Possible Sharing Arrangements in Arma Supply Chains

27 Pages Posted: 10 Oct 2012

See all articles by Vladimir Kovtun

Vladimir Kovtun

Independent

Avi Giloni

Independent

Clifford M. Hurvich

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

Date Written: October 2012

Abstract

We introduce a class of new sharing arrangements in a multi-stage supply chain in which the retailer observes stationary autoregressive moving average demand with Gaussian white noise (shocks). Similar to previous research, we assume each supply chain player constructs its best linear forecast of the leadtime demand and uses it to determine the order quantity via a periodic review myopic order-up-to policy. We demonstrate how a typical supply chain player can create a sequence of partial information shocks (PIS) from its full information shocks FIS and share these with an adjacent upstream player. We go on to show how such a sharing arrangement may be benecial to the upstream player by characterizing the player's FIS in such a case. Hence, we study how a player can determine its available information under PIS sharing, and use this information to forecast leadtime demand. We characterize the value of FIS sharing for a typical supply chain player. Furthermore, we show conditions under which a player is able to form and share valuable PIS without (i) revealing its historic demand sequence or (ii) revealing its FIS sequence. We also provide a way of comparing various PIS sharing arrangements with each other and with conventional sharing arrangements involving demand sharing or FIS sharing. We show that demand propagates through a supply chain where any player may share nothing or a sequence of PIS shocks with an adjacent upstream player as quasi-ARMA in - quasi-ARMA out.

Keywords: Supply Chain Management, Information Sharing, Time Series, ARMA, Invertibility, QUARMA, Demand Sharing, Full Information Shocks, Partial Information Shocks, Order-up-to policy

Suggested Citation

Kovtun, Vladimir and Giloni, Avi and Hurvich, Clifford M., Possible Sharing Arrangements in Arma Supply Chains (October 2012). NYU Working Paper No. 2451/31630. Available at SSRN: https://ssrn.com/abstract=2159617

Vladimir Kovtun (Contact Author)

Independent

No Address Available

Avi Giloni

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

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