[Lecture, Jun 26] Supply Chain Contracts that Prevent Information Leakage
 
time: 2018-06-21

Title: Supply Chain Contracts that Prevent Information Leakage

Speaker: Dr. Yiwei Chen, Singapore University of Technology and Design

Time: 10:00-12:00 am, June 26, 2018

Venue: Zhuanghui Hall, Building 12, Wushan Campus


Introduction to the Speaker:

Dr. Yiwei Chen is an Assistant Professor at Singapore University of Technology and Design, Pillar of Engineering Systems and Design. He will be joining the University of Cincinnati, College of Business as an Assistant Professor in August 2018. Dr. Chen received his Ph.D. from MIT Sloan School of Management. His primary research interests are revenue management and pricing, and sharing economy and innovative marketplaces. His papers have been published at Management Science, Mathematics of Operations Research, Operations Research, Production and Operations Management, Transportation Research Part B: Methodological.


Abstract:

This paper determines categories of contracts that facilitate vertical information sharing in a supply chain while precluding horizontal information leakage among competing newsvendors. We consider a supply chain in which retailers replenish inventory from a common supplier to satisfy uncertain demand and are engaged in newsvendor competition. Each retailer has imperfect demand information. Yet, one of the retailers (the incumbent) has a more accurate demand forecast than the other (the entrant). Information leakage among such competing retailers precludes vertical information sharing and is often the reason for many retailers to abandon collaborative forecast sharing initiatives, leading to sub-optimized supply chains. We show that whether a contract can prevent information leakage depends on how the inventory risk (i.e., cost of supply-demand mismatch) is distributed between the supplier and retailers in conjunction with the allocation of financial flows (i.e., sharing of pro ts). These results help us categorize contracts based on how they allocate inventory risk among firms when compared with a wholesale price contract. This comparison yields four mutually exclusive and collectively exhaustive categories of contracts.