Information Sharing in Supply Chains

Daniel Dumke — Mon, 07 Mar 2011 13:25:00 +0000

Obstacles to Information Sharing

There are many obstacles to information sharing in a supply chain. Confidentiality is probably one of the biggest issues, but there are others not so obvious like antitrust regulations, the timeliness and accuracy of the provided information, differing technologies between the supply chain partners or a mismatch in the alignment of incentives. Therefore trust and cooperation become critical ingredients in a supply chain partnership.

Drivers of Information Sharing

Lee and Whang discuss those obstacles and present some common types of information sharing in their paper of 2000.
In their view supply chain management primarily implies a focus change from the business to the supply chain. Inter-firm communication gains importance. The goal should be to integrate material, information and money as the three supply chain flows. Drivers behind this development are globalization and the more cost effective IT. Nonetheless, information sharing is only an enabler for better coordination and planning of the supply chain.

Types of shared Information

There are several different categories of information shared between companies.
Inventory Level
Why:

Echelon-based inventory control is optimal under certain assumptions
A variation of the order-up-to policy based on the echelon inventory level would achieve near-optimum
Production rule will adjust the production rate at a stage according to the inventory levels at the downstream stages

Forms:

Continuos replenishment programs
Vendor managed inventory

Problem:

Information validity can be a huge problem

Sales Data
Why:

Orders from downstream serve as a critical source of information about future business
The variance of orders is often larger than the variance of sales
Mitigation of the Bullwhip effect. By having sales data, manufacturers would be in a much better position to differentiate real demands and the so-called “phantom” demands.

Order Status for Tracking/Tracing
Sales Forecast
Why:

Elimination of the Bullwhip effect and the associated inefficiencies.

Production/Delivery Schedule
Why:

Information about (raw) material availability helps the buyer to expand the planning horizon of his own production schedule
For the supplier knowledge about the manufacturers schedule can help to ensure reliable resupply

Other Information Sharing
Sharing of performance metrics or capacity can help to identify bottlenecks in the supply chain and improve the performance.

Models of Information Sharing

Lee and Whang explain three models of information sharing:
Information Transfer Model
In this model one partner takes the lead in the supply chain, the other partner(s) transfers their information to the other who maintains the database for decision making.
Third Party Model
The 3rd-party model involves a third party whose main function is to collect information and maintain it in a database for the supply chain.
Information Hub Model
The information hub model is similar to the 3rd-party model except that the third party is replaced by a system. In this case the information hub does not have to exist physically, individual functional modules may reside at scattered locations and be called and invoked only as needs arise. Thus, the information hub could exist only as a logical entity.

Conclusion

Lee and Whang show what information can be shared in a supply chain and how it can be accomplished. Nonetheless the obstacles remain and are an ongoing subject of research.

Reference:

Lee, H., & Whang, S. (2000). Information sharing in a supply chain International Journal of Manufacturing Technology and Management, 1 (1) DOI: 10.1504/IJMTM.2000.001329

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