Information and profit sharing between a buyer and a supplier: Theory and practice

Abstract

This paper is about aspects of an optimal relationship between 2 firms, a supplier and a retailer, in a 2-party supply chain. The focus is on sharing private information when demand uncertainty exists so as to better coordinate the supply chain. It draws inspiration from a real case in Ireland of a new fish-processing company, Oceanpath, and a supermarket chain, Superquinn, in which information was shared. The argument is that sharing the retailer's information increases supply chain profit, as well as benefiting consumers. Profit sharing will be needed to guarantee that both the retailer and the supplier gain when information is shared. | INTRODUCTIONThis paper explores the relationship between two firms, a supplier and a retailer/buyer in a two-party supply chain. The study is inspired by an actual case involving Oceanpath, a fish-processing company, and Superquinn, a supermarket chain, in Ireland. The focus is on information sharing. We ask who benefits, including in the frame both of the parties and the consumers. The mechanism established and the conclusions reached, however, can be applied more generally and as such may guide practitioners. In particular, they may be applicable to the increasingly important area of the Internet of Things (IoT). At its most basic, the IoT is "everyday devices automatically exchanging informa-

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