Design and simulation of demand information sharing in a supply chain

Abstract On the premise of discrete simulation technology, the study developed a simulation approach to quantify firms’ business operations and performances in a multi-tier supply chain. By careful simulation scenario design and statistical validation, the simulation model was applied to understand one practical business problem, i.e., how to evaluate the business model and its trade-off of implementing demand information sharing strategy. The results showed that with high demand variance, low demand correlation, and/or high demand covariance, the supply chain without the intermediate tier performed better than that with the intermediary. However, bypassing the intermediate tier in the chain might cause companies less responsive to demand variability. The simulation and analytical approaches presented in the paper can help firms make better decision on business model design and inter-organizational collaboration in supply chains.