Abstract
Considering
trust as a critical factor for successful collaborative demand forecast
sharing, this paper studies the dynamic relationship between trust level-based
forecasting capability and supply chain profitability. We develop a forecasting
coordination model to examine how the enhanced partner trust level can
influence the forecasting evolution to improve demand forecasts’ accuracy. We
estimate costs and profits from demand forecast sharing under varying trust
levels between a buyer and a partner supplier and then determine the optimal
level of trust for both parties to create the maximum economic value through
collaborative demand forecast sharing. To assess the opportunity costs associated
with no demand forecast sharing, we compare a joint forecasting supply chain’s
profitability with a supply chain where the supply chain partners maintain
separate demand forecasts. We find that once the buyer and the supplier agree
to engage in demand forecast sharing with a joint goal of supply chain profit
maximization, they should be able to retain the collaborative trust that is as
closer to an absolute level as possible throughout their working relationship.
Thus, the model presented in this study may help both the buyer and the partner
supplier evaluate how supply chain profitability can improve as they modify
their partner trust levels and determine the optimum trust-level policy for
mutual benefits.
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IJBMS by IPRPD is licensed under a Creative Commons Attribution 4.0 International License.