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The value of information sharing in a two‐stage supply chain with production capacity constraints

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  • David Simchi‐Levi
  • Yao Zhao

Abstract

We consider a simple two‐stage supply chain with a single retailer facing i.i.d. demand and a single manufacturer with finite production capacity. We analyze the value of information sharing between the retailer and the manufacturer over a finite time horizon. In our model, the manufacturer receives demand information from the retailer even during time periods in which the retailer does not order. To analyze the impact of information sharing, we consider the following three strategies: (1) the retailer does not share demand information with the manufacturer; (2) the retailer does share demand information with the manufacturer and the manufacturer uses the optimal policy to schedule production; (3) the retailer shares demand information with the manufacturer and the manufacturer uses a greedy policy to schedule production. These strategies allow us to study the impact of information sharing on the manufacturer as a function of the production capacity, and the frequency and timing in which demand information is shared. © 2003 Wiley Periodicals, Inc. Naval Research Logistics, 2003

Suggested Citation

  • David Simchi‐Levi & Yao Zhao, 2003. "The value of information sharing in a two‐stage supply chain with production capacity constraints," Naval Research Logistics (NRL), John Wiley & Sons, vol. 50(8), pages 888-916, December.
    • Handle: RePEc:wly:navres:v:50:y:2003:i:8:p:888-916
    DOI: 10.1002/nav.10094
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    References listed on IDEAS

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    1. 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.
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    3. A. Federgruen & P. Zipkin, 1986. "An Inventory Model with Limited Production Capacity and Uncertain Demands I. The Average-Cost Criterion," Mathematics of Operations Research, INFORMS, vol. 11(2), pages 193-207, May.
    4. 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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    Cited by:

    1. Mingming Leng & Mahmut Parlar, 2009. "Allocation of Cost Savings in a Three-Level Supply Chain with Demand Information Sharing: A Cooperative-Game Approach," Operations Research, INFORMS, vol. 57(1), pages 200-213, February.
    2. Ketzenberg, Michael E. & Metters, Richard D., 2020. "Adapting operations to new information technology: A failed “internet of things” application," Omega, Elsevier, vol. 92(C).
    3. Seyed M.R. Iravani & Tieming Liu & K.L. Luangkesorn & David Simchi‐Levi, 2007. "A produce‐to‐stock system with advance demand information and secondary customers," Naval Research Logistics (NRL), John Wiley & Sons, vol. 54(3), pages 331-345, April.
    4. Boray Huang & Seyed M. R. Iravani, 2005. "Production Control Policies in Supply Chains with Selective-Information Sharing," Operations Research, INFORMS, vol. 53(4), pages 662-674, August.
    5. Lu, Jizhou & Feng, Gengzhong & Shum, Stephen & Lai, Kin Keung, 2021. "On the value of information sharing in the presence of information errors," European Journal of Operational Research, Elsevier, vol. 294(3), pages 1139-1152.
    6. Cannella, Salvatore & Dominguez, Roberto & Ponte, Borja & Framinan, Jose M., 2018. "Capacity restrictions and supply chain performance: Modelling and analysing load-dependent lead times," International Journal of Production Economics, Elsevier, vol. 204(C), pages 264-277.
    7. Dong, Ciwei & Yang, Yunpeng & Zhao, Ming, 2018. "Dynamic selling strategy for a firm under asymmetric information: Direct selling vs. agent selling," International Journal of Production Economics, Elsevier, vol. 204(C), pages 204-213.
    8. Elena PUICA, 2021. "Technologies used in Supply Chain Management in Romania: where is it going?," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 167-173.

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