Information Value Analysis for Real-Time Silo Fill-Level Monitoring

Abstract

Supply chains in the construction industry are less efficient than in other industries (e.g., retail or automotive). The reason for the less optimized supply chains is often the lack of accurate, up-to-date information. For a leading supplier of building materials and construction systems, we perform a value of information analysis to guide future investments in costly sensors for silo fill-level monitoring. Silo inventory is vendor-managed as construction sites withdraw material from silos as they need it. Ensuring continuous availability of material requires proactive replenishment across products and customers. We establish the optimal purchase level of (partial) information for different hardware costs and service levels. Based on the current ensured service level regime, the minimum total costs are achieved with approximately 50% sensor-equipped silos for medium and high annual sensor costs. The findings on the appropriate use of information technology to improve decision making with partial information are generally relevant for suppliers looking to stand out with service guarantees and short delivery times. History: This paper was refereed.