Decentralized Serial Supply Chains Subject to Order Delays and Information Distortion: Exploiting Real-Time Sales Data

Decentralized supply chains are traditionally order focused: stage managers focus on meeting replenishment orders of downstream stages; market demand information is relayed up through these orders, and therefore is subject to costly delay and distortion. This paper shows that sharing real-time sales data across all stages and a change in focus to meeting customer demand can mitigate performance impairment caused by the order focus.

We show that a change of managerial focus in a decentralized chain can be made by measuring stages’ performance based on their respective echelon stocks, which only depends on how well they respond to the market demand. A demand-focused measurement scheme can be made incentive compatible with the knowledge of the demand distribution; a heuristic scheme independent of the demand distribution can be used to achieve near incentive compatibility.