Information Sharing in Competing Supply Chains with Production Cost Reduction

Albert Y. Ha (), Quan Tian () and Shilu Tong ()
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Albert Y. Ha: School of Business and Management, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong
Quan Tian: School of Business, Guangzhou University, Guangzhou, China
Shilu Tong: School of Management and Economics, CUHK Business School, Shenzhen Finance Institute, The Chinese University of Hong Kong, Shenzhen, China

Manufacturing & Service Operations Management, 2017, vol. 19, issue 2, 246-262

Abstract: We consider the problem of sharing demand information in two competing supply chains, each consisting of one manufacturer and one retailer. Information sharing allows a manufacturer’s wholesale price to respond to demand signal, which benefits the supply chain if the manufacturer is efficient in cost reduction and hurts it otherwise. It also allows a manufacturer’s cost reduction level to respond to demand signal, which always benefits the supply chain. A supply chain that engages in information sharing triggers a reaction from the rival chain. Such a reaction may benefit or hurt the first supply chain, depending on whether the retailers compete on quantity or price, and whether or not the manufacturers are efficient in cost reduction. With quantity competition, information sharing occurs when the manufacturers are efficient in cost reduction. It is more likely to occur when either information is less accurate or competition is less intense. With price competition, information sharing occurs when either competition is intense or the manufacturers are efficient in cost reduction. It is more likely to occur when information is more accurate. When information sharing is beneficial to a supply chain, a manufacturer can buy information from a retailer with a side payment, which is zero if the manufacturer is sufficiently efficient in cost reduction.

Keywords: supply chain management; information sharing; cost reduction (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (82)

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