Impact of Real-time Granular Product Information on Transshipment between Stores : Study of a New Business Process by using RFID-enabled Granular Object Control

Abstract

This study evaluates a new business model that realizes cost and benefit sharing in RFID (Radio Frequency Identification) applications. In the model proposed in this study, the author assumes that one supplier sells goods to a retailer that has two identical stores, which share real-time item level inventory information and transship goods in order to meet local customer demands. Assuming that the demand pattern follows a single-period stochastic problem, the author shows that this model increases the optimum quantity that will maximize expected profits to each store and generates more profits for both the supplier and retailer. The author also shows that the profit of the retailer does not improve when he takes handling cost between stores into consideration and the handling cost reaches its upper boundary, but that the profits of both the retailer and supplier improve even in the upper-boundary situation if the supplier covers part of the transshipment cost. The result indicates that RFID implementation benefits all the supply chain channel members and that information sharing among these members is promoted when using the proposed model.