An assessment model for RFID impacts on prevention and visibility of inventory inaccuracy presence

Bullwhip effect has been considered as one of major research topics in supply chain management. Most of the studies disregarded the mismatch between the recorded inventory and the reality. However, it is shown that the inventory inaccuracy under uncertainty is a widespread phenomenon in both retail and distribution centers. Due to the propagation of information distortion along the supply chain, the financial impacts of inventory inaccuracy include not only the cost of direct inventory loss but also the increasing holding and shortage cost at each stage. The emergence of RFID technology offers a possible solution to alleviate the growing cost of inventory inaccuracy. By making full use of RFID technology, this paper attempts to compare the inventory inaccuracy impact on bullwhip effect in terms of order variance amplification and supply chain performance under two scenarios: (1) all members are aware of the inaccuracy and optimize their operations; (2) all members deploy RFID technology to reduce inventory inaccuracy. Informed order policy is used as benchmark to capture the true RFID value and differentiate two types of RFID impacts, prevention and visibility, to provide more manageable insight. In particular, the incentive of sharing information in supply chain is also provided by comparing the cost of two supply chain settings.