The value of sharing planning information in supply chains
International Journal of Physical Distribution & Logistics Management
ISSN: 0960-0035
Article publication date: 17 May 2013
Issue publication date: 17 May 2013
Abstract
Purpose
The development of information technology has made it possible for companies to get access to information about their customers ' future demand. This paper outlines various approaches to utilize this kind of visibility when managing inventories of end products on an operative level. The purpose is to explain the consequences, for capital tied up in inventory, of sharing four different types of planning information (point-of-sales data, customer forecasts, stock-on-hand data, planned orders) when using re-order point (R,Q) inventory control methods in a distribution network.
Design/methodology/approach
A simulation study based on randomly generated demand data with a compound Poisson type of distribution is conducted.
Findings
The results show that the value of information sharing in operative inventory control varies widely depending on the type of information shared, and depending on whether the demand is stationary or not. Significantly higher value is achieved if the most appropriate types of information sharing are used, while other types of information sharing rather contribute to decreased value. Sharing stock-on-hand information is valuable with stationary demand. Customer forecast and planned order information are valuable with non-stationary demand. The value of information sharing increases when having fewer customers, and when the order quantities are large. Sharing point-of-sales data is not valuable, regardless of the demand type.
Research limitations/implications
The use of simulation methodology is a limitation, because the study has to be limited to a specific model design, and because it is not based on primary empirical data. The study is especially limited to dyadic relationships in supply chains, and to distribution networks with a rather limited number of customers.
Practical implications
Guidance is given about what type of information should be appropriate to share when different types of demand patterns and distribution networks, and how order batch sizes and lead times affect the value of information sharing when using re-order point (R,Q) methods.
Originality/value
Very limited research providing specific assessments of potential inventory control consequences when sharing planning information in various contexts has been found in the literature. The findings and conclusions also question some previous research on information sharing.
Keywords
Citation
Jonsson, P. and Mattsson, S.-A. (2013), "The value of sharing planning information in supply chains", International Journal of Physical Distribution & Logistics Management, Vol. 43 No. 4, pp. 282-299. https://doi.org/10.1108/IJPDLM-07-2012-0204
Publisher
:Emerald Group Publishing Limited
Copyright © 2013, Emerald Group Publishing Limited