The Impact of the RFID Technology in Improving Performance of Inventory Systems subject to Inaccuracies

The RFID technology is considered by a large number of people as a breakthrough in product identification and data capture throughout the supply chains. While the development of the different parts needed in order to implement the RFID systems (hardware, software, standardization,...) is under way, it is also important to evaluate the impact of such technology on the performance of supply chains. Benefits of the RFID technology, in terms of cost reduction, are various and among them, the elimination of inventory record errors that are currently encountered in many supply chains may be considerable. The purpose of our research project is to develop a set of models that provide qualitative and quantitative insights on the benefits of the RFID technology on the performance of supply chains in terms of cost reduction and/or improvement of service levels. The starting point of our research is a real world observation: more and more companies are looking for other identification systems than the bar code technology enabling a more accurate tracking of products in supply chains. Most of them are also interested in evaluating the benefits of an advanced automatic identification system such as the RFID technology. They are interested in new functionalities associated with this technology in order to compare it with the performance enabled by the bar code technology. Our second observation concerns the inventory information system which is a major obstacle to achieving operational excellence. In fact, the inventory information system, in contrary to popular belief and assumptions in most academic papers and in spite of the considerable amounts invested in information technology, are often inaccurate.
Our aim is to quantify the penalty resulting from the inventory inaccuracy issue and to analyze one of the improvements stemming from the deployment of the RFID technology, namely the benefit of having accurate inventory data.