Is there a benefit to sharing market sales information? Linking theory and practice

Using a real-life data set, we investigate the benefit of sharing market sales information in a setting where a theoretical model argues there is no benefit from such a collaboration scheme. The set of real Electronic Point Of Sales (EPOS) data and the orders that were placed by a retailer to a suppler was used. We have focused on products that operate under an every day low price strategy. To measure the benefit of the second echelon player the Standard Deviation of the Prediction Errors (SDPE) is used as this is linearly related to inventory costs. It is revealed that the second echelon player can reduce its SDPE by between 8% and 19% by exploiting the shared EPOS data, suggesting that there is a benefit to information sharing. Furthermore, it is proposed that the noise element that is originally contained in the EPOS series is the major source of the information sharing benefit. (c) 2007 Elsevier Ltd. All rights reserved.