impact of information sharing on supply chain

8/6/2019 Impact of Information Sharing on Supply Chain

1/50

Information Sharing

and

Echelon Inventory Managementfor

Supply Chain Excellence

B. Ebenezer1 Vinay V.Panicker2 R.Sridharan3

1Graduate Student, 2Assistant Professor, 3Professor,

Department of Mechanical Engineering

National Institute of Technology Calicut


2/50

Supply Chain

All stages that are involved directly or indirectly in fulfilling a

customer request forms a supply chain.


3/50

Information Sharing

Performance of a supply chain is influenced by many factors.

Information sharing has been cited as one of major means of

improving supply chain performance. It allows companies to

better coordinate their activities with their supply chain

partners and generate improved performance. Baihaqi.(2008).


4/50

Literature Review

S.No Author Year Content1 Bourland et al. 1996 reduction of inventory cost when the

downstream member shares itsdemand information

2 Cachon andFisher

2000 benefits of sharing real timeinformation of demand and

inventory level

3 Zhao et al. 2002 simulated and examined theforecasting and inventoryreplenishment decisions

4 Vieira et al. 2004 development of simulation model fora supply chain

5 Yao et al. 2007 benefits of following VendorManaged Inventory

6 Yu et al. 2010 simulated and analysed the effect of four different information scenarioson supply chain


5/50

Problem Definition

Manufacturer Distributor

customerRetailers

A supply chain consisting of three retailers, one distributor

and a manufacturer has been considered. Each stage meets thedemand raised by its downstream buyer from its on hand

inventory. The inventory level is reviewed and order is placed

to its upstream supplier based on the inventory policy it

follows. Back order is considered only in the retailer level.


6/50

Data Assumptions

Customer inter arrival time

exponentially distributed with mean 0.1 month

Quantity of customer demand (D)

D =

Lead time for order arrival

23 days (0.75 month)

1 with probability 0.1666





7/50

Inventory Policy

Periodic review - Order up to level policy

Each stage of the supply chain reviews its inventorylevel at the starting of every month and places order toits upstream supplier as follows:

OQ= S-IL if IL < s

0 if IL s

where OQ Order Quantity

S - Maximum inventory level for the stage

s - Minimum inventory level for the stage

IL - Inventory level at the stage


8/50

Inventory Policy Parameters

Minimum inventory levels= L * Davg + safety stock

Maximum inventory levelS = (r+L) * Davg + safety stock

Safety stock

= z * Dstd * sqrt (r+L)Where rreview period, Llead time,

z- safety stock factor

Davg ,Dstd Average, standard deviation of demand


9/50

ARENA Model Developed


10/50

ARENA Model Developed


11/50

Conventional Model

Distributor Retailers


12/50

Conventional Model

Distributor

customer

Retailers


13/50

Conventional Model

Distributor

customer

Retailers


14/50

Conventional Model

Distributor

customer

Retailers


15/50

Conventional Model

Distributor

customer

Retailers

C l d l


16/50

Conventional Model

Distributor

customer

Retailers

C ti l M d l


17/50

Conventional Model

Distributor

customer

Retailers

Review period

C ti l M d l


18/50

Conventional Model

Distributor

customer

Retailers

Review period

ROQ

C ti l M d l


19/50

Conventional Model

Distributor

customer

Retailers

Review period

ROQ

C ti l M d l


20/50

Conventional Model

Distributor

customer

Retailers

Review period

ROQ

C ti l M d l


21/50

Conventional Model

Distributor

customer

Retailers

Review period

ROQ

Conventional Model


22/50

Conventional Model

Distributor

customer

Retailers

Review period

ROQ

Conventional Model


23/50

Conventional Model

Distributor

customer

Retailers

s= L * ROQavg + safety stock

S = (r+L) * ROQavg + safety stock

Review period

ROQ

Conventional Model


24/50

Conventional Model

Distributor

customer

Retailers

Review period

ROQ

Conventional Model


25/50

Conventional Model

Distributor

customer

Retailers

Review period

ROQDOQ

Conventional Model


26/50

Conventional Model

Distributor

customer

Retailers

Review period

ROQDOQ

Orderquantity

TimeTime

Order

quantity

Time

Order

quantity

Bullwhip Effect

Demand Information Sharing


27/50

Demand Information Sharing

Distributor

customer

Retailers

s= L * Davg + safety stock

S = (r+L) * Davg + safety stock

End customer demand information

Inventory Information Sharing


28/50

Inventory Information Sharing

DistributorRetailers

Echelon inventory

management

Echelon Inventory Management System


29/50


Retailer 2Manufacturer Distributor

Retailer 3

Retailer 1



30/50



Retailer 3

Retailer 1



31/50



Retailer 3

Retailer 1

se= Le * Davg + safety stock

Se = (r+Le) * Davg + safety stock

Where Le is the echelon lead time



32/50



Retailer 3

Retailer 1






33/50



Retailer 3

Retailer 1




Scenarios

Inventory alone

Inventory and Demand

Performance Indices


34/50

Performance Indices

Fill rate

The fraction of customer demand that ismet routinely. i.e., without backorder orlost sales

Demand met / Demand arised

Average total cost of the supply chain

Sum of cost at each stageCost at each stage = Avg holding cost +

avg shortage cost* + avg order cost*shortage cost is considered only in Retailer level

Performance Indices


35/50

Performance Indices

Bullwhip Effect

The increase in demand variability as wetravel up the supply chain.Bullwhip effect is measured by the variance inthe order quantity placed by each stage


36/50

Impact of Information Sharing

Impact on Fill Rate


37/50

Impact on Fill Rate

NIS DIS IIS DIIS

Retailer 1 94.65 92.79 96.32 96.2800

Retailer 2 94.71 92.25 95.95 95.91

Retailer 3 94.69 92.28 96.37 96.4000

90

91

92

93

94

95

96

97

FillRate

Fill Rate

Notations used

NIS- No information sharing DIS- Demand information sharing

IIS - Inventory information sharing DIIS- Demand and Inventory information sharing

Impact on Total Cost of Supply Chain


38/50

p pp y

0

100

200

300

400

500

600

700

NIS, 94.68% DIS, 92.44% IIS, 96.21% DIIS, 96.20%

Avgtotalcosto

fsupplychain

Information shared, fill rate

Avg total cost vs information shared

Avg total cost

Notations used



Impact on Inventory Levels


39/50

p y

0

50

100

150

200

250

300

NIS DIS IIS DIIS

Avghold

ingcost

Information sharing scenario

Avg holding cost

Retailer 1

Retailer 2

Retailer 3

Distributor

Manufacturer

Notations used



Impact on Bullwhip Effect


40/50

p p

No information shared

Standarddeviation Average

COQ 14.711 75.18

ROQ 18.56 117.97

DOQ 34.82 156.92

MOQ 56.43 238.55

Graphs for other scenarios



41/50

p p

No information

Demand

Information

Inventory

Information

Demand and

Inventory

information

Standard

deviation Average

Standard

deviation Average

Standard

deviation Average

Standard

deviation Average

Customerorder 14.711 75.18 14.711 75.18 14.711 75.18 14.711 75.18

Retailer

Order 18.56 117.97 23.83 118.58 17.56 109.81 17.37 109.67

Distributor

Order 34.82 156.92 28.5 133.67 26.9 152.84 30.55 118.19

Manufacturer

Order 56.43 238.55 28.83 138.42 29.44 194.10 33.35 124.34

Scope for Future Work


42/50

p

Further experimentation can be carried outfor different inventory policies and different

values of the parameters.

Conclusion


43/50

It is evident from the results obtained thatthe supply chain can perform better when

information is shared between the stages.

Echelon inventory management technique

performs better when both demand and

inventory information are shared to the

upstream stages.

References


44/50

Bourland, K. E., Powell, S. G., and Pyke, D. F. (1996).Exploiting timely demand information to reduceinventories. European Journal of Operational Research,92, 239243.

Cachon, G. P., and Fisher, M. (2000). Supply chain

inventory management and the value of sharedinformation. Management Science, 46, 10321048.

Chen, F., Drezner, Z., Ryan, J. K., & Simchi-Levi, D.(2000a). Quantifying the bullwhip effect in a supplychain: The impact of forecasting, lead times, and

information. Management Science, 46, 436443.

Thonemann, U. W. (2002). Improving supply-chainperformance by sharing advancedemand information.European Journal of Operational Research, 142, 81107.

References


45/50

Yao, Y. Evers, P.T. Dresner, M.E. Supply chain integration

in vendor-managed inventory. Decision Support Systems,43, 663-674.

Yu, M.M. Ting, S. Chen, (2010), M. Evaluating the cross-efficiency of information sharing in supply chains. ExpertSystems with Applications, 37, 2891-2897.

Zhao, X., Xie, J., and Leung, J. (2002). The impact of forecasting model selection on the value of informationsharing in a supply chain. European Journal of OperationalResearch, 142, 321344.


46/50

THANK YOU


47/50



48/50

Demand information shared

Standard

deviation Average

COQ 14.711 75.18

ROQ 23.83 118.58

DOQ 28.5 133.67

MOQ 28.83 138.42



49/50

Standard

deviation Average

COQ 14.711 75.18

ROQ 17.56 109.81

DOQ 26.9 152.84

MOQ 29.44 194.10

Inventory information shared



50/50

Both demand and inventory information shared

Standard

deviation Average

COQ 14.711 75.18

ROQ 17.37 109.67

DOQ 30.55 118.19

MOQ 33.35 124.34

back

impact of information sharing on supply chain

Documents