258 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO. 3, AUGUST 2002 Effects of Information Sharing on Supply Chain Performance in Electronic Commerce Fu-ren Lin, Sheng-hsiu Huang, and Sheng-cheng Lin Abstract—As businesses adopt electronic commerce, infor- mation exchange between business partners within a supply chain becomes more essential. Information exchange is often considered when companies implement the Extranet. This study aims to analyze the impact of various levels of information sharing including order, inventory, and demand information, which is based on transaction costs. This study further examines the effects on supply chain performance in electronic commerce. Specifically, the multiagent simulation system Swarm is employed to simulate and analyze the buyer–seller correlation in sharing information among business partners in supply chains. Our findings indicate that the more detailed information shared between firms, the lower the total cost, the higher the order fulfillment rate. and the shorter the order cycle time. In other words, information sharing may reduce the demand uncertainty that firms normally encounter. Firms that share information between trading partners tend to transact with a reduced number of suppliers. In sum, this work illustrates the effects of various levels of information sharing on supply chain performance in electronic commerce. Index Terms—Electronic commerce, Extranet, information sharing, multiagent simulation system, supply chain. I. INTRODUCTION T HE TERM “Extranet” extends from the Intranet concept by using Internet protocols and public telecommunication systems to share secure information while coordinating with suppliers, vendors, partners, customers, or other business enti- ties. Typically, it is the medium for business-to-business elec- tronic commerce. Companies may use the Extranet to do the following: 1) exchange large volumes of data via a high-speed commu- nication channel; 2) share product catalogs exclusively with wholesalers or those “in the trade;” 3) collaborate with other companies on joint development efforts; 4) jointly develop and apply training programs with other companies; 5) provide or access services provided by one company to a group of other companies; 6) share news of common interest exclusively with partner companies. Manuscript received February 14, 2001; revised February 10, 2002. This work was supported by the National Science Council of the Republic of China under Contract NSC88-2416-H-110-003-N6. Review of this manuscript was arranged by Special Issue Editors J. K. Liker and T. Choi. The authors are with the Department of Information Management, Na- tional Sun Yat-sen University, Kaohsiung 804, Taiwan, R.O.C. (e-mail: frlin@cc.nsysu.edu.tw). Digital Object Identifier 10.1109/TEM.2002.803388 Yet, interorganizational data networks such as an Extranet demonstrate two opposing effects on buyer-seller correlations. That is, networks may foster electronic marketplaces, which are characterized by numerous business transactions between buyers and sellers. Alternately, by increasing the costs of switching to new trading partners, networks strengthen existing commercial relationships and lock in partners [1]. As technological developments lower buyers’ search costs, a buyer may increase their number of suppliers, particularly in differentiated product markets [2]. Despite recent declines in search costs due to information technology (IT), there is little evidence that firms connect with either additional or fewer suppliers. What becomes clear, however, is that IT has altered supply chain management and produced a variety of new interorganizational logistics management approaches. This study analyzes the impact of various levels of informa- tion sharing based on transaction costs and then explains their impact on supply chain performances within electronic com- merce. Various Extranet technologies can implement varying levels of information sharing—such as order, inventory, and de- mand information—among businesses. The effect of these dis- tinct levels of information sharing on the supply chain struc- ture is of particular interest. Specifically, we apply the multi- agent simulation system, Swarm, to simulate and analyze the buyer–seller relationship of sharing information among busi- ness partners in supply chains. The following section explains the various levels of informa- tion sharing and related transaction costs. Via the Swarm simu- lation system and measurable parameters for a transaction cost model, Section III depicts the framework of this study. The ex- perimental results and analysis are presented in Section IV. We conclude and make recommendations for future research in Sec- tion V. II. LITERATURE REVIEW In this section, we explain the impact of information sharing on the transaction costs and, in turn, on the supply chain struc- ture. A. Sharing Information in a Supply Chain Internet, Intranet, and Extranet can be distinguished based on characteristics including access, users, and information. The Internet is a public network accessed by general users. How- ever, due to inconsistent format and diversified content, infor- mation available on the Internet is fragmented. By comparison, the Intranet, via Internet technologies, is a private network set up within an organization; information is proprietary and only 0018-9391/02$17.00 © 2002 IEEE