Value of supply disruption information and information accuracy

In this paper, we examine the factors that influence the value of supply disruption information, investigate how information accuracy influences this value, and provide managerial suggestions to practitioners. The study is motivated by the fact that although accurate disruption information creates benefits, fully accurate disruption information may be difficult and costly to obtain. Furthermore, inaccurate disruption information can decrease the financial benefit of prior knowledge and even lead to negative performance. To perform the analysis, we adopt a newsvendor model within a single product setting where the focal firm can source from a supply network and has a given resilience capacity. The results show that information accuracy, specifically information bias and information variance, plays an important role in determining the value of disruption information. This influence varies at different levels of disruption severity and resilience capacity, and our results imply that higher amounts of resilience capacity actually may be detrimental to a firm without accurate information about a disruption's influence. Thus, for companies with a high resilience capacity, obtaining quality information is critical for effectively coping with disruptions.