Item-Level RFID in the Retail Supply Chain
Gary M. Gaukler, Ralf W. Seifert, Warren H. Hausman
Production and Operations Management · 2007 · Volume 16 · Issue 1
DOI: 10.1111/j.1937-5956.2007.tb00166.x
Abstract
Analyzing the proliferation of item-level RFID, recent studies have identified the cost sharing of the technology as a gating issue. Various qualitative studies have predicted that conflict will arise, in particular in decentralized supply chains, from the fact that the benefits and the costs resulting from item-level RFID are not symmetrically distributed among supply chain partners. To contribute to a better understanding of this situation, we consider a supply chain with one manufacturer and one retailer. Within the context of this retail supply chain, we present analytic models of the benefits of item-level RFID to both supply chain partners. We examine both the case of a dominant manufacturer as well as the case of a dominant retailer, and we analyze the results of an introduction of item-level RFID to such a supply chain depending on these market power characteristics. Under each scenario, we show how the cost of item-level RFID should be allocated among supply chain partners such that supply chain profit is optimized.
Keywords
RFID, item-level, retail, supply chain, cost sharing
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