Forecasting and Information Sharing in Supply Chains Under Quasi-ARMA Demand

37 Pages Posted: 11 Aug 2009

See all articles by Avi Giloni

Avi Giloni

Independent

Clifford M. Hurvich

Stern School of Business, New York University; New York University (NYU) - Department of Information, Operations, and Management Sciences

Sridhar Seshadri

University of Illinois at Urbana Champaign; Indian School of Business

Date Written: July 2009

Abstract

In this paper, we revisit the problem of demand propagation in a multi-stage supply chainin which the retailer observes ARMA demand. In contrast to previous work, we show how eachplayer constructs the order based upon its best linear forecast of leadtime demand given itsavailable information. In order to characterize how demand propagates through the supplychain we construct a new process which we call quasi-ARMA or QUARMA. QUARMA isa generalization of the ARMA model. We show that the typical player observes QUARMAdemand and places orders that are also QUARMA. Thus, the demand propagation model isQUARMA-in-QUARMA-out. We study the value of information sharing between adjacentplayers in the supply chain. We demonstrate that under certain conditions information sharingcan have unbounded bene¯ts. Our analysis hence reverses and sharpens several previous resultsin the literature involving information sharing and also opens up many questions for futureresearch.

Keywords: Supply Chain Management, Information Sharing, Time Series, ARMA, Invertibility

Suggested Citation

Giloni, Avi and Hurvich, Clifford M. and Seshadri, Sridhar, Forecasting and Information Sharing in Supply Chains Under Quasi-ARMA Demand (July 2009). Statistics Working Papers Series, Vol. , pp. -, 2009. Available at SSRN: https://ssrn.com/abstract=1444716

Avi Giloni (Contact Author)

Independent

No Address Available

Clifford M. Hurvich

Stern School of Business, New York University ( email )

44 West 4th Street
New York, NY 10012-1126
United States

New York University (NYU) - Department of Information, Operations, and Management Sciences

44 West Fourth Street
New York, NY 10012
United States

Sridhar Seshadri

University of Illinois at Urbana Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Indian School of Business ( email )

Hyderabad, Gachibowli 500 019
India

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