Research On The Investment Decisions Of RFID Technology In A Two-level Supply Chain

As the seasonal product suffer a great market demand fluctuation and a low residual after the selling season, the impact of the order quantity of retailer and the misplaced product in retailer’s store on the profit of the supply chain is significant. With the advantage of improving enterprise automation level and accelerating the speed of logistics, apply RFID technology is regarded as an effective method to compress the lead-time. In addition, the misplaced product can be found and Returned to the correct shelf with the help of the RFID reader if the RFID tag is labeled on the product. However, the investment RFID technology will increase the cost of supply chain, and then affects the profit of the manufacturer and the retailer. Therefore, it is urgent need to study the decision of applying RFID technology.In this paper, a two-level supply chain with one manufacturer and one retailer was studied in the condition of the functions of RFID technology in compress lead-time and reduce misplaced product in the retail store. Using the newsvendor model, respectively in no-RFID situation and with-RFID situation, the profit function of the manufacturer and the retailer in wholesale price contract supply chain, revenue sharing contract supply chain, buy back contract supply chain was established and solved by the method of Stackelberg game so as to obtain the optimal solution, and then coordinate the profit of the manufacturer and the retailer, obtain the threshold of cost of RFID tag invest RFID technology or not and the contract parameters to make decentralized supply chain achieve perfect coordination and both the manufacturer and the retailer can earn more in cooperation. In addition, this paper studied the changes of the optimal profit of the manufacturer and the retailer, the optimal wholesale price of the manufacturer and the retailer’s optimal order quantity under different contracts after investing RFID technology. In the end, a numerical example is presented to illustrate the conclusion.This study can be used as quantitative and modeling basis by seasonal product manufacturers in making decision on RFID investment.