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Role of forecast effort on supply chain profitability under various information sharing scenarios

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  • Zhu, Xiaowei
  • Mukhopadhyay, Samar K.
  • Yue, Xiaohang

Abstract

In this paper, we consider a manufacturer who sells a product to a retailer in a single selling season. Each party obtains a forecast of the market demand independent of each other. We study three different forecast scenarios: Non-Information Sharing, Information Sharing, and Retailer Forecasting cases. In the first scenario, both parties make their forecasts, but do not share the information with the other firm. In the second scenario, they share the information with each other, while in the last scenario, only the retailer makes the forecast, and shares it with the manufacturer. Noting that the forecast accuracy comes at a cost, we derive the optimal price and forecast accuracy level for each of the three cases. We then compare the optimal policies of the three cases and derive conditions under which the two parties should share information with each other. Results of extensive numerical experimentation are also presented.

Suggested Citation

  • Zhu, Xiaowei & Mukhopadhyay, Samar K. & Yue, Xiaohang, 2011. "Role of forecast effort on supply chain profitability under various information sharing scenarios," International Journal of Production Economics, Elsevier, vol. 129(2), pages 284-291, February.
    • Handle: RePEc:eee:proeco:v:129:y:2011:i:2:p:284-291
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    6. Uddin, Gazi Salah & Tang, Ou & Sahamkhadam, Maziar & Taghizadeh-Hesary, Farhad & Yahya, Muhammad & Cerin, Pontus & Rehme, Jakob, 2021. "Analysis of Forecasting Models in an Electricity Market under Volatility," ADBI Working Papers 1212, Asian Development Bank Institute.
    7. Bin Shen & Hau-Ling Chan, 2017. "Forecast Information Sharing for Managing Supply Chains in the Big Data Era: Recent Development and Future Research," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(01), pages 1-26, February.
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    9. Tsan-Ming Choi, 2016. "Multi-period risk minimization purchasing models for fashion products with interest rate, budget, and profit target considerations," Annals of Operations Research, Springer, vol. 237(1), pages 77-98, February.
    10. Serel, Doğan A., 2012. "Multi-item quick response system with budget constraint," International Journal of Production Economics, Elsevier, vol. 137(2), pages 235-249.
    11. Chun-Hung Chiu & Tsan-Ming Choi, 2016. "Supply chain risk analysis with mean-variance models: a technical review," Annals of Operations Research, Springer, vol. 240(2), pages 489-507, May.
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