The value of information sharing in a two-stage supply chain with production capacity constraints: The infinite horizon case

David Simchi-Levi, Yao Zhao

Research output: Contribution to journalReview articlepeer-review

12 Scopus citations

Abstract

We study the value of information sharing in a two-stage supply chain with a single manufacturer and a single retailer in an infinite time horizon, where the manufacturer has finite production capacity and the retailer faces independent demand. The manufacturer receives demand information even during periods of time in which the retailer does not order. Allowing for time-varying cost functions, our objective is to characterize the impact of information sharing on the manufacturer's cost and service level. We develop a new approach to characterize the induced Markov chains under cyclic order-up-to policy and provide a simple proof for the optimality of cyclic order-up-to policy for the manufacturer under the average cost criterion. Using extensive computational analysis, we quantify the impact of information sharing on the manufacturer's performance in an infinite time horizon under both i.i.d. demand and independent but nonstationary demand.

Original languageEnglish (US)
Pages (from-to)247-274
Number of pages28
JournalProbability in the Engineering and Informational Sciences
Volume18
Issue number2
DOIs
StatePublished - 2004

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Statistics, Probability and Uncertainty
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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