The Information Value of Item-Level RFID in Retail Supply Chain Operations

Product availability in retail stores has become a major competitive factor. Insufficient replenishment processes and missing inventory visibility still account for a major fraction of lost sales. Radio Frequency Identification (RFID) may eliminate inventory record inaccuracy and improve the means of employees and customers to localize products. However, to date a lack of knowledge about the information value of this technology prevents a comprehensive financial evaluation. This paper proposes and demonstrates a simulation method that is able to capture the information value of item-level RFID in retail supply chain operations. Overall our results show that the ROI of item-level RFID depends on many factors. We demonstrate that a positive ROI is possible at the current price of passive RFID transponders.