The bullwhip effect on inventory: a perspective on information quality

In recent years, there has been a vast increase in the quantity of information shared across supply chain. We investigate how the timeliness and accuracy of information quality affect the value of information sharing. We use the inventory bullwhip effect (BWE) to measure the value of information sha...

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Bibliographic Details
Published in:Applied economics 2017-05, Vol.49 (24), p.2322-2338
Main Authors: Lu, Jizhou, Feng, Gengzhong, Lai, Kin Keung, Wang, Nengmin
Format: Article
Language:English
Subjects:
bullwhip effect
information quality
Information sharing
Inventories
Inventory
Order quantity
Quality
Supply chains
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Summary:In recent years, there has been a vast increase in the quantity of information shared across supply chain. We investigate how the timeliness and accuracy of information quality affect the value of information sharing. We use the inventory bullwhip effect (BWE) to measure the value of information sharing in a two-level supply chain consisting of one retailer and one manufacturer. The retailer faces a price-sensitive demand and the price is an AR (1) process. Our study shows if customer demand and retailer's immediate order are delayed, using retailer's historical order quantity to forecast can decrease manufacturer's BWE. If information errors happen, during delivery and utilization, information sharing is not always valuable for the manufacturer. Sometimes, no information sharing can decrease much more of BWE. If information errors occur when the retailer collects demand information, value of information sharing is more significant than when there are no information errors.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2016.1237762