The value of sharing advance capacity information under "Zero-full" supply capacity availability

Abstract

The importance of information sharing within the modern supply chains has been established both by practitioners as well as the researches. The accurate and timely information helps firms to effectively reduce the uncertainties of the volatile and uncertain business environment. We model a periodic review, single-item, stochastic demand and stochastic supply, where in a given period supply is either available or completely unavailable. Additionally, a supply chain member has the ability to obtain advance capacity information (ACI) about the future supply capacity availability. We show that the optimal ordering policy is a base stock policy with the optimal base stock level being a function of future capacity availability or unavailability given through ACI. In a numerical experiment we quantify the value of ACI and give the relevant managerial insights.