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Using System Dynamics to assess the impact of RFID technology on retail operations

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  • De Marco, Alberto
  • Cagliano, Anna C.
  • Nervo, Mauro L.
  • Rafele, Carlo

Abstract

The application of item-level radio frequency identification (RFID) technology in retail supply chains creates cost savings and promises large potential benefits from revenue growth. However, the economic assessment of the impact on improved store operations, labor utilization, and increased sales is still not fully explored. We propose to use System Dynamics as a structural modeling and simulation approach to integrate conventional return on investment evaluations. Building on previous research about RFID technology in retail supply chains, we developed a model based on the case exploration of a leading Italian apparel retailer. Simulations show that RFID implementations are profitable whenever they contribute to increase sales, especially when a fashion retailer is focused on clerk-assisted sales strategies. Sales growth results from the dynamic and integrated impacts of RFID technology on better inventory control, faster inventory turnover, and longer time available for store personnel to assist consumers as an effect of more efficient backroom operations.

Suggested Citation

  • De Marco, Alberto & Cagliano, Anna C. & Nervo, Mauro L. & Rafele, Carlo, 2012. "Using System Dynamics to assess the impact of RFID technology on retail operations," International Journal of Production Economics, Elsevier, vol. 135(1), pages 333-344.
    • Handle: RePEc:eee:proeco:v:135:y:2012:i:1:p:333-344
    DOI: 10.1016/j.ijpe.2011.08.009
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    References listed on IDEAS

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    2. Piramuthu, Selwyn & Zhou, Wei, 2013. "RFID and perishable inventory management with shelf-space and freshness dependent demand," International Journal of Production Economics, Elsevier, vol. 144(2), pages 635-640.
    3. Cannella, Salvatore & Framinan, Jose M. & Bruccoleri, Manfredi & Barbosa-Póvoa, Ana Paula & Relvas, Susana, 2015. "The effect of Inventory Record Inaccuracy in Information Exchange Supply Chains," European Journal of Operational Research, Elsevier, vol. 243(1), pages 120-129.
    4. Mou, Shandong & Robb, David J. & DeHoratius, Nicole, 2018. "Retail store operations: Literature review and research directions," European Journal of Operational Research, Elsevier, vol. 265(2), pages 399-422.
    5. Huiming Zhang & Yu Zheng & Dequn Zhou & Peifeng Zhu, 2015. "Which Subsidy Mode Improves the Financial Performance of Renewable Energy Firms? A Panel Data Analysis of Wind and Solar Energy Companies between 2009 and 2014," Sustainability, MDPI, vol. 7(12), pages 1-13, December.
    6. Giulio Mangano & Giovanni Zenezini & Anna Corinna Cagliano, 2021. "Value Proposition for Sustainable Last-Mile Delivery. A Retailer Perspective," Sustainability, MDPI, vol. 13(7), pages 1-15, March.

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