Perishable inventory management and dynamic pricing using RFID technology

Abstract

In price-sensitive markets, price promotions coupled with an appropriate item replenishment strategy can be effective in controlling the total costs of servicing the market. In supply chains that handle perishable products, inventory management is already a complex problem and the management of products in a dynamic-pricing environment is even more challenging. Monitoring and control of time-sensitive products can be facilitated by the application of radio frequency identification (RFID) technology, which enables non-contact, real-time data collection and efficient interfacing with the management control system in the supply chain. This paper describes an integrated framework for inventory management and pricing in a discrete time (periodic review and ordering) framework, and describes an efficient algorithm, including a new approximation, for the related optimization problem. We then propose a suitable architecture for the application of RFID technology in this context, to realize the potential benefits.