A continuous approximation approach for supply network design considering radio frequency identification adoption

Abstract

The design and management of multiechelon supply networks is one of the most crucial and challenging problems that managers encounter. In this study, supply networks are designed for both single-item and multi-item cases by considering RFID adoption. To maximize total profits, the objective is to determine the following: (1) the locations of distribution centers, (2) the allocation of retail stores to distribution centers, (3) the replenishment cycle time at distribution centers, and (4) whether RFID was adopted. In this study, a continuous approximation model is developed and an algorithm for solving this problem is proposed. Numerical studies are adopted to demonstrate the solution procedure and the effects of changing parameters on decisions and profits. The results also show how RFID adoption affects the design of supply networks. This paper provides novel management implications that business managers can use as a reference.