Inaccuracies within a Decentralized Supply Chain: A General Framework

One of the implicit assumptions considered in the majority of investigations performed in the area of inventory management is that the physical flow of products that passes through an inventory system as well as the associated information flow are free from defects, i.e. for a given type of product, the quantity received matches exactly the quantity ordered or there are no errors occurring during the data capture process such that the level of the available inventory shown by the information system corresponds exactly to the physical quantity available. However, various factors can create a difference between the expected and the effective physical and information flows and perturb the synchronized evolution between these two flows. The performance of such inventory systems whose flows are disturbed by defects can be improved by using advanced product identification and data capture technologies such as the RFID (Radio Frequency IDentification) technology. This paper deals with the impact of inaccuracies on inventory and supply chain performances. We first give an overview of potential errors that may occur within an inventory system. Then, we propose a general framework to model the impact of errors and we provide analytical optimal solutions for both centralized and decentralized supply chains. For the centralized case, we evaluate the performance improvement enabled by the RFID technology on such inventory systems