Effect of Sharing Supplier Capacity Information

In recentyears manufacturers have taken initiatives to integrate information within their supply chains in order to provide quick response to customer needs. In this paper, we study the influence of sharing supplier capacity information (available-to-promise capacity) on the performance of a supply chain. We consider a manufacturer who orders raw materials from two alternative suppliers differing in cost and capacity. We first derive the optimal inventory policy for the manufacturer under stochastic demand when exact capacities of the suppliers are known. Subsequently, using simulation, we compare different information sharing scenarios. Among other results, our simulation study shows that, while information sharing is beneficial to overall supply chain performance, it can be detrimental to individual entities. We find when supplier adoption costs of the information system are negligible, the more expensive supplier makes less profits under information sharing. However, it is still beneficial to share information for that supplier. When adoption costs are substantial, our results indicate that it is better for the manufacturer to have information links with fewer suppliers (a subset of potential suppliers)