Abstract
In a two-echelon supply chain system with one retailer and one manufacturer, the mathematical model of retailer's inventory level and operation cost by sharing the manufacturer 's supply capacity information on time is constructed when the market demand refers to AR(1) model. Based on the order-up-to S level policy, without sharing supplier's capacity information and with sharing supplier's capacity information, the inventory holding and shortages costs are discussed. Supplier's capacity information sharing leads to increased information flows, reduced uncertainty, and a more coordination supply chain. The analyses show that the reductions of retailer's average inventory and average costs are substantial with the capacity information sharing.
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