Evaluating RFID investment on a supply chain using tagging cost sharing factor

Abstract

Radio frequency identification (RFID) is a promising technology for optimising supply chain processes, as it improves manufacturing and retail operations from forecasting demand to planning, managing inventory, and distribution. In this study, a simulation model is used to calculate the net present value (NPV) of an RFID investment on a three-echelon supply chain and to examine the effects of sharing the tagging cost between supply chain members on the NPV at the echelon level. 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 according to the expected benefit of each supply chain member using the tagging cost sharing factor. In the second case, the tagging cost is shared equally between supply chain members. Furthermore, we investigate the difference in the NPVs for a supply chain member change as the end-customer demand value increases.