Strategic sharing of information may be highly beneficial in a variety of business situations. Information sharing often happens in a supply chain when a retailer chooses to share information with a manufacturer, or alternatively, the retailer may choose to share the same information with a competing manufacturer if it benefits them. Information sharing may also come from the manufacturer to the retailer under certain conditions. Nevertheless, strategic use of information may be a powerful tool for all parties involved in a supply chain. This paper will describe two articles on information sharing in a supply chain, explain how they relate to Porter’s five competitive forces model, and how the examples provided in the articles utilize information strategically.
Information Sharing in a Supply Chain With a Common Retailer
The first article was written by Wexin Shang, Albert Ha, and Shilu tong and it is focused on a supply chain with a make-to-stock manufacturer (2014). The article analyzes a situation where two competing manufacturers are providing substitutable products to one retailer. Through the analysis of the situation, the authors discover that the retailer is incentivized to share information when the nonlinear production cost, the intensity of the competition are beneficial, and the retailer is able to propose a contract to charge for the information.
The article also covers a possibility that the retailer may provide the information for free when the economy of production is large. Otherwise, the retailer is most incentivized to sell information during periods of intense competition between manufacturers. For the retailer, the process of selling information is often sequential in this arrangement. The paper also presents a number of real-life examples of situations where retailers provide information only to a portion of their suppliers. One of the presented examples is the retail chain Costco that provides its data-sharing utility called “Collaborative Retail Exchange” only to a limited number of its suppliers by charging an annual fee (Shang, Ha, & Tong, 2015).
Information Sharing in a Supply Chain With a Make-to-Stock Manufacturer
The second article was written by Tian Li and Hongtao Zhang, and it is dedicated to supply chains with a make-to-stock manufacturer (2015). The authors examine a situation in which a retailer may have imperfect demand information and chooses to share it with the manufacturer. According to the information sharing agreement between the two groups, the manufacturer is able to change the wholesale price of the product, as well as decide the stocking level. The retailer then can order the required quantity of the product, and the manufacturer can fulfill it to the available stock level.
The authors find that during the intermediate uncertainty of demand, the retailer is incentivized to share information voluntarily. The authors point out that in the majority of literature they examined, the idea of retailers sharing information with make-to-order manufacturers is almost universally opposed. Their main outcome is significant because it shows that retailer’s incentives may differ between situations. In this case, they provide an example of an in-demand product being out-of-stock at a retailer (Li & Zhang, 2015). This is never a desired outcome, and it can be avoided through information sharing, which creates a clear incentive for the retailer to share information
Porter’s Five Competitive Forces Model
Porter’s five competitive forces model is a framework for the analysis of the competitiveness in a given industry. As the title suggests, it analyzes five different forces in the market which include the threat of new entrants, bargaining power of buyers, threat of substitutes, bargaining power of suppliers, and industry rivalry (Dobbs, 2014; Sutherland, 2014). The presented papers present a number of situations where these forces can be seen in action. In the first article, the threat of substitutes and industry rivalry incentivizes the retailer to charge for the sharing of information. Such transaction has no negative side for the retailer because both manufacturers are still providing product to the store, despite having different amounts of information.
The situation in the second article shows the interplay of the bargaining power of buyers and manufacturers at the same time. Due to the make-to-stock nature of the manufacturer in the second article, they are not able to always provide the product to satisfy all the demands of the customers. To resolve that issue, retailers may share information with the manufacturer about uncertain demand to prevent situations where demanded products are unavailable at retail. Both manufacturer and retailer have a lot of bargaining power, and yet they both benefit from the sharing of information.
How Information can be Used Strategically
Strategic use of information is shown in a variety of ways in the examples within the articles. As it was mentioned earlier, the first article presents the case of the large retail chain Costco providing only some of its manufacturers with the data gathered by the company. The benefits of information for the manufacturers lie in having a concrete grasp on the demand of products, trends in the industry and other possibly useful information that can be used when developing future projects. If a product is showing signs of becoming obsolete, the manufacturer would be able to address the situation with greater speed and perhaps avoid negative consequences. For the retailer, strategic sharing of information can be used to not only make additional monetary resources through annual charges but also potentially improving the product lineup from the manufacturers who are able to access the shared information.
The second article provides an even more symbiotic scenario. The retailer has to be the initiator in this situation because they hold all the information. However, unlike the first scenario, no party is left without benefit. By providing information to the manufacturer, the retailer becomes more capable of meeting the demand of the market. On the other hand, the manufacturer may benefit from increased production and lower need for storage space.
The presented articles show that strategic use of information can be highly beneficial and each case relates to Porter’s five competitive forces model in a different way. Depending on the status of the industry, different parties may be incentivized to share information voluntarily, or as a contract for a specified charge. Companies may pay for information to gain a competitive edge, or uncertain retailers may share information to avoid possible issues with supply. Strategic use of information has a lot of applications, and their benefits may not be apparent at first examination. However, the modern industry is reliant on big data to operate, and decisions are rarely made without analytics (Qin, 2014; Wang, Gunasekaran, Ngai, & Papadopoulos, 2016). The tools to gather information have also become very portable and cheap, which makes the gathering process much easier. This is why the strategic exchange of information will continue to be a relevant topic in the foreseeable future.
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Sutherland, E. (2014). Info, 16(5), 1–18.
Wang, G., Gunasekaran, A., Ngai, E. W. T., & Papadopoulos, T. (2016). International Journal of Production Economics, 176, 98–110.