A Quantitative View on How RFID Will Improve a Supply Chain

Radio-frequency identification (RFID) as an emerging technology has generated enormous amount of interest in the supply chain arena. There are a number of theoretical advantages of RFID technology. Inventory can be tracked more accurately in real time, resulting in reduced processing time and labor. More significantly, the complete visibility of accurate inventory data throughout the entire supply chain, from manufacturer’s shop floor to warehouses to retail stores, brings opportunities for improvement and transformation in various processes of the supply chain. In this study we investigate how these advantages can contribute to the performance of a supply chain and hence to business value. We identify existing supply chain results, most of which were developed for purposes other than RFID but are applicable to RFID, and model the impact of RFID in a manufacturer-retailer supply chain environment using computer simulation when we cannot find relevant existing results. Our study provides a comprehensive view on how to demonstrate the potential benefits of RFID in terms of inventory reduction and service level improvement.

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