Demand forecast information sharing with manufacturer encroachment

Abstract

This study explores the interplay between the manufacturer’s encroachment strategy and the retailer’s information sharing strategy in a supply chain, wherein both the upstream manufacturer and downstream retailer possess private demand forecast information. The manufacturer has the option to establish a direct selling channel to encroach on the end market, and the retailer can decide whether to share private information with the manufacturer. We consider four scenarios and derive the corresponding equilibrium outcomes of firms. Theoretical research results show that when the manufacturer opts not to encroach, neither the manufacturer nor the retailer will voluntarily share their demand information. In contrast, if the manufacturer encroaches, they will reach an information sharing agreement under certain conditions. Once such an agreement is reached, the manufacturer can benefit more from encroachment. If information sharing is not achieved, the manufacturer encroaches only if his unit direct selling cost is lower than a certain threshold. In addition, fierce competition among channels encourages the manufacturer to encroach. Based on the abovementioned works, we conduct numerical studies to analyze the impact of forecast accuracy on the profits and information sharing value of the manufacturer, the retailer and the whole supply chain. These results offer valuable management insights for firms. For example, the improved forecast accuracy is beneficial to both firms. Moreover, as the channel substitution rate increases, not only the possibility of manufacturer encroachment increases, but both the manufacturer and the whole supply chain also get more profits from it.