Decentralized Serial Supply Chains Subject to Order Delays and Information Distortion: Exploiting Real-Time Sales Data

Noel Watson; Yu-Sheng Zheng

doi:10.1287/msom.1050.0074

Decentralized Serial Supply Chains Subject to Order Delays and Information Distortion: Exploiting Real-Time Sales Data

¹ Harvard Business School, Soldiers Field Road, Boston, Massachusetts 02163 · ² Operations and Information Management Department, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104, and Cheung Kong Graduate School of Business, China

Manufacturing and Service Operations Management 2005

Decentralized supply chains are traditionally order focused: stage managers focus on meeting replenishment orders of downstream stages; market demand information is relayed up through these orders, and therefore is subject to costly delay and distortion. This paper shows that sharing real-time sales data across all stages and a change in focus to meeting customer demand can mitigate performance impairment caused by the order focus. We show that a change of managerial focus in a decentralized chain can be made by measuring stages’ performance based on their respective echelon stocks, which only depends on how well they respond to the market demand. A demand-focused measurement scheme can be made incentive compatible with the knowledge of the demand distribution; a heuristic scheme independent of the demand distribution can be used to achieve near incentive compatibility.

DOI: 10.1287/msom.1050.0074
Volume: 7 (2)
Pages: 152-168
Language: en
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