Efficient Inventory Management by Leveraging RFID in Service Organizations

Abstract

RFID provides real-time tracking, resulting in two additional benefits as an information technology. When inventory is inaccurate and real-time tracking is not available organizations have to use a periodic review policy. When inventory is accurate and realtime tracking is available, they may switch to a continuous review policy. Based on a case study in a radiology practice, we compare the operational and economic differences between a system that uses barcode technology and periodic review, and one that uses RFID technology and continuous review. While the first switch from barcode to RFID is a technology improvement providing automatic counting, the second switch from periodic to continuous review is a process innovation. We measure the value of automatic counting, process innovation, and the total of the two, (the value of RFID). We also explain how these benefits change with service level, lead time, demand, etc.