This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via Google Scholar Google Scholar Articles by Huang, B. Articles by Iravani, S. M. R. Search for Related Content

Production Control Policies in Supply Chains with Selective-Information Sharing

Department of Industrial Engineering and Management Sciences, Northwestern University, 2145 Sheridan Road, Evanston, Illinois 60208
Department of Industrial Engineering and Management Sciences, Northwestern University, 2145 Sheridan Road, Evanston, Illinois 60208
bhuang{at}alumni.northwestern.edu
s-iravani#x0040;northwestern.edu

We consider a supply chain consisting of one manufacturer (capacitated supplier) and two retailers. We characterize the manufacturer’s optimal production policy under selective-information sharing, in which the manufacturer receives demand and inventory information from only one of the two retailers. We show that the manufacturer’s optimal production policy is a state-dependent base-stock policy and that the base-stock levels have a monotonic structure. We also perform an extensive numerical study to examine how system factors affect the benefit of information sharing and the relative values of information from each retailer. In addition, we identify cases where the cost saving due to receiving information from only one retailer captures most of the saving that can be obtained when the information is received from both retailers. Finally, we investigate the cost effectiveness of echelon-stock policies in systems with full-information sharing and introduce the "information pooling effect" as well as economies of scale with respect to information sharing.

Subject classifications: production/scheduling:applications; dynamic programming:applications.
History: Received July 2002; revision received July 2004; accepted July 2004.