Supply Chain Network Design Considering RFID Adoption

This paper reports on the integrated supply chain network design with radio-frequency identification (RFID) technology. The proposed model seeks to maximize the total profits of a manufacturer, servicing multiple retailers through regional distribution centers (RDCs) by identifying the optimal area of influence and order quantity for each RDC using a two-phase approximation method. Simulation results indicate that when using RFID, increasing the order quantity leads to a decrease in the area of influence of each RDC. Our findings also show that RFID has a more pronounced influence on supply chains affected by inventory inaccuracy and demand distortion.

I. Introduction

Radio-frequency identification (RFID) is a wireless noncontact system in which radio-frequency electromagnetic fields are used for the transfer of data between a tag attached to an object and a database. Szmerekovsky et al. [1] reported that the benefits of RFID with regard to supply chain management include a decrease in inventory inaccuracy and reduced demand distortion. Inventory inaccuracy refers to situations in which the actual inventory does not match the recorded inventory, whereas demand distortion refers to products that are available in stores but not available for customers. By reducing inventory inaccuracy and demand distortion, RFID can actually increase sales of manufacturers. The influence of supply chain networks on the cost of logistics makes the design of a network an important topic in the adoption of RFID.