination of deteriorating items when considering preservation technology investment.     

The impact of timely information on organisational performance in a supply chain

Information produced by ERP systems is termed JIT-information, since it is provided at the right time in the right place with a minimum of waste. The JIT-information construct is defined and described and a measurement scale is developed. A JIT-information performance model is proposed and assessed using a structural equation modelling methodology. The results indicate that the model fits the data well: (1) supply chain management strategy positively impacts JIT-information, (2) JIT-information directly impacts both logistics and organisational performance, and (3) logistics performance directly impacts organisational performance.     

In-house capability and supply chain decisions

This study considers an internal production option for a contractor and analyzes its effect on the supply chain decisions when the contractor has innovated and the subcontractor has an incentive for opportunistic behavior. In contrast to the single disclosure threshold in the benchmark scenario where the contractor lacks in-house capability, we find two thresholds in the referred scenario. When information misappropriation is possible and the contractor has in-house capability, the contractor will organize a coordinated supply chain only when innovations fall between the two thresholds. Compared to the benchmark scenario, in-house capability has a positive effect on the contractor's incentive to innovate and an ambiguous effect on the subcontractor's incentive to invest in the production process. When the contractor needs to incur an extra cost to build in-house capability, the contractor keeps the same levels of investment compared to the case of no additional in-house capability cost, whereas the subcontractor increases the levels of investment. Furthermore, we find that in the presence of potential misappropriation on the part of the subcontractor, the higher the level of in-house capability, the less likely the contractor will be to outsource innovative products that generate higher profitability. This study can explain why firms strategically outsource low-end products and produce high-end products themselves. This study provides new results on the effects of in-house capability on the strategic interactions of parties in supply chains and, hence, on supply chain efficiency.     

Potentially self-defeating: Group buying in a two-tier supply chain

Retailers have an incentive to cooperate in the form of group buying (GB) when a supplier provides quantity discounts, because wholesale price under GB depends on total purchasing quantity rather than individual purchasing (IP) quantity. Most previous studies on GB focus on the benefits that buyers get but ignore the supplier׳s response to GB. In this paper, we take the supplier׳s response into consideration, and present a game model with a single supplier and two symmetric competing retailers in two systems: the retailers purchase individually, and the retailers group buy. Under a general quantity discount schedule, each system has a unique sub-game perfect equilibrium. The comparison between IP and GB suggests that GB may sabotage the benefits of all members in the supply chain (i.e., the supplier, the retailers, and the consumer). Retailers may hold contradictory attitudes toward GB before and after the publishing of the discount schedule. These insights are shown to be robust for the case when more than two retailers are involved, as well as the case when the supplier enjoys economies of scale based on the order volume. We suggest that a mixed discount schedule may help prevent the potential damage of GB. In addition, with significant economies of scale, the supplier and retailers may be better off under GB. Then GB can be a favorable purchasing strategy.     

Economic analysis of demand uncertainty and delayed information sharing in a third-party managed supply chain

Designers and retailers in consumer products industry are faced with high demand volatility and potential loss of profit from design piracy. Many retailers rely on third-party supply chain managers (SCMs) to manage global supply chains. A SCM starts raw materials procurement and production process based on expected demand and takes financial risks associated with demand uncertainty. But a retailer often delays sharing product design information with SCM forcing it to expedite production and distribution processes incurring additional financial penalties. To analyse economic impact of delayed information sharing under uncertain demand, we develop a mathematical model. Our model indicates that higher demand volatility lessens the effect of penalty associated with delayed information sharing for retailers. The model also shows that for a given demand volatility, per-unit premium increases asymptotically for a retailer compared to marginal production cost increase for SCM. Such findings are not intuitive for SCMs or retailers.     

On variance amplification in a three-echelon supply chain with minimum mean square error forecasting

We analyse a three echelon supply chain model. First-order autoregressive end consumer demand is assumed. We obtain exact analytical expressions for bullwhip and net inventory variance at each echelon in the supply chain. All of the three supply chain participants employ the order-up-to policy with the minimum mean square error forecasting scheme. After demonstrating that the character of the stochastic ordering process observed at each level of the supply chain is mathematically tractable, we show that the upper stream participants have complete information of the market demand process. Then we quantify the bullwhip produced by the system, together with the amplification ratios of the variance of the net inventory levels. Our analysis reveals that the level of the supply chain has no impact upon the bullwhip effect, rather bullwhip is determined by the accumulated lead-time from the customer and the local replenishment lead-time. We also find that the conditional variance of the forecast error over the lead-time is identical to the variance of the net inventory levels and that the net inventory variance is dominated by the local replenishment lead-time.     

实报还是谎报——双边信息激励与供应链效率

探讨了双边不对称信息下供应链信息真实分享和谎报对效率的影响。首先,给出完全信息下的最优商品交易量和供应链利润作为比较基准。其次,构建双方信息真实分享的激励模型。研究发现激励双方信息真实共享所需的信息租金降低交易量和供应链利润。再次,构建允许信息谎报的交易量谈判模型。研究发现,供销双方都偏好高报自己的信息类型。个体谎报信息的幅度随着谈判力增加而减小。拥有绝对谈判力的一方不会谎报信息。供应链效率与谎报信息的幅度、成本上界以及销售价格相关。最后,通过数值算例对实报信息和谎报信息下交易量、供应链个体利润及效率进行对比分析。研究结果为管理实践提供一定的洞见:供应链企业是否激励双边信息分享可根据双方成本大小进行选择。     

Supply chain coordination under discrete information asymmetries and quantity discounts

We consider a two node supply chain with a rational manufacturer–retailer pair, in which the retailer has private information that affects the nodes׳ reservation levels. Quantity discounts offered by the manufacturer is the mechanism we propose in order to achieve reduced costs for both supply chain nodes. We derive analytical expressions of the quantity discounts that minimize the manufacturer׳s costs, while enabling the establishment of the business. Furthermore, we show that perfect coordination is possible even under asymmetric information. Sensitivity analysis and numerical examples offer evidence of the robustness of the results and of the potential of the approach for applications to real-life business ventures.     

Coordination in supply chains: an evaluation using fuzzy logic

Supply chain coordination (SCC) is an effective approach to improve supply chain (SC) performance. The coordination can be achieved when interdependent entities work together by sharing resources and information to achieve common objectives aligned to maximise customer value for the entire SC. There are a number of mechanisms by which the SC members can coordinate, e.g. contracts, information sharing, information technology and collaborative initiatives. To communicate frequently and effectively, the partners are required to have good information systems and capability to share information. To coordinate with each other the SC members are required to have capabilities to implement coordination mechanisms effectively. In this paper, a model is proposed to measure the effect of these mechanisms on the extent of coordination. Currently, there is no scale of measurement reported in the literature to measure the SCC. A fuzzy logic approach combined with the analytic hierarchy process (AHP) is proposed to evaluate the extent of coordination. The proposed methodology is demonstrated through a case study of an automotive parts manufacturer.     

Implementing coordination contracts in a manufacturer Stackelberg dual-channel supply chain

We examine a manufacturer's pricing strategies in a dual-channel supply chain, in which the manufacturer is a Stackelberg leader and the retailer is a follower. We show the conditions under which the manufacturer and the retailer both prefer a dual-channel supply chain. We examine the coordination schemes for a dual-channel supply chain and find that a manufacturer's contract with a wholesale price and a price for the direct channel can coordinate the dual-channel supply channel, benefiting the retailer but not the manufacturer. We illustrate how such a contract with a complementary agreement, such as a two-part tariff or a profit-sharing agreement, can coordinate the dual-channel supply chain and enable both the manufacturer and the retailer to be a win-win.     

A network-based approach to integrated supply chain design

The inherent complexity of supply chains, combined with their economic importance, has prompted research in supply chain management. While there has been a significant amount of work reported in modelling supply chains, the effectiveness of these models in addressing the complex area of supply chain management is questionable. What is giving added urgency to the need for research in this area are the recent developments in communications that offer the promise of connecting suppliers, assemblers and customers in a seamless network of information that can form integrated supply chain management. This paper aims to address the deficiency in modelling by proposing a methodology that models the integrated supply chain as an abstracted network, called a Trans-Net. The Trans-Net approach offers three main potential advantages. First, the multiple participants in a supply chain can be modelled without undue complexity. Second, it is an approach that allows users to examine the interactions between different considerations so that important attributes such as cost and lead-time can be readily calculated and bottleneck areas identified. Third, it applies a mathematical formalism to the problem, with the potential of being relatively straightforward to computerize.     

Coordinating a three level supply chain with flexible return policies

This paper studies the coordination issue of a three level supply chain selling short life cycle products in a single period model. The manufacturer first negotiates the trade contract with the retailer, then with the supplier. We construct the so-called flexible return policy by setting the rules of pricing while postponing the determination of the final contract prices. With return policies between each pair of adjacent firms, unsold products or used modules dissembled from the unsold products are returned level by level from the retailer to the upstream firms and each firm shares in the loss due to the overstock. We show that the three level supply chain can be fully coordinated with appropriate contracts and the total profit of the channel can be allocated with any specified ratios among the firms.     

A systematic approach for supply chain conflict detection with a hierarchical Petri Net extension

Coordinating and managing distributed entities in a supply chain is a challenging task due, in part, to conflicts present in such systems. If not handled effectively, the conflict can degrade the performance of the system as a whole due to the fact that each individual entity may be working towards goals that sub-optimize the integrated system. Therefore, the ability to discover conflicts would be a valuable asset, particularly if the discovery occurred proactively. This paper presents a methodology, extending the concept of basic Petri Nets, to discover supply chain conflict before they occur and cause detrimental effects to system performance. The approach involves linking hierarchical levels of the supply chain system and detecting conflicts occurring when the single entities, each optimized for it own operations, are combined together in a supply chain. These conflicts are not obvious or intuitive in examining the single entities of the supply chain, but when integrated the conflicts are discovered by the methodology. We applied the proposed methodology on a real-world supply chain to illustrate the validity of the tool. Although, further research is needed to fully explore this method of conflict detection, we believe that this research does indeed provide some much needed insight into the daunting task of conflict discovery and therefore proactive handling of these potentially negative occurrences in the supply chain.