Investigation of RFID investment in a single retailer two-supplier supply chain with random demand to decrease inventory inaccuracy

Abstract

Inventory information inaccuracy is one of the main causes to the inventory waste in supply chain operations, which motivates many companies to adopt modern tracing technologies, e.g. radio frequency identification (RFID), to decrease inventory errors and strengthen the cooperation between the supply chain stakeholders. Considering different types of RFID possess unequal technique features in tracing items in more practical environment, for the first time this paper explores the different effectiveness of RFID in decreasing the inventory inaccuracies in a supply chain containing one retailer and two suppliers. Firstly, a novel scale factor function is introduced to illustrate the relationships between the variable cost of RFID and the non-full abilities of RFID in decreasing inventory inaccuracies. Then, under the stochastic demand and inaccurate inventory, analytical models are formulated to investigate the cost-effectiveness of different RFIDs to the optimal order quantities and the expected profits in different scenarios (uncoordinated and coordinated supply chains), hereby the best coordination strategies are addressed. At last, numerical results obtained from different scenarios on adopting RFID and a practical case-level RFID system for recycling packaging cases indicate that RFID can not only decrease inventory inaccuracies, but also strengthen the supply chain coordination.