Handbook of Information Exchange in Supply Chain Management PDF
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Springer Series in Supply Chain Management Albert Y. Ha Christopher S. Tang Editors Handbook of Information Exchange in Supply Chain Management Springer Series in Supply Chain Management Volume 5 SeriesEditor ChristopherS.Tang UniversityofCalifornia LosAngeles,CA,USA Moreinformationaboutthisseriesathttp://www.springer.com/series/13081 Albert Y. Ha • Christopher S. Tang Editors Handbook of Information Exchange in Supply Chain Management 123 Editors AlbertY.Ha ChristopherS.Tang HongKongUniversityofScience UniversityofCalifornia andTechnology LosAngeles,CA,USA Kowloon,HongKong ISSN2365-6395 ISSN2365-6409 (electronic) SpringerSeriesinSupplyChainManagement ISBN978-3-319-32439-5 ISBN978-3-319-32441-8 (eBook) DOI10.1007/978-3-319-32441-8 LibraryofCongressControlNumber: 2016943081 ©SpringerInternationalPublishingSwitzerland2017 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpartof thematerialisconcerned,specificallytherightsoftranslation,reprinting,reuseofillustrations,recitation, broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionorinformation storageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilarmethodology nowknownorhereafterdeveloped. Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublication doesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant protectivelawsandregulationsandthereforefreeforgeneraluse. Thepublisher,theauthorsandtheeditorsaresafetoassumethattheadviceandinformationinthisbook arebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsor theeditorsgiveawarranty,expressorimplied,withrespecttothematerialcontainedhereinorforany errorsoromissionsthatmayhavebeenmade. Printedonacid-freepaper ThisSpringerimprintispublishedbySpringerNature TheregisteredcompanyisSpringerInternationalPublishingAGSwitzerland Preface To mitigate the “bullwhip effect” along a supply chain, Lee et al. (1997) develop stylizedmodelssothattheycangenerateanalyticalresultstoarguefortheimpor- tanceofinformationsharingamongsupplychainpartners.Sincethen,manysupply chainacademicresearchhasfocusedontheinteractionbetweeninformationsharing and operations planning. For example, Lee et al. (2000) investigate further about theconditionsunderwhichsharinginformationaboutmarketdemandisbeneficial; andAviv(2001)examinesthebenefitsofcollaborativeforecasting(viasharingin- formationaboutafirm’sdemandforecastwithotherfirms). OnSeptember8,2015,oursimplesearchofthekeywords“informationsharing” and“supplychain”throughGoogleScholaryields42,700articles.Thissearchresult revealsthatmanyresearchersareinterestedinseveralfundamentalquestionsabout information sharing in supply chains. For instance, what is the magnitude of the bullwhip effect observed in practice? Do different industries experience different magnitudes of the bullwhip effect? Besides information about demand and fore- casts,shouldfirmsshareinformationaboutitscapacity,inventorylevel,andproduct development with its supply chain partner? How do firms facilitate collaborative forecastinginpractice? To gain a better understanding about these questions, we have invited leading scholars who have shaped their respective fields of research. This book contains the state-of-the art research in operations management that deals with information sharing in supply chains. It consists of comprehensive surveys of empirical and analytical studies and novel models of various problems arising from information asymmetrysothatthereisaneedtoexchangeinformation. Weenjoyedtheexperienceworkingonthisbook,andwehopethatthisbookwill stimulatefurtherworkinthisexcitingareaofresearch. Kowloon,HongKong AlbertY.Ha LosAngeles,CA,USA ChristopherS.Tang October2015 v vi Preface References AvivY(2001)Theeffectofcollaborativeforecastingonsupplychainperformance.ManagSci 47(10):1326–1343 LeeHL,PadmanabhanV,WhangS(1997)Informationdistortioninasupplychain:thebullwhip effect.ManagSci43(4):546–558 LeeHL,SoKC,TangCS(2000)Thevalueofinformationsharinginatwo-levelsupplychain. ManagSci46(5):626–643 Introduction Intheinstantclassic“Bullwhip”paper,Leeetal. (1997)suggestedthatfirmscan mitigate the bullwhip effect if demand information is shared among supply chain partners. Since then, the rapid advancement in Information and Communication Technology (ICT) has enabled supply chain partners to explore different mecha- nismstosharedifferenttypesofinformation(productdesign,productioncapacity, inventorystatus,shipmentstatus,realizeddemand,andforecasteddemand).Atthe sametime,theresearchcommunityexpressedinterestinevaluatingthebenefitsof sharingdifferenttypesofinformationbyusingdifferentmechanisms(includingin- centivecontracts).BasedonourScopussearch,therewereover1400journalarticles publishedbetween1997and2014thatcontainkeywords“informationsharing”and “supply chain.” (See the Fig.1 below for details.) This finding revealed that infor- mationsharinginsupplychainmanagementcontinuedtobeanimportantresearch areaofinterest.Thisobservationmotivatedustoinviteleadingscholarsinthisarea tosharetheirperspectivesthroughcomprehensivesurveysornovelmodelssothat ourcommunitycangainaclearunderstandingaboutthestate-of-the-artresearchin thisarea. OverallStructure Thisbookiscomprisedof17chaptersthataredividedinto4sections.Thefirstsec- tion (Chaps.1–3) provides comprehensive reviews of research literature that deal with different issues arising from information sharing in supply chains. The sec- ondsection(Chaps.4–9)investigatesdifferenttypesofincentivecontractsthatare intended to enable the principal to entice the agents to behave in a certain manner when certain information about the agents are not perfectly known to the princi- pal.Thethirdsection(Chaps.10–13)examinessituationswhenafirmcancredibly conveyunverifiableinformation(e.g.,demandforecast)viasignalingorcheaptalk vii viii Introduction Fig. 1 Number of published journal articles with keywords “information sharing” and “supply chain”(from1997to2014) to the recipients (e.g., customers). Finally, the fourth section (Chaps.14–17) ana- lyzes how certain issues (e.g., competition, trust, etc.) can affect the incentive for informationsharing. ChapterHighlights PartI:ValueofInformation Sharing In Chap.1, Li Chen and Hau Lee review both theoretical and empirical research studiesthatareintendedtoexaminethefollowingquestions:Whatcausesthebull- whip effect in a supply chain? What is the magnitude of the bullwhip effect in practice? In addition, they identify approaches that are necessary to measure and evaluatethebullwhipeffectproperly.InChap.2,JustinRenassessesdifferentem- piricalstudiesofinformationsharinginsupplychains.Specifically,heclassifiesthe relevantliteratureaccordingtothetypeofinformation(realizedcustomerdemand, demand forecasts,inventory status,and product development) thatfirmscan share in order to improve various supply chain performance measures. By focusing on theissueofinformationsharinginretailsupplychains,Mu¨minKurtulus¸inChap.3 reviewstheexistingliteratureoncollaborativeforecasting(CF):aprocessthaten- ablessupplychainpartnerstosharetheirindividualdemandforecaststodevelopa “joint”demandforecast.ByhighlightingthemodelsthatcapturetheessenceofCF, hesummarizesthekeyfindingsandinsightsaboutthevalueofCF. PartIsetsthestagebyreviewingtheliteraturethatexaminesthefollowingfun- damental questions: What causes the bullwhip effect? What is the proper way to measurethebullwhipeffect?Howcanfirmsusethesharedinformationtoimprove supply chain performance? What type of information should a firm share with its Introduction ix supplychainpartners?However,duetoself-interest,afirmisreluctanttoshareor to reveal private information. Therefore, how can one firm provide incentives for otherfirmstoeithershareinformationtruthfullyortobehaveinacertainmanner? Thisisthefocusoftheremainderofthisbook. PartII:ContractingUnderAsymmetricInformation In this section, different contributing authors analyze different types of incentive contractsarisingfromdifferentcontexts.First,motivatedbydissatisfactionwiththe level of after-sales support from key suppliers, many firms are considering chang- ing the service contracts from the traditional resource-based contracts (RBC) to performance-based contracts (PBC). In Chap.4, Sang-Hyun Kim, Morris Cohen, andSergueiNetessineinvestigatethevalueofperformance-basedcontracting(PBC) inthecontextofafter-salesproductsupportservices.Specifically,underRBC,the price of the after-sales service is based on pre specified unit prices of the service parts,labor,andotherconsumableresources.However,underPBC,thecompensa- tionisbased ontheactualavailability oftheproductrealized bythecustomer.By consideringthecasewhenthesuppliercanexertcostlyefforttoimproveproductre- liability,theauthorsfindthatPBCismorecost-efficienttothecustomerespecially because PBC incentivizes thesupplier toinvestmoreinreliability.Also,PBCcan generatemaximumbenefitwhenthesparepartsarefullyownedbythesupplier. In the operations management literature, most analytical models tend to focus on the dynamics between one customer and one supplier. However, in the context ofprojectmanagement,manyprojectsinvolvemultiplesuppliers(agents)withun- observable efforts. Because of potential free riding, it is challenging for the cus- tomer(principal)todevelopeffectiveincentivecontractsthatyieldmaximumpay- off.GeorgeGeorgiadisandChristopherTangtacklethisprobleminChap.5bycon- sideringateamdynamicsprobleminwhichmultipleagentscollaborateovertimeto completeaproject.Theyshowthat,whenthesizeofprojectisexogenouslygiven, itisoptimalforthecustomertocompensatetheagentsonlyuponcompletionofthe project.Inotherwords,the“payasyougo”contractisnotoptimal.Also,whenthe sizeoftheprojectisendogenousandwhenthecustomercannotcommittothesize oftheproject,theyfindthatthecustomerisbetteroffdelegatingthedecisionrights overtheprojectsizetotheagents. In project management (PM), customers do not have perfect information about thecapabilityandthecostefficiencyofdifferentpotentialcontractors.Assuch,how can a customer develop incentive contracts to entice the contractor to exert costly effortsothattheprojectcanbecompletedinatime-efficientandcost-effectiveman- ner?Recently,anovelreverseauctionideahasemergedunderwhicheachcontractor isinvitedtosubmitabidthatconsistsoftwoelements:aquotedpriceandaquote completiontime.Inthistwo-bidauction,thewinningbidistheonethatyieldsthe lowestcompositescore(i.e.,aweightedaverageofthequotedpriceandthequoted completion time). However, the winning contractor is subject to a penalty if the x Introduction project is completed late. Christopher Tang, Kairen Zhang, and Sean Zhou evalu- atethistime-basedincentivecontractinChap.6forthecasewhentheamountofthe workinvolvedisinherentuncertain.Theyshowthatthistwo-bidauctionisefficient; however,theyfindthatasimpleauctionmechanismcanyieldthesamebenefit. Rapidnewproductdevelopment(NPD)isanimportantstrategyforafirmtosus- tain its revenue growth. Because NPD projects often involve internal stakeholders and external partners, a firm needs to develop contracts to align the incentives of differentagents.Forinstance,iftheincentiveisbasedonthenumberofnewprod- uctlaunchesinayear,thentheNPDprogrammanagerwouldfocusondeveloping incrementalproductsthatcanbelaunchedquickly.Similarly,ifthedevelopmentin- volvesthecollaborationoftwodifferentfirms,thenthefree-ridingissuewillemerge sothatboth firms willunder invest intheNPD project.InChap.7,Sameer Hasija and Shantanu Bhattacharya review the existing NPD literature that deals with in- centive contracts for coordinating the agents’ efforts to attain higher profits. They alsodiscussdifferenttypesofincentivecontractsexaminedintheliteraturethatare intended to deal with the issue of information asymmetry, the timing of different decisions,etc. Most supply contract models tend to focus on ways to govern interactions be- tweenamanufacturerandasupplier.IntheOMliterature,itiswellknownthatthe buy back contracts and revenue-sharing contracts can coordinate the supply chain by sharing the demand risks. Volodymyr Babich and Zhibin Yang examine the is- sue of supply disruptions (e.g., bankruptcy) and the role of procurement contracts tomitigatethisformofsupplyrisksinChap.8.Specifically,theydiscusshowfirms deal with the issues of supply chain risks and contracting in practice. Also, they present various procurement contracts that can enable firms to cope with various typesofsupplychainrisks. In the final chapter of Part II (Chap.9), Guoming Lai and Wenqiang Xiao con- sider a situation in which a manufacturer sells its product through a retailer who engagesintwotypesofactivities:collectmarketinformationfordevelopingmore accuratedemandforecast,andgeneratesalesforcreatingmorerevenue.Whenboth activitiesrequirecostlyefforts,whatkindofincentivecontractshouldthemanufac- turer offer to the retailer? The authors compare the performance of forecast-based contracts and the traditional linear contracts. They show that there are situations underwhichforecast-basedcontractsdominatelinearcontracts. PartIII:InformationSignalingandCheapTalk Inthissection,severalcontributingauthorsinvestigatehowafirmcancrediblycon- veyprivateandunverifiableinformationtooutsidepartiessuchasitssupplychain partners,competitors,customers,andinvestors.Thisisdonebyeithersignaling(i.e., undertakingcostlyactionssuchasinventoryorcommittingonacontract)orcheap talk(i.e.,costlesscommunication).
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