A study on information sharing for supply chains with multiple suppliers

Abstract

This study considers the coordination of a two-echelon supply chain with multiple suppliers, with which information sharing is essential, since it can often enhance the performance of the supply chain, but may also intensify the competition among members in the chain. In general, information sharing among channel members can improve the efficiency of inventory holding by achieving better quality predictions of demand. Nevertheless, sharing perfect information may often result in the problem of double marginalization; while sharing partial information may result in the problem of distortion between demand and inventory, i.e., the bullwhip effect. This study probes into the impacts of information sharing on inventory reduction and profit gains with consideration of possible promotion activities performed by the retailer, which hinders the suppliers from accurately forecasting the market demand. It is found that, as the demand of successive periods is more correlated, information sharing would have more impact on the reduction of inventory level and total costs of the suppliers, i.e., information sharing is more valuable as the correlation coefficient on successive demand increases.