Item‐Level RFID in the Retail Supply Chain

Abstract

Analyzing the proliferation of item‐level RFID, recent studies have identified the cost sharing of the technology as a gating issue. Various qualitative studies have predicted that conflict will arise, in particular in decentralized supply chains, from the fact that the benefits and the costs resulting from item‐level RFID are not symmetrically distributed among supply chain partners. To contribute to a better understanding of this situation, we consider a supply chain with one manufacturer and one retailer. Within the context of this retail supply chain, we present analytic models of the benefits of item‐level RFID to both supply chain partners. We examine both the case of a dominant manufacturer as well as the case of a dominant retailer, and we analyze the results of an introduction of item‐level RFID to such a supply chain depending on these market power characteristics. Under each scenario, we show how the cost of item‐level RFID should be allocated among supply chain partners such that supply chain profit is optimized.

Adoption and Diffusion Speed of New Technology with Network Externality in a Two-level Supply Chain : An Approach to Relative Factors in Buyer-Supplier Relationships

“…In a total supply chain's perspective, one can expect more speedy diffusion in total network due to significant decreases of suppliers' threshold values for the adoption. This result corresponds with Gaukler et al [13] such that in the absence of mandating entities, there exists a unique optimal way of sharing the cost of RFID tags between a supplier and a buyer. They also found that sharing the its tag cost is optimal in the sense that the total supply chain profits are maximized.…”

“…Under these cost issues, several literature has already studied about the optimal policies for RFID investment. Gaukler et al [13] show that in the absence of mandating entities, there exists a unique optimal way of sharing the cost of RFID tags between a manufacturer and a retailer. Sharing the tag costs is optimal in the sense that the total supply chain profits are maximized.…”

Risk Analysis of a Two-Level Supply Chain Subject to Misplaced Inventory

“…There are two main streams of literature dealing with the inventory inaccuracy problem. One stream has focused on optimal decision making when subject to inventory inaccuracy [1,11,12,21]. Specifically, these studies have dealt with the inventory errors from different sources, such as temporary shrinkage [22,23], transaction errors [24], and misplaced inventory [25,26].…”

“…With RFID implementation, accurate and timely information about inventory errors can be transferred to the supplier; meanwhile, the retailer can benefit from the reduction of inventory errors. Since both the retailer and the supplier are direct beneficiaries through RFID implementation, it is reasonable to adopt RFID technology along the supply chain [11].…”

“…An RFID system includes tags and readers, where tags provide the unique identification numbers for products and readers detect the products as they flow through the reader points [10]. RFID improves inventory visibility and therefore eliminates misplaced inventory in a timely manner [11]. Several research projects have provided evidence for the fact that an RFID-enabled inventory control system outperforms a traditional replenishment process that relies on cycle counting [12,13].…”