Vertical and horizontal impacts of information sharing on a divergent supply chain

Abstract

Despite the tremendous advancements in communication technologies, convincing decision makers in supply chains to establish cooperation mechanisms remains a challenge. This paper aims to raise awareness among supply chain partners regarding the importance of information sharing by assessing the value of upstream (supplier lead time) and downstream (customer demand) information sharing in a divergent supply chain. Through a simulation study, this work investigates the impact of information sharing on the logistic cost of each link horizontally and vertically and for each cost component for three different structures of the distribution network. The results show that the warehouse benefits the most from information sharing and should implement revenue-sharing contracts to motivate its partners to share their information. In addition, the gains are not sensitive to the structure of the distribution network, and the retailers' gains are proportional to their level of demand and unit holding and penalty costs. Moreover, the holding and penalty costs for the warehouse are sensitive to the sharing of supplier lead time information when only holding costs are sensitive to the sharing of customer demand information at the warehouse and retailers.