Benefits of information sharing with supply chain partnerships

TLDR

Information technology enables supply‑chain partners to collaborate, reducing decentralized control deficiencies and mitigating the bullwhip effect to improve overall system performance. The study demonstrates the advantages of supply‑chain partnerships that rely on information sharing. By modeling a decentralized manufacturer–retailer network, the authors derive optimal inventory policies under various information‑sharing scenarios and illustrate the results with a case study. Greater information sharing yields Pareto‑improving outcomes, lowering inventory levels and cutting costs for all chain members.

Abstract

The power of information technology can be harnessed to help supply chain members establish partnerships for better supply chain system performance. Supply chain partnerships can mitigate deficiencies associated with decentralized control and reduce the “bullwhip effect”. This study illustrates the benefits of supply chain partnerships based on information sharing. For a decentralized supply chain comprising a manufacturer and a retailer, we derive the members’ optimal inventory policies under different information sharing scenarios. We show that increasing information sharing among the members in a decentralized supply chain will lead to Pareto improvement in the performance of the entire chain. Specifically, the supply chain members can reap benefits in terms of reductions in inventory levels and cost savings from forming partnerships with one another. A case study is provided for illustration.