Measuring the Value of RFID Investment: Focusing on RFID Budget Allocation

Abstract

Despite the current challenges and risks in implementation, radio frequency identification (RFID) technology is rapidly expanding its application area from simple inventory management to advanced location tracking and supply chain management in a wide range of industries. As RFID technology is widely adopted in the industries, the valuation of RFID investment has become vital for businesses due to its potential impacts on cost, operational efficiency, and customer satisfaction. Because of the lack of analytical methods for measuring the benefits and costs, our study attempts to develop a mathematical approach to the valuation of RFID investment. This study presents the base model for RFID investment decisions in a supply chain management setting and enhances the model to help make budget allocation decisions for businesses with multiple sites under budgetary constraints. Our model provides a basis for our understanding of RFID value creation and ways to build an RFID business case for an RFID investment justification.