By assuming that the underlying demand is independent and identically

By assuming that the underlying demand is independent

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By assuming that the underlying demand is independent and identically distributed, Gavirneni et al. (1999) develop a model to examine the benefits of information sharing for the case in which the manufacturer has limited production capacity. In their model, the retailer has the information about the underlying demand distribution and the retailer would order according to an (s, S) policy. Under the (s, S) policy, the retailer would place an order in a period only when the inventory level drops below s. When there is no
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37information sharing, the manufacturer has the information about the underlying demand distribution and the retailer’s ordering policy; however, the manufacturer does not have the information about the retailer’s inventory level. When there is information sharing, the retailer would share the information about the actual inventory level with the manufacturer in each period. They show that information sharing is beneficial to the manufacturer especially when the manufacturer’s production capacity is higher or when the demand uncertainty level is moderate. Cachon and Fisher (1997) and (2000) analyze the benefits of information sharing for the N-retailer case in which the manufacturer has limited production capacity. By assuming that each retailer implements a (R, nQ) policy, they show analytically that information sharing is beneficial to the retailer and the manufacturer. In addition, Cachon and Fisher (2000) show numerically that lead time reduction will be more beneficial than information sharing. Zhao et al. (2002) develop a simulation model to examine the impact of forecasting methods such as moving average, exponential smoothing, and Winters’ method, etc., on the value of information sharing in a supply chain that has 1 manufacturer and N retailers. They show that the cost savings for the entire supply chain are more substantial when the retailers share information about future orders with the manufacturer than the case in which the retailers share information about the customer demand. While many companies reported that sharing information (such as customer demand, inventory level, or demand forecast) among supply chain partners is beneficial, there are several obstacles for supply chain partners to share private information. For instance, retailers are reluctant to share information with the manufacturer because of fear (lower bargaining power, information leakage, etc.). Besides fear, there are other problems associated with forecast sharing in practice. Terwiesch et al. (2005) articulate that when a retailer revises his forecasts (or soft orders) frequently before placing a firm order, the manufacturer may ignore the revisions. Also, when a manufacturer is unable to fulfill the firm order in one period, the retailer may inflate his soft orders in future periods to ensure sufficient supply.
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