Analysing Impacts of RFID in Supply Chains Using Joint Economic Lot Size Models

It is generally assumed that Radio Frequency Identification (RFID) has the potential to organize the flow of material in supply chains more efficiently. Based on the two-tiered Joint Economic Lot Size (JELS) model by Banerjee, this article analyzes how the increase in efficiency affects the order and production policies and therefore the total costs of the supply chain, and the individual costs of the companies in question. The analysis takes into account different bargaining power constellations and cost structures between supplier and customer. By employing simple methods of game theory it is shown in which cases the implementation of RFID is beneficial and how the disadvantaged company should be compensated.