How Does a Radio Frequency Identification Optimize the Profit in an Unreliable Supply Chain Management?

Abstract

Competition in business is higher in the electronics sector compared to other sectors. In such a situation, the role of a manufacturer is to manage the inventory properly with optimized profit. However, the problem of unreliability within buyers still exists in real world scenarios. The manufacturer adopts the radio frequency identification (RFID) technology to manage the inventory, which can control the unreliability, the inventory pooling effect, and the investment on human labor. For detecting RFID tags, a reasonable number of readers are needed. This study investigates the optimum distance between any two readers when using the optimum number of readers. As a vendor managed inventory (VMI) policy is utilized by the manufacturer, a revenue sharing contract is adopted to prevent the loss of buyers. The aim of this study is to maximize the profits of a two-echelon supply chain management under an advanced technology system. As the life of electronic gadgets is random, it may not follow any specific type of distribution function. The distribution-free approach helps to solve this issue when the mean and the standard deviation are known. The Kuhn-Tucker methodology and classical optimization are used to find the global optimum solution. The numerical analysis demonstrates that the manufacturer can earn more profit in coordination case after utilizing revenue sharing and the optimum distance between readers optimizing cost related to the RFID system. Sensitivity analysis is performed to check the sensibility of the parameters.