The impact of RFID technology and EPC system on stock‐out of promotional items

Abstract

This paper examines the impact of radio frequency identification (RFID) and EPC Network on out‐of‐stocks of promotional items during a sales promotion in the fast-moving consumer goods (FMCG) context. A mathematical model is developed to estimate savings achievable by reducing the main causes of unavailability of promotional items. In particular, the model compares the current performance of sales promotion of FMCG retail stores, in terms of stock‐out occurrence and related duration, with a re-engineered situation where RFID and EPC are exploited in the store to reduce stock‐out causes. The model has been applied to a retail store of a major Italian distributor of FMCG. Results of the application suggest that RFID and EPC have the potential to substantially reduce economical losses due to unavailability of promotional items, thus proving the economical profitability of their implementation in the FMCG field.