Economic Analysis Development and Provider Elective Decision Model on Auto-ID Technology Investment

Abstract

In the last few years, the warehousing system use Auto Identification technology to manage the warehouse operation. Auto-ID is often used to obtain the information about amount, location, content, and condition of part or product. However, some industries still use manual warehouse management. Manual warehouse management systems usually cause some problem like inventory shrinkage and stock out. The investment and application of Auto-ID technology on the warehouse system can reduce the effect of the manual system. The use of Auto-ID technology in warehousing systems has a significant effect on the reduction of human error, the reduction of loss of goods, the accuracy of inventory stock, and can handle the product in large quantities, the speed of acceptance, and improve the delivery process. In this research, the cost and benefit analysis was carried out to assess the Auto-ID technology investments. The cost of inventory shrinkage reduction, labor and stock out, and the increase of productivity and maintenance on the spare parts warehouse management system used to analyse the cost benefit. To determine the expected NPV value in Auto-ID technology investments used Monte Carlo analysis. Furthermore, a company’s evaluation for selecting an Auto ID provider is a significant aspect. The evaluation of decision making for selecting Auto ID vendors is based on three criteria. This is referred to as many criteria decision making. Vendor performance, service after installation, and system attributes are the criteria employed in the decision-making model. Evaluation of Auto-ID vendor selection is done by using AHP. Based on the results of AHP analysis for the selection of Auto-ID suppliers, it was found that supplier PT C was the main priority (39.3%) for best suppliers, and the last priority was PT B (13.8%).