Advance Information Sharing in Supply Chains

Introduction

With the continuous development and improvement in information technology, information sharing has been broadly adopted in supply chain management. The effects of information sharing have been extensively studied in the literature (Chen 1998; Cachon & Fisher, 2000; Lee et al, 2000; Simchi-Levi & Zhao, 2005; and Croson & Donohue, 2005). Information sharing can mitigate the bullwhip effect which refers to the amplification of variability in order quantity at different supply chain stages because one major cause of the bullwhip effect is the asymmetric demand information obtained by the downstream/upstream members in supply chains (Forrest, 1958; Lee et al, 1997; and Lee & Whang, 2000).

Information sharing in supply chains is also facilitated by the development and implementation of new data-capturing technologies. For example, the implementation of radio frequency identification (RFID) technology has been promoted by major retail channels. In June 2003 Wal-Mart announced a mandate to its top 100 suppliers to attach RFID tags to selective cases and pallets by January 2005. Later on, other retail chains like Target, Best Buy, CVS, and Tesco also announced plans to implement RFID systems. Although RFID technology is not new, its recent business applications based on the unique technical advancement, such as no line-of-light needed and multiple tags can be read simultaneously, provide an efficient means for information sharing. It is vital and valuable to the adopters because RFID can provide timely point-of-sale data, accurate inventory records, and production lead time information.

The value of information sharing has been analyzed from different perspectives, such as inventory control and lead time reduction, and under different scenarios, such as stochastic demand and capacitated supply (Bourland et al, 1996; Chen, 1998; Aviv & Federgruen, 1998; Gavireni et al, 1999; Lee et al, 2000; Cachon & Fisher, 2000; Yu et al, 2001; Simchi-Levi & Zhao, 2005; and Croson & Donohue, 2005). In particular, accurate and timely demand information helps to dampen upstream variability propagation in supply chains, especially under situations with capacity constraints and large demand uncertainty (Balakrishnan et al, 2004; Wijngaard, 2004; Bollapragada & Rao, 2006; and Boute et al, 2007).

In addition to sharing the information of orders received, retailers can also share their forecasts on future demand with their suppliers. Such advance demand information (ADI) provides additional information and opportunities for the suppliers to have better production planning and inventory replenishment. There is a line of research which focuses on ADI sharing in supply chain management (Thonemann, 2002; Moinzadeh, 2002; Ozer, 2003; and Ozer & Wei, 2004).