A quantitative view on how RFID can improve inventory management in a supply chain

Radio-frequency identification (RFID) as an emerging technology has generated an enormous amount of interest in the supply chain arena. There are a number of theoretical advantages of RFID technology. Inventory can be tracked more accurately in real time, resulting in reduced processing time and labour. More significantly, the complete visibility of accurate inventory data throughout the entire supply chain, from the manufacturing shop floor to warehouses to retail stores, brings opportunities for transformation and improvement in various processes of the supply chain. In this study, we investigate how these advantages can be utilised to improve the inventory performance of a supply chain. We identify the relevant results in the existing supply chain literature, and model the impact of RFID using computer simulation when we cannot find existing results. Our study provides a comprehensive view and some new insights on the potential benefits of RFID in terms of inventory reduction and service level improvement.