Decentralised decision-making with information sharing vs. centralised decision-making in supply chains

Abstract

In recent years, implementing coordination mechanisms in decentralised supply chains to reduce the well-known negative effects of decentralisation, such as the ‘bullwhip effect’, has become a considerable challenge. Furthermore, with the dramatic developments in information and communication technologies, real-time information sharing has become increasingly easier to implement. In this work, we study a mono-product divergent supply chain composed of a supplier, a warehouse, retailers and customers in the context of decentralised and centralised decisions. The main objective of this study is to compare a decentralised supply chain combined with different scenarios of simultaneous upstream and downstream information sharing vs. a centralised supply chain. A mathematical model is developed to compare the logistics costs in the two decision contexts. The experimental results clearly show that the simultaneous sharing of customer demand and supplier-warehouse lead time information in a decentralised supply chain yields nearly equivalent logistics costs as the centralised supply chain context. However, the main beneficiary of the sharing is the warehouse, which receives approximately two-thirds of the benefit. Thus, incentives and revenue sharing contracts should be implemented to motivate and balance the benefits between supply chain partners.