Information Sharing in Omnichannel Operations: Impact of Information Errors

48 Pages Posted: 11 Oct 2021 Last revised: 3 Apr 2023

See all articles by Jizhou Lu

Jizhou Lu

Central University of Finance and Economics

Leela Nageswaran

University of Washington - Michael G. Foster School of Business

Jinpeng Xu

Xidian University

Jin Kyung Kwak

Ewha Womans University

Srinagesh Gavirneni

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: March 31, 2023

Abstract

Omnichannel firms often share information between their channels (e.g., between the online channel and a physical store) to improve their operational and financial performance. In reality, the information is often error-prone. We study when such information sharing is advisable if there exist errors in the way the data is collected, transmitted, or both. We construct and analyze a multi-period inventory management model with autoregressive uncertain demands that are linked between two channels of an omnichannel firm. We show that different information errors have different influences. In particular, transmission error always hurts the firm, but source error may sometimes benefit it. Our numerical experiments suggest that for a typical omnichannel retailer, sharing information can reduce the long-run average cost by, on average, 2-11% depending on the type of error. In contrast, we also find that the value of information can become negative when the leadtime is high. A longer leadtime makes it difficult to accurately predict the demand during leadtime, and the information from the other channel is not useful if market factors affect the demands in both channels in a similar way. Our findings provide guidance on when retail managers dealing with erroneous information may want to re-evaluate their information sharing strategy. In cases when information sharing is detrimental, we also inform how investments can be made to mitigate these errors so that firms can better achieve their objectives. By considering source and transmission errors and general leadtimes for an omnichannel retailer, our work also makes a contribution to the literature on information sharing.

Keywords: Information sharing, information errors, omnichannel retailing

Suggested Citation

Lu, Jizhou and Nageswaran, Leela and Xu, Jinpeng and Kwak, Jin Kyung and Gavirneni, Srinagesh, Information Sharing in Omnichannel Operations: Impact of Information Errors (March 31, 2023). Available at SSRN: https://ssrn.com/abstract=3931934 or http://dx.doi.org/10.2139/ssrn.3931934

Jizhou Lu

Central University of Finance and Economics ( email )

Beijing
China

Leela Nageswaran (Contact Author)

University of Washington - Michael G. Foster School of Business

Seattle, WA 98195-3226
United States

Jinpeng Xu

Xidian University ( email )

Xi'an Chang'an two hundred ten National Road
Xian, Shaanxi Province
China

Jin Kyung Kwak

Ewha Womans University ( email )

11-1 Daehyun-dong
Seodaemun-gu
Seoul 120-750, Seoul Seoul 120
Korea, Republic of (South Korea)

Srinagesh Gavirneni

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

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