Article ID: | iaor200634 |
Country: | United States |
Volume: | 7 |
Issue: | 2 |
Start Page Number: | 152 |
End Page Number: | 168 |
Publication Date: | Mar 2005 |
Journal: | Manufacturing & Service Operations Management |
Authors: | Zheng Yu-Sheng, Watson Noel |
Keywords: | supply chain |
Decentralized supply chains are traditionally order focused: stage managers focus on meeting replenishment orders of downstream stages: market demand information is relayed up through these orders, and therefore is subject to costly delay and distortion. This paper shows that sharing real-time sales data across all stages and a change in focus to meeting customer demand can mitigate performance impairment caused by the order focus. We show that a change of managerial focus in a decentralized chain can be made by measuring stages' performance based on their respective echelon stocks, which only depends on how well they respond to the market demand. A demand-focused measurement scheme can be made incentive compatible with the knowledge of the demand distribution; a heuristic scheme independent of the demand distribution can be used to achieve near incentive compatibility.