Supply-side collaboration and its value in supply chains

Abstract

Collaboration has been recognized as a significant process that holds the value creation opportunity in supply chain management. Evaluating the value of collaboration is thus necessary for developing the effective collaboration mechanisms. This paper presents the evaluation approach specifically focusing on the supply-side collaboration on inventory decisions between a supplier and a distributor in a two-echelon supply chain. Two scenarios are compared. In the traditional scenario, the distributor is unaware of the supplier’s inventory decisions and merely makes its own inventory decisions according to the available information. In the second scenario with supply-side collaboration, the distributor considers the supplier’s inventory policy ( r, Q) and the planned service level as provided by the supplier. The numerical experiments show that the supply-side collaboration has the ability to improve the supply chain performance in terms of better stabilizing effect and service level.