Study Of Retail Supply Chain Coordination Mechanism And Investment Decision-making Based On Radio Frequency Identification (RFID)

Efficient management of modern logistics and supply chain has become the core competence of enterprise. Inventory inaccuracies are prevalent in supply chain and bound to affect the performance of supply chain. Radio-frequency identification technology has been publicized as one of the most effective solutions for inventory inaccuracies. But the supply chain enterprises cannot directly analyze whether there is a large enough return on investment of RFID technology. On the other hand the application of RFID raises a new issue on the traditional supply chain coordination.Therefore the study of supply chain coordination mechanism and investment decision-making based on RFID is significant.Unlike previous studies which only consider inventory shrinkage or misplacement, from the perspective of supply chain coordination, this paper conducts a research on RFID technology investment decision-making in a two-level retail supply chain suffering from inventory misplacement and shrinkage.Firstly, we construct the centralized and decentralized supply chain models and analyze the effect of inventory inaccuracies on the optimal order quantity and expected profits of supply chain. In order to eliminate the double marginalization effect, buy back contracts is introduced to realize supply chain coordination. Secondly, this paper applies RFID technology to reduce inventory inaccuracies and establishes corresponding mathematical models. Then the models of the supply chain with and without RFID technology are both constructed. Through comparison and analysis of the profits of the supply chain before and after the investment of RFID technology, the cost threshold at which RFID adoption becomes profitable for both partners in retail supply chain is obtained. This paper can provide a theoretical reference for supply chain enterprises in making decision on RFID implementation.