The Impacts of RFID Implementation on Reducing Inventory Inaccuracy in a Multi-Stage Supply Chain

Abstract

Mismatch of inventory information between the reality and what is on the record of in-formation systems has been generally accepted as inventory inaccuracy. Its financial impacts go beyond the cost of direct inventory loss at each stage of the supply chain. The discrepancy also results in increasing holding and shortage cost because information distortion propagates along the supply chain. With the growing emphasis on responsiveness and cost of inventory, inventory inaccuracy has become a critical hurdle to achieve high performance supply chains. The emergence of RFID technology offers a possible solution to alleviate the growing cost of inventory inaccuracy. However, differs from tangible justification based on shrinkage reduc-tion, adoption of RFID technology has to be justified with improvement in intangible infor-mation flow. The objective of this paper is to present a systematic approach with analytical models to quantify the extent of saving from timely information as well as reduction in in-formation distortion and its amplification. With the increasing dynamic and complexity of global supply chain, this paper may shed some new light on framing the discussion of invest-ing in RFID technology.

Keywords: inventory inaccuracy, RFID justification, information distortion