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Evaluating the Value of Information Sharing in a Supply Chain

In: Business and Management

Submitted By andrewxiao
Words 4416
Pages 18
Int J Adv Manuf Technol (2006) 27: 604–609 DOI 10.1007/s00170-004-2214-4

ORIGINAL ARTICLE

J.M. Hsiao · C.J. Shieh

Evaluating the value of information sharing in a supply chain using an ARIMA model

Received: 10 October 2003 / Accepted: 20 April 2004 / Published online: 9 February 2005 © Springer-Verlag London Limited 2005 Abstract This paper considers a two-echelon supply chain, which contains one supplier and one retailer. It studies the quantification of the bullwhip effect and the value of informationsharing between the supplier and the retailer under an autoregressive integrated moving average (ARIMA) demand of (0, 1, q). The results show that with an increasing value of q, bullwhip effects will be more obvious, no matter whether there is information sharing or not. When there exists information sharing, the value of the bullwhip effect is greater than it is without information sharing. With an increasing value of q, the gap between the values of the bullwhip effect in the two cases will be larger. Keywords ARIMA · Bullwhip effect · Information sharing · Supply chain dard deviation of order amount is bigger than that of sales, i.e. demand deviation. This kind of distortion winds upward in the form of an increasing square of the standard deviation [9]. The bullwhip effect has drawn much attention in recent years [1, 3, 4, 6, 8–10]. This effect conceals a serious problem of cost. For instance, due to an inefficient estimation of demand, various problems may occur, such as an excess or a shortage of raw materials, extra operating costs and overtime costs caused by excess manufacturing, or high storage cost and retarded financial flow; all of these have a negative effect on the profit of a company. Lee [9] and some other researchers [1, 10] have done some qualitative studies on this effect, and find that sharing information about the clients is one way to...

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