The Value of Rfid Technology Enabled Information to Manage Perishables
37 Pages Posted: 13 Apr 2009
Date Written: April 7, 2009
We address the value of RFID technology enabled information to manage perishables in the context of a supplier that sells a random lifetime product subject to stochastic demand and lost sales. The product's lifetime is largely determined by the time and temperature history in the supply chain. We compare two information cases to a Base case in which the product's time and temperature history is unknown and therefore its shelf life is uncertain. In the first information case, the time and temperature history is known and therefore the remaining shelf life is also known at the time of receipt. The second information case builds on the first case such that the supplier now has visibility up the supply chain to know the remaining shelf life of inventory available for replenishment. We formulate these three different cases as Markov decision processes, introduce well performing heuristics of more practical relevance, and evaluate the value of information through an extensive simulation using representative, real world supply chain parameters.
Keywords: perishable inventory, value of information, simulation, RFID
JEL Classification: M11, R4, M, L81, O31, L23
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