Effects of Errors in Production-Inventory Systems--The Advantage of RFID

We focus on a simple inventory system at a retailer store, whose operations reflect the fact that in the real world, the execution of moving goods in a supply chain is often not without errors. Using simulation, we show that if ignored, these errors can result in substantial cost increases to the retailer, and therefore affect his bottom line. As the newly emerged radio frequency identification (RFID) technology can virtually wipe out most of the errors in a supply chain, our findings underscore the urgency for firms to adopt this nascent technology.