4.7 Article

Optimal production and inventory rationing policies with selective-information sharing and two demand classes

Journal

EUROPEAN JOURNAL OF OPERATIONAL RESEARCH
Volume 288, Issue 2, Pages 394-407

Publisher

ELSEVIER
DOI: 10.1016/j.ejor.2020.05.051

Keywords

Information sharing; Production-inventory system; Inventory rationing; Second-mover advantage; Dynamic programming

Funding

  1. Zhejiang Province Philosophy and Social Science Program [19NDJC052YB]
  2. National Natural Science Foundation of China [71831006, 71771185, 71271167, 71832011]

Ask authors/readers for more resources

This study examines the impact of partner selection on the value of information sharing in a distribution system. The findings suggest that partnering with the high priority retailer is more effective, and a selective-information sharing system serves as an effective pilot run to full-information sharing.
This paper studies the impact of partner selection on the value of information sharing in a distribution system with one capacitated make-to-stock manufacturer and two retailers. When the high priority retailer with a higher shortfall cost is the sole partner, in the case that the low priority one places an order, the manufacturer allocates inventory more accurately according to more predictable orders from the high priority retailer. When only the low priority retailer shares information, the manufacturer is better informed about orders from this retailer, which shall trigger rationing decisions. Such intriguing differences in utilizing information from two prioritized retailers further induce different interactions between production and rationing policies and form two distinctive but closely related selective-information sharing systems. We characterize the manufacturer's optimal production and rationing policies under both systems. Through a numerical study, we emphasize the effectiveness of partnering with the high priority retailer. When the manufacturer can establish information sharing links with only one retailer, such a choice usually brings more benefits despite differences in order sizes and/or demand rates of the two retailers. When a selective-information sharing system is the pilot run to full-information sharing, we find that the value of information throughout the implementation process often exhibits second-mover advantage and such a choice also helps the manufacturer create a more balanced return pattern. Finally, we illustrate that the cost-effectiveness of inventory rationing can be significant and optimally rationing inventory is the prerequisite for the superior of the selective-information sharing system with the high priority retailer. (C) 2020 Elsevier B.V. All rights reserved.

Authors

I am an author on this paper
Click your name to claim this paper and add it to your profile.

Reviews

Primary Rating

4.7
Not enough ratings

Secondary Ratings

Novelty
-
Significance
-
Scientific rigor
-
Rate this paper

Recommended

No Data Available
No Data Available