Quantifying the Effect of Sharing Information in a Supply Chain Facing Supply Disruptions

Abstract

In this work, a system dynamics simulation approach is proposed to evaluate the effect of sharing information with partners in a supply chain when it is faced with supply-related disruptions which severely affect the product manufacturing. We focus on a simple two-echelon supply chain involving one retailer and two suppliers, and study the retailer’s decision on allocating orders between the suppliers. Three specific settings of information sharing by the suppliers are investigated: (i) no information shared; (ii) information partially shared; and (iii) information completely shared. After establishing corresponding ordering policy under each setting, we conduct extensive numerical analysis to simulate shocks to suppliers’ manufacturing capacity and calculate the resulting extra cost as measure of the effectiveness of information sharing. Simulation results show that with more information shared by suppliers, the retailer is able to make response to disruptions more accurately and timely, the negative impact of which thus can be reduced by larger extent, even though not completely eliminated.