Challenges in the implementation of digitalized information-sharing collaboration in the downstream decentralized supply chain.

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Résumé:

Gerpisa research proposal
28th International Colloquium of Gerpisa

Title:
Challenges in the implementation of digitalized information-sharing collaboration in the downstream decentralized supply chain.

Purpose
With the progress of digitalization and the increasing availability of the data from the internet of things devices, the potential of improvement by the application of digital information-sharing is expected to be more beneficial for supply chain members. Tliche et al. (2019) discussed that for many years, the main objective of studying decentralized supply chains, which are characterized by independent agents with asymmetric information, was to demonstrate that a better inter-firm collaboration could lead to a better overall performance of the system. However, in fact, in this form of the supply chain, most agents may not share information due to confidentiality policies, quality of information, or incompatibility of different information systems. Ali et al. (2017) revealed that the lack of information technology capability, information accuracy, information leakage, and trust are the issues.

This paper aims to build hypotheses to explain practical and essential reasons as to why the supply chain information-sharing is not happening despite its possible benefits in automotive spare-parts inventory management through a case study of the tire industry.

Design
This paper employs a case study-based approach. We surveyed extant literature from studies about logistics and supply chain management, supply chain analytics, supply chain collaboration, supply chain leadership, spare-parts demand forecast, and inventory control to identify relevant factors and mechanisms that may affect sufficient and insufficient information-sharing. We then conducted a case study to explore factors or underlying conditions in the actual industrial context.

We selected the tire industry because its downstream supply chain structure is diversified and complicated; there coexist competition and collaboration between tire manufacturers, wholesalers, retailers, and service agents with various business scales of national, regional, and local coverage. In the aftermarket, the accurate demand forecast for passenger car tires provides substantial advantages to these players to control inventory and avoid the loss of sales, while various macroscopic and microscopic drivers influence the forecast. For the case analysis, archival data from the tire industry associations in the U.S. and Japan and industry trade magazines are used.

Findings
Despite the widely discussed benefits of the information-sharing, a substantial number of supply chain agents do not share the information. Instead, a steady stream of papers (Ali et al., 2017, for example) has found a phenomenon known as downstream demand inference, where the upstream member in a supply chain can infer the downstream demand without the need for a formal information-sharing mechanism.

This paper hypothesizes the factors influencing (sometimes restricting) the formation of information-sharing in the decentralized supply chain collaboration (SCC) by looking at the structures of ownership and governance, SCC leadership, contractual relationship, business dependence, and competitive and cooperative factors.

A case of a tire manufacturer demonstrates the benefits of information-sharing with its company-owned tire wholesalers to control winter tire inventory. The tire company has a system to forecast the demand for tires mainly for production planning purposes and also share the information with their company-owned wholesalers so that they can know the trend of popular tire sizes for their stock keeping. When the actual sales are started, their stock is adjusted based upon the order from retailers.

Tire service and retail agents are diversified with different business characteristics such as tire manufacturer-owned, independent multi-brand carried, car dealers linked with automotive brands, mass-merchandisers, and auto repair shops. Tire manufacturers are competing to sell their products to downstream agents to get the shelf space, while downstream agents are competing to sell their carried brands to end customers. There are cases where the independent tire dealers who are competing with tire manufacturers’ owned shops are reluctant to collaborate.

There are tire manufacturers that offer independent tire sales agents a collaborating marketing program to provide various incentive packages, including information-sharing cooperation, with their agreement of tire purchase volume or a percentage of the in-house market share. The agents sometimes abuse this type of arrangement backed by the power imbalance supported by the strong buying power.

Tire manufacturers have taken the selective channel strategy to collaborate with only friendly partners. However, this will cause a shortage of enough market information to efficiently and effectively implement SCC.

Implications
Challenges in effective information-sharing through the downstream decentralized SCC is influenced (sometimes restricted) by the strategy and competitive or cooperative relationship.

Tire manufacturers’ marketing and channel strategy and channel ownership and governance structure may result in limited participation of partners and make the information-sharing ineffective.

Downstream agents’ marketing strategy, including multi-brand dealing, (competitive or cooperative) attitude toward cooperation, may make them reluctant to join the SCC.

The power imbalance and mutual business dependence between tire manufacturers and downstream agents may make the formation of information-sharing SCC difficult. In industries where various downstream agents hold significant buying power, the power imbalance caused by the business dependence may influence the level and the leadership of information-sharing. Some downstream agents who have dominant buying and selling power would want to take the leadership role of SCC to meet their objectives mainly.

Manufacturers’ owned downstream agents would have a positive and negative influence in building a system of information-sharing SCC. A jointly developed system by tire manufacturers and their controlled agents would have a positive influence on other players by reducing their investment on the system. However, the system would have a negative impact by demotivating some agents to join their competitors' developed system.

(Text 892 words; Text and References; 953 words)

Tliche Y., Taghipour A., Canel-Depitre B. (2019). Downstream Demand Inference in decentralized supply chains. European Journal of Operational Research 274 65–77

Ali, M. M., Mohamed Zied Babai, M. Z., Boylan J. E., Syntetos A. A. (2017). Supply chain forecasting when information is not shared. European Journal of Operational Research 260 984–994

Keywords:
Logistics and supply chain management, supply chain analytics, supply chain collaboration, supply chain leadership, spare-parts demand forecast, inventory control