Impact of privacy-preserving horizontal retailer information sharing on the bullwhip effect in supply chains with multiple retailers

Experiences from real-world supply chains as well as exhaustive research show that the lack of coordination within supply chains leads to bullwhip effect, in which the magnitude of fluctuations in orders increases in the upstream direction from retailer to the supplier. One potential solution for addressing this phenomenon is information sharing between supply chain actors that can reduce the impact of fluctuations in customer demand on the supply chain. However, sharing too much information might lead to higher vulnerability of stakeholders in negotiations with their partners or to an unwanted leakage of information to competitors. Therefore, relevant actors are often reluctant to share the necessary information. To overcome these problems, we propose a horizontal information sharing model where retailers share demand information in form of average values between each other without revealing the exact values of each individual partner. This could be achieved by, e.g., applying costly cryptographic methods. Therefore, we evaluate the potential effects of this type of information sharing on the whole supply chain by developing a simulation model representing a 4-echelon supply chain, which consists of multiple customers, each served by their own retailer, one wholesaler, one manufacturer and one supplier. We investigate the effect of horizontal information sharing of average customer demand among the retailers on the bullwhip effect and show its effects on the different supply chain actors. In addition, the influences of demand variability and demand correlations between customers, different forecasting methods, safety stock approaches, stochastic lead times and the number of retailers sharing the information on the bullwhip effect are analyzed.