A simulation study on the transfer effects of decision rights in a supply chain

Many people are getting more and more interested in the value of information sharing in a supply chain in proportion to the development of information technology in these days. In spite of much interest in the value of shared information, the related studies concluded that the effect of only sharing information strategy between upper and lower level is not large. However, many related companies want to link each channel members in the supply chain with on-line to expect to reduce the cost by means of information sharing. This study wants to evaluate the alternative strategy to reduce more related costs than only sharing information strategy. This paper analyzed that how much the total supply chain cost is to change in the case of a transfer of decision right from the lower (retailers) to the upper level (depot, vendor) in a supply chain. The decision rights mean the rights of being able to decide when to order, how much to order, where to order, and what mode to transport or distribute, etc. in a supply chain. By the experimental simulation study to the simple case, the strategy to share only information took the low effect of 1–2%, but the strategy to transfer the decision rights from the lower to the upper member had larger effect of about 5%. However, for the strategies to work well, it needs to cooperate closely among each supply chain members, and the fruits from the transfer of decision rights in a supply chain are allocated to each chain members reasonably. Therefore, there needs to study in the future not only the exact transfer effect of decision rights, but the reasonable allocation method of the fruits among the chain members.