Research On Inventory Inaccuracy In A Supply Chain

Classical inventory theory often assumes no discrepancies between recorded inventory and actual inventory. However, inventory records are usually inaccurate due to many reasons in practice. Misplaced error, theft, destruction of products, manufacturers and trade fraud, error, and so on all lead to Inventory differences and inefficient operations. Therefore, the performance of the supply chain may be seriously affected because of incorrect information. RFID technology has been widely publicized as a promising solution of inventory differences. RFID has two major values. Firstly, RFID technology provides visibility through emphasizes differences problems, and it ensures the accuracy of the actual inventory levels by eliminating the difference between the actual and the flow of information. Secondly, RFID technology "corrects" them by eliminating disparities.This paper considers a single-period two-echelon supply chain consisting of a manufacturer and a retailer whose inventory is subject to shrinkage errors. This paper compares these improvement strategies and derive critical tag price for RFID implementation as a technological remedy for the inventory inaccuracy problem. Conditions for the profitability of RFID adoption are discussed. This paper analyze inventory shrinkage problems by optimizing order quantities and expected profits in consideration with the effect of the available rate of ordering quantity, RFID read rate improvement, and the tag price, respectively. In addition, the above conclusions are discussed under the condition of Nash game and Stackelberg game. The results show that whether the retailer deploys RFID depends on the relative value of the available rate of ordering quantity and RFID read rate improvement. This paper also presents a formulation of the threshold value of tag cost which makes the deployment of RFID cost-effective.