Journal
OMEGA-INTERNATIONAL JOURNAL OF MANAGEMENT SCIENCE
Volume 46, Issue -, Pages 86-103Publisher
PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/j.omega.2013.08.001
Keywords
Radio frequency identification; Inventory misplacement; Central semi-deviation; Risk-averse; Risk sharing; Coordination
Funding
- National Natural Science Foundation of China [71125001, 61174147, 70971046]
- Program for Changjiang Scholars and Innovative Research Team in University
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This paper investigates the application of radio frequency identification (RFID) technology to eliminate the misplacement problems in the supply chain, which consists of a risk-neutral manufacturer and a risk-averse retailer. By considering both fixed cost and tag cost of RFID implementation, we study the agents' incentives to adopt RFID in both uncoordinated and coordinated cases. We focus on analyzing the impact of risk attitudes on the agents' incentives and on the supply chain coordination. The central semi-deviation is adopted to measure the retailer's risk attitude. In the uncoordinated case, we find that, in order to induce the retailer to adopt RFID, the manufacturer must assume more fixed cost if the retailer is more risk-averse. In the coordinated case, we first show that the standard revenue sharing contract does not always coordinate the channel. If the channel is coordinated, we observe that the agents' incentives will be perfectly aligned and independent of the risk attitudes, if the revenue sharing ratio equals the fixed cost sharing ratio. Then we propose a risk-sharing contract that offers the risk protection to the retailer, to achieve the channel coordination. An interesting finding is that the manufacturer's incentive will not decrease with the tag cost, if she takes much risk from the retailer. The corresponding impacts of RFID adoption on the two contracts are also analyzed in this paper. Finally, a case study in a tobacco industry is presented to show the real RFID cost in practice. (C) 2013 Elsevier Ltd. All rights reserved.
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