Understanding the value of upstream inventory information sharing in supply chain networks

Global competition has caused a paradigm shift in a firm’s outlook from a product-centric to a customer-centric view. With this shift, the availability of inventory at a store is a prime concern for firms in a supply chain network (SCN) as it affects customer goodwill and market share. Information sharing among the SCN partners is a key strategy to address this issue. In this study, we focus on the impact of sharing upstream inventory information in a SCN on its overall performance. A two-echelon SCN configuration with one retail store and two production facilities was used as an experimental test bed. To assess the marginal benefits of sharing additional information, three levels of information sharing were considered along with the base case of no information sharing. The information shared ranged from stock-out information at the lowest level to inventory and backorder levels at the highest level. Continuous Time Markov Chain models of the SCN were developed and analyzed to gain insights into the value of inventory information sharing. Numerical experiments were conducted to show that inventory information can be an effective substitute for physical inventory and to assess the impact of backorder limits on the SCN performance.