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The Value of Information Sharing in a Two-Level Supply Chain

Author

Listed:
  • Hau L. Lee

    () (Graduate School of Business, Stanford University, Stanford, California 94305)

  • Kut C. So

    () (Graduate School of Management, University of California, Irvine, California 92697)

  • Christopher S. Tang

    () (Anderson School of Management, University of California, Los Angeles, California 90095)

Abstract

Many companies have embarked on initiatives that enable more demand information sharing between retailers and their upstream suppliers. While the literature on such initiatives in the business press is proliferating, it is not clear how one can quantify the benefits of these initiatives and how one can identify the drivers of the magnitudes of these benefits. Using analytical models, this paper aims at addressing these questions for a simple two-level supply chain with nonstationary end demands. Our analysis suggests that the value of demand information sharing can be quite high, especially when demands are significantly correlated over time.

Suggested Citation

  • Hau L. Lee & Kut C. So & Christopher S. Tang, 2000. "The Value of Information Sharing in a Two-Level Supply Chain," Management Science, INFORMS, vol. 46(5), pages 626-643, May.
  • Handle: RePEc:inm:ormnsc:v:46:y:2000:i:5:p:626-643
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    File URL: http://dx.doi.org/10.1287/mnsc.46.5.626.12047
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    References listed on IDEAS

    as
    1. Nesim Erkip & Warren H. Hausman & Steven Nahmias, 1990. "Optimal Centralized Ordering Policies in Multi-Echelon Inventory Systems with Correlated Demands," Management Science, INFORMS, vol. 36(3), pages 381-392, March.
    2. Peter M. Guadagni & John D. C. Little, 1983. "A Logit Model of Brand Choice Calibrated on Scanner Data," Marketing Science, INFORMS, vol. 2(3), pages 203-238.
    3. Kahn, James A, 1987. "Inventories and the Volatility of Production," American Economic Review, American Economic Association, vol. 77(4), pages 667-679, September.
    4. GĂ©rard P. Cachon & Paul H. Zipkin, 1999. "Competitive and Cooperative Inventory Policies in a Two-Stage Supply Chain," Management Science, INFORMS, vol. 45(7), pages 936-953, July.
    5. Hau L. Lee & V. Padmanabhan & Seungjin Whang, 1997. "Information Distortion in a Supply Chain: The Bullwhip Effect," Management Science, INFORMS, vol. 43(4), pages 546-558, April.
    6. Srinagesh Gavirneni & Roman Kapuscinski & Sridhar Tayur, 1999. "Value of Information in Capacitated Supply Chains," Management Science, INFORMS, vol. 45(1), pages 16-24, January.
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