Study Of Two-Level Retail Supply Chain Coordination Mechanism Based On Radio-Frequency Identification (RFID)

Inventory inaccuracies are expensive and are prevalent in many industries. Radio Frequency Identification (RFID) technology has been publicized as a promising solution. Many retailers start to push their suppliers to adopt this technology. Adoption of this technology has a fixed cost and variable cost of implementation, which can cause incentive issues in the supply chain.In this paper, we first consider a supply chain under inventory inaccuracies when the demand independs on the retail price. We study the centralized supply chain and identify the conditions to coordinate the supply chain under implementation of RFID. We apply a Newsvendor model to analyze how to reduce inventory inaccuracies by deploying RFID technology. In the decentralized supply chain, we study the coordination mechnisms of wholesale price contract, revenue sharing contract and buyback contract. We also consider the fixed cost and tag cost of investing RFID technology, both of which are shared between the retailer and the manufacturer.Secondly, when the underlying demand depends on the retail price, it has been known that channel coordination cannot be achieved if only one of these mechanisms is deployed. In this article, we show that a policy that combines the use of wholesale price, rebate, and buyback (PRB) contracts can coordinate a channel with additive price-dependent demands. We determine the sufficient conditions for the contract parameters associated with the equilibrium policy in both centralized and decentralized supply chains. We also analyze the cost of the RFID which makes its deployment cost effective.