Value Of Supply Chain Information Sharing And Coordination Based On Conditional Value-at-Risk Criterion

Under the background of economic globalization, it is irreversible that the trend ofcompetition among enterprises evolves to the competition between supply chains for marketshares. And one of the decisive factors that whether the supply chain can achieve the strategicsuccess is whether the supply chain information sharing can be realized. In reality, most of thesupply chain decision-makers are risk averse, they always hope to achieve a balance betweenexpected revenue and market risk in order to reduce the possibility of significant losses.Under such conditions, the traditional research achievement based on the assumption that therisk-neutral decision maker are not necessarily accurate. Therefore, this research introducesConditional Value-at-Risk, CVaR, to characterizes the utility functions of risk-averse decisionmakers in the supply chain, and then study the impact of risk aversion characteristics to thesupply chain information sharing.Firstly, this research builds a single cycle model of supply chain demand informationsharing under stochastic price elastic demand and the retailer is risk averse. The researchanalyzes how the optimal decision-making behavior of retailer and supplier and the retailer’srisk aversion affect the information sharing value of supply chain. The results show that thevalue of demand information sharing is related to the retailer’s risk aversion, the size ofdemand uncertainty and how the demand will change: while supplier giving retailer apayment, the more risk-averse retailer is, the better to strengthen information sharing withsupplier; when the demand uncertainty shows demand will increase, demand informationsharing will benefit the promotion of supply chain’s performance in the most condition, whilesupplier giving retailer a payment to ensure that both of them will benefit from informationsharing; when the demand uncertainty shows demand will decrease and retailer’s risk aversionis low enough, there is no need for information sharing because it will decrease the benefit ofthe whole supply chain.Secondly, the multi-cycle supply chain demand information sharing model is proposedbased conditional value-at-risk criterion under AR(1) stochastic demand, and also the retaileris risk averse. The research analyzes how the optimal decision-making behavior of retailerand supplier and the retailer’s risk aversion affect the information sharing value of supplychain. The results show that the value of demand information sharing is related to the retailer’srisk aversion, the size of demand uncertainty and the correlation coefficient of demand: underthe absence of any transfer payment or incentive contract, while the retailer is extremely risk- averse, the retailer is unable to obtain the exact information of market demand due to its toolow safety inventory, there is no value of supply chain information sharing; the value ofdemand information sharing will increase since the retailer becomes to be less risk averse;when the retailer is closed to risk neutral, the retailer’s characteristics of risk aversion will notaffect the value of information sharing. Besides, while supplier offers a cost-sharing contractto retailer, if retailer’s risk aversion is high enough that the cost-sharing contract will increasesthe value of information sharing.Finally, this research summarizes the conclusions obtained in the two models, andanalyzes the causes of difference. The results show that the size of the value of supply chaininformation sharing and its realization conditions is closely related to the research model.