Value of Information Sharing in Improving Supply Chain Management

Based on Shapley concept, the paper analyzes the Surplus Value manufacturers and retailers expected from information sharing in the Supply chain. The research shows that demand correlation affects the magnitude and shape of the Surplus function, and in turn impacts the incentives for the manufacturer and retailers to form partnerships. Higher correlation increases (reduces) the manufacturer (retailer) surplus. In the meantime, manufacturer's marginal surplus will decline as higher correlation increasing, which will induce the manufacturer to limit the number of retailer partners.