Essentials for Information Coordination in Supply Chain

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Asian Social Science

October, 2008

Essentials for Information Coordination in Supply Chain Systems Qing Zhang
School of Business Administration, South Central University for Nationalities Wuhan 430074, China
Tel: 86-27-6784-3646

E-mail: hust-zq@sohu.com

Abstract
The supply chain plays an essential role for modern companies to retain their competitive advantages in today's business environments. As supply chain members are often separate and independent economic entities, a key issue in supply chain management is to develop mechanisms that can align their objectives and coordinate their activities so as to optimize system performance. Information is a keyword in the coordination. In this paper, we provide a review of coordination of operational information in supply chain which is classified into information types, their impact on supply chain performance, and the policy of information sharing. Then the essentials for information coordination are indicated. In the end, future research direction is pointed out. Keywords: Coordination, Supply chain management, Operational information, Production planning and inventory control

1. Introduction
Supply chain management (SCM) has become an important management paradigm. It is to apply a total systems approach to managing the entire flow of information, materials, and services in fulfilling a customer demand (Chase and Richard, 1998). Several seminal studies have identified the problems caused by a lack of coordination, and to what extent competitive advantage can be gained from a seamless supply chain (Forrester, 1961; Lee et al., 1997, pp.546-558; Chen et al., 2000, pp.436-443). Supply chain coordination leads to increased information flows, reduced uncertainty, and a more profitable supply chain .It has become a critical success factor for SCM and effectively improving the performance of organizations in various industries.

From an operational perspective, SCM is to effectively integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide cost while satisfying service requirements(Simchi-Levi et al.,2000). In this sense, a supply chain coordination mechanism is an operational plan to coordinate the operations of individual supply chain members and improve system profit. When supply chain members are separate and independent economic entities, this action plan has to include an incentive scheme to allocate the benefits from coordination among them so as to entice their cooperation (Li Xiuhui and Wang Qinan, 2007, pp.1–16).

Information sharing between the buyer and vendor in the supply chain has been considered as useful strategies to remedy the so-called bullwhip effect (namely the fluctuation and amplification of demand from downstream to upstream of the supply chain) and to improve supply chain performance (Lee et al., 1997, pp.546-558; Metters, 1997, pp. 89–100). Information exchange is a very important issue for coordinating actions of units. There has been a great deal written on SCM (Li Xiuhui and Wang Qinan, 2007,pp.1–16; Tsay et al., 1998, pp. 299–336; Ganeshan et al., 1998, pp. 839–879; Tan, 2001,pp. 39–48; Sahin and Robinson, 2002,pp.505–535). We focus on coordination from the perspective of information flow that can align the objectives of individual supply chain members. The paper is arranged as follows: section 2 presents the literature review and the classification regarding operational information in supply chain; section 3 points out the essential elements for coordination of supply chain operational information; section 4 makes some concluding remarks and suggests future research directions. 2. Review and classification

2.1 Information types
Information involved in literature regarding production planning and inventory control is mostly order and inventory (Lee and Whang, 1999, pp.633-640; Lee...
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