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Strategic Information Management Under Leakage in a Supply Chain

Author

Listed:
  • Krishnan S. Anand

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Manu Goyal

    (Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742)

Abstract

The importance of material flow management for a profit-maximizing firm has been well articulated in the supply chain literature. We demonstrate in our analytical model that a firm must also actively manage information flows within the supply chain, which translates to controlling what it knows, as well as what its competitors and suppliers know. In our model of horizontal competition between an informed and an uninformed firm with a common upstream supplier, material and information flows intersect through leakage of demand (order) information to unintended recipients. As a result, the informed firm's drive to control information flows within the supply chain can trigger operational losses through material flow distortion. These losses can be so severe that the firm may prefer not to acquire information even when it is costless to do so. Our results underscore the importance of strategic information management--actively managing the supply chain's information flows, and making trade-offs with material flows where appropriate, to maximize profits.

Suggested Citation

  • Krishnan S. Anand & Manu Goyal, 2009. "Strategic Information Management Under Leakage in a Supply Chain," Management Science, INFORMS, vol. 55(3), pages 438-452, March.
    • Handle: RePEc:inm:ormnsc:v:55:y:2009:i:3:p:438-452
    DOI: 10.1287/mnsc.1080.0930
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    References listed on IDEAS

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