Bull whip effect 3 - Research Paper No 1549 Information...

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RESEARCH PAPER SERIES GRADUATE SCHOOL OF BUSINESS STANFORD UNIVERSITY Research Paper No. 1549 Information Sharing in a Supply Chain Hau L. Lee Seungjin Whang
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Information Sharing in a Supply Chain L. and Seungjin Department of Industrial Engineering and Engineering Management, and Graduate School of Business, Stanford University, Stanford, CA 94305, USA. Graduate School of Business Stanford University, Stanford, CA 94305, USA. July 1998 Abstract Advances in information system technology have had a huge impact on the evolution of supply chain management. As a result of such technological advances, supply chain partners can now work in tight coordination to optimize the chain-wide performance, and the realized return may be shared among the partners. A basic enabler for tight coordination is information sharing, which has been greatly facilitated by the advances in information technology. This paper describes the types of information shared: inventory, sales, demand forecast, order status, and production schedule. We discuss how and why this information is shared using industry examples and relating them to academic research. We also discuss three alternative system models of information sharing -- the Information Transfer model, the Third Party Model, and the Information Hub Model.
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1. Introduction In supply chain management, the focal point for the partners is that the unit of analysis is changed from a business unit (like a plant or a warehouse) to a supply chain (including parts suppliers, manufacturers, distributors, logistics service providers, wholesalers and retailers). The integration and optimization of three -- material, information and financial -- flows in the supply chain form the core concern of supply chain management. It suggests extensive coordination among multiple functions and independent companies engaged in the delivery of a product or a service to end consumers. Traditional transaction-based intra-organizational relationships give way to partnerships in which information, processes, decisions and resources are shared among partner companies. There are several major underlying trends that have formed the key drivers for supply chain management. The first is the globalization of businesses. Modern businesses attempt to deploy global resources to maximize the potential opportunities in the global community. This, however, entails the challenges of dealing with long delivery lead times, high buffer stock, complex logistics and high cost of coordination, as companies try to coordinate the three flows across the globe. Another driver is the innovations in the retail landscape. General merchandise store chains like Wal-Mart, wholesale clubs like Price Club, category specialist chains like Toys-R-Us, mail order companies like Lands End, and virtual electronic stores like Amazon have revolutionized the retail side of supply chains. Innovations like Vendor-Managed Inventory (VMI), everyday low pricing , activity-based costing and cross-docking have
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