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This paper reports simulation research that empirically investigates and compares supply chain performance under varying conditions of information exchange and demand uncertainty. Specifically, the research objective is to quantitatively document the characteristics and performance impact of information exchange among supply chain entities. The findings suggest that the response-based supply chain model consistently outperforms the anticipatory model in terms of customer service delivered under conditions of both low and high demand variation. Comparisons of inventory holdings across supply chain models demonstrate that the retailers' inventory burden is significantly lower in the response-based scenario. The inventory savings enjoyed by retailers in the response-based model are substantial enough to lower system-wide inventories. In sum, the study supports the feasibility of achieving both improved service and lower inventories as a result of information sharing.
There is substantial research suggesting that integrated management and information sharing can improve supply chain capabilities and performance. The recent World Class Logistics research completed at Michigan State University has identified seventeen capabilities characteristic of firms demonstrating a high level of logistics performance [1 ]. Many of these capabilities emphasize high levels of both internal and external integration. While qualitative and anecdotal evidence suggests supply chain integration and information sharing can substantially improve overall performance, there is limited empirical research indicating the magnitude of the impact.
This paper reports simulation research that empirically investigates and compares supply chain performance under varying conditions of information exchange and demand uncertainty. The research objective is to quantitatively document the characteristics and performance impact of information exchange. The research uses a personal computer-based simulation tool to model a typical consumer product supply chain consisting of one supplier, one manufacturer, two distributors and three retailers under various conditions of information-based integration and demand uncertainty.
Specifically, the research compares the customer service and inventory performance of anticipatory and response-based supply chains. A traditional anticipatory supply chain utilizes forecasts and established reorder points to push product through the distribution channel. The anticipatory approach assumes limited information exchange between supply chain partners as each channel member attempts to "anticipate" the requirements of the next channel member based on forecasted sales, typically a function of historical demand. A response-based strategy uses feedback loops and information sharing between retailers, distributors, and manufacturers to pull...