RFID in Supply Chain: The Tagging Cost Sharing Approach

Abstract

Sharing the tagging cost among supply chain members is an important issue for item-level implementation of RFID in an open-loop where the tags can only be used once. In this chapter, an economic analysis by calculating the net present value (NPV) of an RFID investment on a three-echelon supply chain is presented and the effects of sharing the tagging cost among supply chain members on the NPV at the echelon level are examined. In the proposed model, NPVs for the retailer, distributor, and manufacturer are calculated for two cases. In the first case, the tagging cost is shared equally between supply chain members while in the second case the tagging cost is shared according to the expected benefit of each supply chain member using the tagging cost sharing factor.