Utility of the inventory information sharing in a supply chain

Supply chain information sharing has been known to reduce a firm's operating costs. Cost-saving benefits from sharing either upstream or downstream information among supply chain members has been well recognised and well studied in the literature in recent years. Information sharing on inventory policies is also important to both buyers and suppliers. In this study, we utilise a supply chain system consisting of a supplier, Buyer 1 and Buyer 2, and analyse the effect of the reordering point system for the supplier and two buyers when they cooperatively determine their optimal order quantities. This paper provides inventory models for a three-echelon supply chain such that the expected cost function is minimised. The research considers both; the case where inventory information is being shared among the three supply chain partners (supplier, Buyer 1 and Buyer 2) and the case where inventory information is only observed from the downstream partner. Through a numerical example, we compare the performance of both systems and provide a set of observations regarding the utility of inventory information sharing among partners from an economic viewpoint.supply chain management; SCM; supply chain partners; information sharing; echelon stock; reordering point policy; inventory policies; inventory modelling