Assessing the Difference Between Demand Sharing and Shock Sharing in Supply Chains

• Activity Number: 617
• Type: Contributed
• Date/Time: Thursday, August 2, 2012 : 8:30 AM to 10:20 AM
• Sponsor: Business and Economic Statistics Section
• Author(s): Vladimir Kovtun*+ and Avi Giloni and Clifford Hurvich
• Companies: Stern School of Business and Yeshiva University and Stern School of Business
• Keywords: ARMA ; QUARMA ; Demand Sharing ; Information Sets ; Full-Information Shocks

Abstract

This work uses time-series methodology to study how information propagates throughout a supply chain. We follow the work of Giloni Hurvich Seshadri 2012 (GHS), who studied supply chains where the retailer observes ARMA demand and each player places orders, while also possibly sharing nothing or their shocks, with adjacent upstream players. This paper explores demand propagation when players can share nothing, demand, or shocks with adjacent upstream players. We show that demand propagates as Quasi-ARMA (as established in GHS). Furthermore we characterize the information provided by each sharing arrangement. In doing so we specify conditions under which the information sets will be different (or equivalent). We find that demand sharing is intermediate in value to no sharing and shock sharing, with the possibility of being strictly between the two. Furthermore we show that the strictly-int