A Decision Model to Analyze Costs and Benefits of RFID for Superior Supply Chain Performance

Radio frequency identification (RFID) is believed to change drastically how supply chains operate, giving more control and visibility into the materials and information flowing through the entire chain. While adoption of RFID technology is starting to ramp up, many supply chain players are still skeptical due to the high costs. The purpose of this paper is to analyze the cost versus the benefits of RFID. Given the uncertainties regarding the RFID technology and scarcity of related data, a simulation model is built to carry out a net present value (NPV) analysis for various possible business scenarios. The parameters considered in our simulation experiments include company size, margins, tag prices, fixed costs, increased sale and margin benefits. The resulting NPV distributions help us identify the risk and the volumes and margins that make RFID a viable option