Analysis of RFID technology on controlling shrinkage and anti-counterfeiting in luxury industry

Motivated by radio-frequency identification (RFID), it has been heralded as a major breakthrough to enhance the efficiency of a supply chain. This paper aims to explore the prospects of RFID investment value in luxury market, by mainly focusing on the optimal investment strategies, in order to optimize ordering quantity and maximize the profits. We compare two scenarios in a three-level supply chain involving a manufacturer, a distributor and a retailer. Each scenario is developed for two situations under conditions with or without the implement of RFID. According to the luxury consumption psychology of consumers and the luxury market characteristics, we mainly consider the case of inventory shrinkage and try to effectively control the issues of mis-categorization, theft and anti-counterfeiting. Finally, we present numerical analyses. Therefore, the research of RFID application in this paper has important theoretical value and great practical significance.