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Supply chain coordination with information sharing: The informational advantage of GPOs

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  • Zhou, Maosen
  • Dan, Bin
  • Ma, Songxuan
  • Zhang, Xumei

Abstract

This paper explores the potential of group purchasing organizations (GPOs) in facilitating information sharing and coordinating horizontal competition. We consider a supply chain composed of one GPO and two manufacturers competing in quantity. The GPO sources and prices a common component for the manufacturers. Each manufacturer has some private information about the uncertain demand, and can choose a part to share with the GPO. Through benchmark analysis, we identify the manufacturers’ horizontal competition and information incompletion as two determinants of supply chain inefficiency under individual purchasing. Then, we investigate the impacts of the GPO on the supply chain with wholesale price contracts and show that double marginalization induced by the GPO is another determinant of inefficiency. For this, both manufacturers have no incentive to share information and group purchasing damages the supply chain. We also show that under group purchasing, information sharing partially from the lower-precision manufacturer rather than both can benefit the supply chain. Next, we present a forecast-sharing-based compensation contracting scheme, under which, the GPO can make perfect supply chain coordination in both quantities and information sharing, and all members in the supply chain can reach win–win results. Finally, we illustrate the GPO's informational advantage by numerical examples.

Suggested Citation

  • Zhou, Maosen & Dan, Bin & Ma, Songxuan & Zhang, Xumei, 2017. "Supply chain coordination with information sharing: The informational advantage of GPOs," European Journal of Operational Research, Elsevier, vol. 256(3), pages 785-802.
  • Handle: RePEc:eee:ejores:v:256:y:2017:i:3:p:785-802
    DOI: 10.1016/j.ejor.2016.06.045
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    2. Wu, Junjian & Wang, Haiyan & Shang, Jennifer, 2019. "Multi-sourcing and information sharing under competition and supply uncertainty," European Journal of Operational Research, Elsevier, vol. 278(2), pages 658-671.
    3. Zhang, Qiao & Tang, Wansheng & Zaccour, Georges & Zhang, Jianxiong, 2019. "Should a manufacturer give up pricing power in a vertical information-sharing channel?," European Journal of Operational Research, Elsevier, vol. 276(3), pages 910-928.
    4. Sun, Zhengwei & Hupman, Andrea C. & Abbas, Ali E., 2021. "The value of information for price dependent demand," European Journal of Operational Research, Elsevier, vol. 288(2), pages 511-522.
    5. Yan, Yingchen & Zhao, Ruiqing & Lan, Yanfei, 2017. "Asymmetric retailers with different moving sequences: Group buying vs. individual purchasing," European Journal of Operational Research, Elsevier, vol. 261(3), pages 903-917.
    6. Liu, Molin & Dan, Bin & Zhang, Shuguang & Ma, Songxuan, 2021. "Information sharing in an E-tailing supply chain for fresh produce with freshness-keeping effort and value-added service," European Journal of Operational Research, Elsevier, vol. 290(2), pages 572-584.
    7. Ducharme, Corey & Agard, Bruno & Trépanier, Martin, 2021. "Forecasting a customer's Next Time Under Safety Stock," International Journal of Production Economics, Elsevier, vol. 234(C).
    8. Hsieh, Chung-Chi & Lai, Hsing-Hua, 2020. "Pricing and ordering decisions in a supply chain with downward substitution and imperfect process yield," Omega, Elsevier, vol. 95(C).
    9. Wang, Jiao & Liu, Zhibing & Zhao, Ruiqing, 2019. "On the interaction between asymmetric demand signal and forecast accuracy information," European Journal of Operational Research, Elsevier, vol. 277(3), pages 857-874.
    10. In, Joonhwan & Bradley, Randy V. & Bichescu, Bogdan C. & Smith, Antoinette L., 2019. "Breaking the chain: GPO changes and hospital supply cost efficiency," International Journal of Production Economics, Elsevier, vol. 218(C), pages 297-307.
    11. Dominguez, Roberto & Cannella, Salvatore & Barbosa-Póvoa, Ana P. & Framinan, Jose M., 2018. "OVAP: A strategy to implement partial information sharing among supply chain retailers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 110(C), pages 122-136.
    12. Zhou, Min & Zhao, Lindu & Kong, Nan & Campy, Kathryn S. & Xu, Ge & Zhu, Guiju & Cao, Xianye & Wang, Song, 2020. "Understanding consumers’ behavior to adopt self-service parcel services for last-mile delivery," Journal of Retailing and Consumer Services, Elsevier, vol. 52(C).
    13. Guan, Zili & Zhang, Xumei & Zhou, Maosen & Dan, Yiran, 2020. "Demand information sharing in competing supply chains with manufacturer-provided service," International Journal of Production Economics, Elsevier, vol. 220(C).

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