Techno-economic analysis of using RFID to reduce errors in supply chains: A simulation approach

Abstract Information and inventory flows are the lifelines of supply chain management which are closely intertwined. However in the real world, there are many errors between these two flows due to the variety of goods the number and variety of products. In this regard, the transaction errors are the common phenomena in supply chain processes such as receiving, selling, warehousing, etc. On the other hand, using RFID to reduce inventory errors via managers has doubts due to its costs. In present study, a novel methodology is provided for analyzing the effect of errors on information system inventory by applying the simulation approach. In addition, quantitative analyzing of RFID role in errors reduction is presented by determination of the optimal amount of inventory. To this, at first, the meaningful difference between profit in the absence and the presence of transaction errors was examined by statistical hypothesis testing and then optimal order quantity in the both of cases with and without the using RFID was calculated based on mathematical modeling. At last, the two-way sensitivity analysis approach is applied to examine the cost-effective using RFID. The results show that only at the point of optimal economic order quantity is always a meaningful difference between profit in the absence and the presence of transaction errors. Also the error rate is the most important factor and sale unit price and shortage cost are others factors, respectively for the cost-effective using RFID technology,