Supply Chain Collaboration Based On Information Sharing: A Comparative Study

With the increasing competition due to market globalization, supply chain management (SCM) has been receiving more and more attention of managers, consultants and researchers. To achieve a quick response to rapidly changing customer requirements, effective supply chain management should integrate partners'internal and external operations all together, to reduce inventory levels, shorten lead time and lower total operational cost, thus to improve customer satisfaction and supply chain performance. The supply chain coordination management has become an important topic.According to Mentzer et al., the supply chain collaboration was defined as integrating all partners by sharing information, knowledge, risk and profits with common goals. Lack of supply chain coordination could lead to inefficiencies, such as bullwhip effect. Research on supply chain coordination began in 1960s, Clark et al. analyzed a multi-level inventory/sales system, the research proved order-up-to level strategy was the best inventory controlling strategy for a multi-level inventory system. Since Clark's research, researchers would like to coordinate the activities in supply chain to get customers'satisfaction by reducing total cost and lead time. Chandra studied approaches of production scheduling and market planning with no coordination and coordination, and demonstrated that effective coordination would bring tremendous business benefits. Holweg et al indicated that the effectiveness of supply chain collaboration relies upon the supply chain settings in terms of the geographical dispersion, the demand pattern, and the product characteristics. Romano explained the logistics processes which can be structured and controlled across supply networks by applying coordination mechanisms. In the study sellers could apply common replenishment epochs (CRE) to reduce ordering and transportation cost.There are a lot of strategies for supply chain coordination, typical strategies include efficient consumer response (ECR) and vendor managed inventory (VMI). However, the level of coordination in these strategies are still limited, ECR and VMI could not promote integrated cross-enterprise strategies and processes for the whole supply chain. Nowadays, a new strategy collaborative planning forecasting and replenishment (CPFR) is dedicated to improve internal and external cooperation efficiency. Steermann's study indicated that an American retailer Sears and its supplier Michelin had applied CPFR to improve cross-enterprise processes, and the inventory level reduced by 25%. In addition, Albright investigated the implementation of CPFR in some famous companies (Wal-Mart, Target, Best Buy), the study showed CPFR could reduce inventory level, increase sales and improve relationship between partners. CPFR could help Wal-Mart obtain more accurate demand forecasts, and enhance the company's core competitive advantage.The current researches have showed that the supply chain with high-level coordination could provide more profits. On the other hand, the studies also indicate that the costs of establishment and operation of high-level coordination supply chain are much higher. CPFR could overcome the problems in VMI, but the costs of investment and operation of CPFR is much higher than VMI, as well as, it is more difficult to implement. That explains why CPFR only could apply in few supply chains. Therefore, supply chain managers should determine the appropriate level of collaboration according to characteristics of supply chains.CPFR is today a thriving concern, both as an academic field and a professional practice. However, CPFR has not been without its troubles. According to KJR's report, there is a big gap between realized benefits and anticipated benefits of CPFR, there are two reasons could explain this problem:(1) CPFR is a relatively new initiative, the theory is lack of implication, and little research has been carried out on its used; (2) Many managers are getting confused with how to determine the appropriate coordinate level for supply chain, they still feel uncertain about the benefits from its implementation. Because of these reasons, we deicide to establish three simulation models with different coordinate levels to ascertain CPFR effect on improving supply chain performance, on the other hand, this study would also define the range of implementations of VMI and CPFR.First, performance of CPFR always has higher level than VMI. Compared to VMI, CPFR could get higher service level through lower cost under the same conditions. This is the reason that why supply chain managers would like to invest money in the implementation of CPFR.Second, we found that the performance of VMI and CPFR were influenced by customer demand, lead time and production capacity. The performance of VMI and CPFR would vary as these variables changed, and the gap between the both sides was significant. For example, the benefits of changing from VMI to CPFR were at the lowest level when lead times were short and production capacity was tight. In other words, if the managers would like to implement CPFR in the supply chain with long lead time and tight production capacity, it is necessary to do a comprehensive cost-benefit analysis. We also observed that the performance of VMI decreased significantly under the conditions where the customer demand was high uncertain, however, the performance of CPFR just decreased slightly. On the other hand, the gap between the.performance produced by VMI and CPFR was increasing as the uncertainty in customer demand increases. Because supply chain members can better manage demand uncertain by joint forecasting and inventory planning under CPFR, it is suitable for investing CPFR in the industries in which product life cycle is short and demand is highly variable.This paper is a preliminary study on supply chain collaboration, there are some deficiencies for further research. First, there are some assumptions in supply chain structures, like the customer arrival time is an exponential distribution, if we could simulate a more realistic supply chain, it will be better to explain the outputs. Second, this paper did not carry out empirical analysis. Therefore, how to apply conclusions to enterprises is important for future research.