Production Control Policies in Supply Chains with Selective-Information Sharing

Boray Huang () and Seyed M. R. Iravani ()
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Boray Huang: Department of Industrial Engineering and Management Sciences, Northwestern University, 2145 Sheridan Road, Evanston, Illinois 60208
Seyed M. R. Iravani: Department of Industrial Engineering and Management Sciences, Northwestern University, 2145 Sheridan Road, Evanston, Illinois 60208

Operations Research, 2005, vol. 53, issue 4, 662-674

Abstract: We consider a supply chain consisting of one manufacturer (capacitated supplier) and two retailers. We characterize the manufacturer’s optimal production policy under selective-information sharing, in which the manufacturer receives demand and inventory information from only one of the two retailers. We show that the manufacturer’s optimal production policy is a state-dependent base-stock policy and that the base-stock levels have a monotonic structure. We also perform an extensive numerical study to examine how system factors affect the benefit of information sharing and the relative values of information from each retailer. In addition, we identify cases where the cost saving due to receiving information from only one retailer captures most of the saving that can be obtained when the information is received from both retailers. Finally, we investigate the cost effectiveness of echelon-stock policies in systems with full-information sharing and introduce the “information pooling effect” as well as economies of scale with respect to information sharing.

Keywords: production/scheduling:applications; dynamic programming:applications (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:53:y:2005:i:4:p:662-674

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