A Study on Supply Chain Information Sharing Decisions from the Perspective of Information Deviations

信息偏差情形下的供應鏈信息共享決策研究

Student thesis: Doctoral Thesis

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Author(s)

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Detail(s)

Awarding Institution
Supervisors/Advisors
  • Stephen Wan Hang SHUM (Supervisor)
  • Kin Keung LAI (Co-supervisor)
  • Gengzhong Feng (External person) (External Supervisor)
Award date7 Sep 2018

Abstract

Many management practices should rely on information sharing to make decisions. However, data quality and information quality problems have become a large source of risk for enterprise operation management. One widely noticed phenomenon is information deviations, which directly affect the quality of information sharing and can further cause a serious negative impact on the supply chain performance. However, existing literature merely discusses information deviations in information sharing. Furthermore, there is no comprehensive analysis regarding this issue in different operation situations. In this paper, the time series model is used to describe the product market demand, and the multi-period model of inventory theory is used to depict the dynamic nature of information deviation propagation. The methods of stochastic process and numerical simulation are used to construct a progressive, interrelated, complementary research framework with the goal of minimizing long-run average inventory cost in various supply chain structures. Then, we comprehensively study the impact of different types of information deviations on the information sharing decisions in multiple supply chain structures and further help the supply chain members identify the optimal information sharing strategies in different situations. The main work and innovative findings of this paper are as follows:

1) Based on the classical information sharing model of Hau L. Lee and Youhua Chen, we divide information deviation into source deviation and transmission deviation according to the occurring stages and influences. When the retailer sells a single product with an ARMA (p,q) demand process, based on three vertical information sharing strategies (no information sharing, demand-order information sharing, and demand-only information sharing), we construct the manufacturer’s inventory cost functions under two types of information deviations with the goal of minimizing costs. This research shows the following insights: When there are no information deviations, no type of information sharing strategies will reduce the manufacturer’s cost. Using customer demand information and retailer order information to forecast will be the optimal strategy for the manufacturer. When there are information deviations, transmission deviations may undermine the value of information sharing, while source deviations may not. In fact, the value of information sharing increases with the magnitude of source deviation but decreases with the magnitude of transmission deviation. It may be optimal for the manufacturer to disregard order quantities of the retailer when making her own ordering decisions when transmission deviation exists, but it is never optimal without transmission deviations, even when source deviations exist.

2) According to the fact that the competition between manufacturers could affect the retailer’s order allocation rate, which can further change the influence of information deviations on information sharing decisions, we construct a multi-upstream supply chain that includes one retailer and two manufacturers. The retailer sells a single product, and the customer demand follows an AR (1) process. We analyze and compare the costs of the manufacturer with different vertical information sharing strategies (no information sharing, demand-order information sharing, and demand-only information sharing) under source deviation and transmission deviation to identify the optimal information sharing strategy for manufacturers. The research shows the following insights. The conclusions in the single supply chain consisting of one retailer and one manufacturer are still tenable in a multi-upstream supply chain. The allocation rate of the retailer’s order quantity has a significant impact on manufacturers’ costs and the influence of information sharing. An optimal order allocation rate may exist theoretically to make the manufacturers achieve the lowest cost and comparative advantage. For a certain manufacturer, the increased costs caused by increased order forms will be larger than that caused by increased information deviations. In addition, the increased costs caused by increased transmission deviations will be larger than that caused by increased source deviations.

3) According to the fact that cooperation between the retailers could affect the information sharing strategies, which can further change the influence of information deviations, we construct a multi-downstream supply chain that includes two retailers and one manufacturer. Each retailer sells one product, and the demands of these two products are interdependent, which follows the first-order vector autoregressive process. Based on the fact that retailers may share demand information horizontally to each other, a retailer may share demand information to the manufacturer vertically, and the manufacturer may leak one retailer’s demand information to the other retailer, we analyze and compare the long-run average costs of retailers and the manufacturer with different information sharing strategies under source deviation and transmission deviation situations to help them identify the optimal information sharing strategies with the goal of minimizing costs. The research shows the following insights. When there are no information deviations, vertical information sharing may increase the manufacturer’s cost. The horizontal information sharing will decrease retailers’ costs but may increase the manufacturer’s cost. Horizontal information status may be better than horizontal information content for the manufacturer. If there is no horizontal information sharing but there is vertical information sharing between each retailer and the manufacturer, the manufacturer may have the incentive to leak the private demand information of one retailer to the other. When there are information deviations, source deviation and transmission deviation will affect the decisions of horizontal information sharing, vertical information sharing and information leakage to different degrees. Regardless of whether horizontal information sharing occurs, source deviation will increase retailers’ costs. However, transmission deviation will increase retailers’ costs only if horizontal information sharing occurs.

4) According to the fact that the interaction between different supply chains can further change the influence of information deviations, we construct a parallel supply chain system that includes two separate supply chains, and each of them consists of one retailer and one manufacturer. Two different but correlated products are sold by the two supply chains, separately. The customer demand follows the first-order vector autoregressive process. Based on the fact that inter-supply chain information sharing may happen within each supply chain and cross-supply chain information sharing may happen between two supply chains, we analyze and compare the long-run average costs of retailers and manufacturers with different information sharing strategies under source deviation and transmission deviation situations to help them identify the optimal information sharing strategies. The research shows the following insights. When there are no information deviations, cross-supply chain information sharing is always beneficial to the retailer but is beneficial to the manufacturer if and only if her retailer does not know the other supply chain’s demand information. In addition, the sequence of cross-supply chain information sharing has a fatal impact on supply chain members’ performance. When there are information deviations, these deviations will make information sharing increase the costs of retailers and manufacturers. When the variance of customer demand is smaller than the variance of information deviations, both retailer and manufacturer should abandon the other supply chain’s demand information.

    Research areas

  • Information sharing, Information deviation, Supply chain structure, Supply chain decision