Manufacturer Benefits from Information Integration with Retail Customers
Information integration efforts between manufacturers and retailers, in the form of information sharing, synchronized replenishment, and collaborative product design and development, have been cited as major means to improve supply chain performance. This paper develops a conceptual framework that relates information-integration initiatives to manufacturer profitability. The framework allows such initiatives to impact inventory management and revenue-enhancing measures that, in turn, increase manufacturer profit margins, or affect profit margins directly. Through an extensive survey in the food and consumer packaged goods industry, we empirically examine this framework. The analysis reveals that the various integration techniques are differentially associated with manufacturer performance. Collaborative planning on replenishment, in the form of vendor-managed inventory (VMI), is directly and positively related to manufacturer margins, while collaboration on new products and services is positively related to intermediate performance measures. Specifically, this latter form of collaboration allows the manufacturer to charge higher wholesale prices and, interestingly, is associated with lower retailer, and consequently manufacturer, stockouts. In contrast, collaboration on the handling of excess and defective retailer inventory (i.e., reverse logistics) results in higher manufacturer stockout levels, on average. Solely sharing information on either inventory levels or customer needs is associated with higher manufacturer performance measures up to a certain point; sharing this information is prevalent among manufacturers that achieve industry-average profitability relative to those that achieve below industry-average profitability. The paper explains these results in the context of the conceptual framework developed and discusses the managerial implications for effective coordination between supply chain partners.
Volume (Year): 50 (2004)
Issue (Month): 4 (April)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Srinagesh Gavirneni & Roman Kapuscinski & Sridhar Tayur, 1999. "Value of Information in Capacitated Supply Chains," Management Science, INFORMS, vol. 45(1), pages 16-24, January.
- Gérard P. Cachon & Marshall Fisher, 2000. "Supply Chain Inventory Management and the Value of Shared Information," Management Science, INFORMS, vol. 46(8), pages 1032-1048, August.
- Srinivasan Raghunathan, 2001. "Information Sharing in a Supply Chain: A Note on its Value when Demand Is Nonstationary," Management Science, INFORMS, vol. 47(4), pages 605-610, April.
- Taylor Randall & Karl Ulrich, 2001. "Product Variety, Supply Chain Structure, and Firm Performance: Analysis of the U.S. Bicycle Industry," Management Science, INFORMS, vol. 47(12), pages 1588-1604, December.
- Larry J. Menor & Aleda V. Roth & Charlotte H. Mason, 2001. "Agility in Retail Banking: A Numerical Taxonomy of Strategic Service Groups," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 273-292, February.
- 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.
- Elie Ofek & Miklos Sarvary, 2001. "Leveraging the Customer Base: Creating Competitive Advantage Through Knowledge Management," Management Science, INFORMS, vol. 47(11), pages 1441-1456, November.
- 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.
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:50:y:2004:i:4:p:431-444. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.