Information sharing and coordination in make‐to‐order supply chains

Abstract

Abstract This research, based on our observations of an industrial vendor–manufacturer relationship, investigates the impact of information sharing and physical flow coordination in a make‐to‐order supply chain. We mathematically model and develop simulation‐based rolling schedule procedures for analyzing the manufacturer's ordering policies, transportation activities, and the vendor's manufacturing and order fulfillment processes under five alternative integration strategies. Our objective is to measure the value of information sharing and system coordination across the strategies, identify whether the source of the benefits come from information sharing or coordination, study the allocation of system benefits among channel members, and analyze the impact of environmental factors on system cost performance. The experimental results indicate a 47.58% cost reduction moving from a traditional supply chain to a fully integrated system. While information sharing reduces costs, the main economic benefit comes from coordinated decision‐making. The savings associated with system integration are not equally allocated among channel members, and vary by strategy. The procedures developed in the research provide economic insight that fosters the sharing of technological and strategic efforts.

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