RFID-enabled shelf replenishment with backroom monitoring in retail stores

This contribution is concerned with the value of RFID for retail store operations, particularly the use of the technology to automate shelf replenishment decisions. We construct and test an inventory control policy based on RFID data with case-level tagging. Our model incorporates RFID hardware capable of detecting bidirectional product movements between a store's backroom and the sales floor. In contrast to prior research, we account for detection errors caused by imperfect RFID read rates. Furthermore, we propose and evaluate a simple heuristic extension to avoid some of the inherent downsides of fully automatic inventory control. We compare the performance of these policies under stochastic demand, lost sales, and shrinkage to the traditional scheme with periodic reviews in a simulation study. Our results indicate that RFID-based policies have the potential to improve cost efficiency and service levels. However, different sensitivities to cost factors and suboptimal read rates must be considered when choosing a policy. (C) 2011 Elsevier B.V. All rights reserved.