Inventory inaccuracy and performance of collaborative supply chain practices

Abstract

PurposeThis paper aims to explore the impact of inventory system inaccuracies on the benefits of collaborative supply chain practices under various supply chain scenarios. To achieve this purpose, two popular collaboration initiatives are considered in a four‐stage supply chain. The first practice is a vendor managed inventory program where the distributor takes the full responsibility of managing the retailer's inventory. The second practice is a collaborative planning, forecasting, and replenishment program where all members work together to plan, forecast, and replenish the product.Design/methodology/approachThe study utilizes Monte Carlo computer simulation in an experimental design.FindingsThe analysis suggests that while the inaccurate inventory records result in significant performance reductions for all supply chain configurations, their impact is substantially greater for the supply chains where members collaborate more closely on key supply chain management activities. In addition, the author also realize that the adverse impact of inaccurate inventory information is stronger under the conditions where lead times are shorter and/or where demand uncertainty in market place is lower.Practical implicationsThis analysis provides a means for practitioners to realize the importance of inventory accuracy to successful adaptation of collaborative supply chain practices. Moreover, this research also helps in understanding the supply chain conditions where the attempts of eliminating or reducing errors in inventory information are more crucial and more beneficial.Originality/valueAlthough there is a range of research focusing on collaborative practices, none of these studies considered the errors in inventory information. This is the first study to investigate the impact of inaccurate inventory information on the benefits of collaborative practices.