Is RFID adoption a double-edged sword? The impacts of a capital-constrained manufacturer

Abstract

This paper uses a newsvendor game model to investigate RFID adoption strategy in a supply chain incorporating a retailer with misplaced inventory problem and a capital-constrained manufacturer who has limited access to the advanced payment financing or the peer-to-peer (P2P) financing. Our work endeavors to investigate the interaction between supply chain members’ RFID adoption strategy and the manufacturer’s financing decision. We solve the model analytically and obtain several interesting findings. The RFID technology can be adopted precisely when the unit RFID tagging cost falls below a certain threshold. One Surprising finding is that RFID adoption has two effects, a negative effect can exacerbate the manufacturer’s financial difficulties, and a positive effect can alleviate or even essentially change the manufacturer’s financial status. However, such fundamental changes are restricted by the size of retailer’s misplacement rate. Also surprisingly, we expose that the manufacturer’s financing decision is significantly influenced by RFID adoption strategy at a middle level of initial capital. With the differentiated sizes of the lower limit of initial capital, the manufacturer will adjust financing decision in response to RFID adoption strategy.