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Hindawi Publishing CorporationMathematical Problems in EngineeringVolume 2013 Article ID 271496 11 pageshttpdxdoiorg1011552013271496
Research ArticleThe Impact of RFID Investment on Complex Product inThree-Level Assembly Supply Chain
Wei Xu1 Zhaotong Lian1 and Xifan Yao2
1 Faculty of Business Administration University of Macau Macau2 School of Mechanical and Automotive Engineering South China University of Technology Guangzhou China
Correspondence should be addressed to Zhaotong Lian lianztumacmo
Received 15 March 2013 Accepted 20 May 2013
Academic Editor Qingsong Xu
Copyright copy 2013 Wei Xu et al This is an open access article distributed under the Creative Commons Attribution License whichpermits unrestricted use distribution and reproduction in any medium provided the original work is properly cited
Motivated by the complex product with the feature about error-prone assembly system and supply chain inventory inaccuracythis paper elaborates on the impact of information technology investment on complex product by establishing a three-stagesupply chain model involving two suppliers one manufacturer and retailer which carried out Stackelberg games In additionit not only compares the manufacturer and the retailerrsquos optimal decision and maximum profit under the situation of theinformation asymmetry and free information sharing but also analyzes their market behavior and changes inmarket performanceMeanwhile it points out that the downstream in supply chain masters more information about market demands compared tothe upstream one The optimal cost threshold values of technology investment are also examined both for the centralized andthe decentralized scenarios utilizing quantitative and modeling methods By analyzing and comparing the optimal profit with orwithout investment on information technology it establishes a supply chain coordination model which boosts the applicationof information technology At the same time it offers the conditions on which the upstream and downstream enterprises cancoordinate with one another The results of this paper have contributed significantly to making the price and ordering decisionson whether RFID should be adopted among members of the supply chain Finally we present numerical analyses and severalextensions of the model are considered as well
1 Introduction
Represented typically by autoindustry complex productassembly process is characterized by typical discrete manu-facturing It involves numerous components and parts mis-cellaneous technology and high-accuracy requirement Theassembly system has the characteristics of mixed productionHowever these complex product assembly operations aremainly completed manually with error-prone steps Due tothe limits of technical investment the range of assemblymonitoring is only restricted to the executive process itselfand it neglects logical relationship between the assembly taskand logistics task so that the assembly and logistics cannot bemanaged uniformly thus causing the disconnection betweenmaterial flow and information flow Since it is easy to getwrong and timeconsuming the information technology is
required to ensure that the architectural decisions will beimplemented correctly
To solve the problems above the model of assemblysystem involving the assembly agent nodes and logistics agentnodesmust be established so as to realize uniformmonitoringand management Additionally RFID can identify itemsconveniently by virtue of the characteristics of noncontactremote distance and read-write so as to improve the realtime of assembly monitoring and promote synchronizationof material flow and information flow What is more thechanges in assembly states and logistics states can be reflectedthrough generation destruction and update of RFID tagIn that case if assembly agent and logistics agent can bemodeled uniformly to establish themapping relation betweenRFID and assembly executive state the feasibility of assemblyexecutive process can be enhanced
2 Mathematical Problems in Engineering
Obviously the wide application of information technol-ogy will free people from the heavy labour Some large-scale retail enterprises such as Wal-Mart and METRO haveobtained obvious effects by trying out RFID technology inthe aspects of clothes and daily necessities However thehigh cost of RFID equipment limits its wider popularizationand application to more supply chains and enterprisesTherefore how to coordinate the upstream and downstreamfirms in the assembly system to use the RFID technologyto improve the performance of the supply chain is of greatsignificance
According to the report of American Shipper the averageoccurrence rate of demand exceeding supply and out-of-stock situations is 8 in global retail business Surprisinglyfor a 8000m2 retail store with the annual sales volume ofRMB 150 million it will lose RMB 84 million sales volumeonly due to the stockout per year The replenishment speedis 3 times faster than that of goods without the tags AfterWal-Mart adopts electronic product code (EPC) supportedby RFID technology to monitor goods the stockout ratereduces 16 For the goods tagged with RFID labels manualordering reduces by 10 RFID can decrease the quantity ofsafety inventory effectively and make quick response to thestockout [1] After BestBuy adopts RFID goods availabilityhas been added to 93 from 80 At present a famousBritish retailer TESCO introduces a device called smart shelfwhich can record each move of all products on the shelvesThis is also one of applications of RFID technology At thesame time RFID antennae are installed at the entrance andexit of the warehouse which are connected with warehousemanagement system Thus when the goods enter and leavethe warehouse electronic label information can be readpromptly Meanwhile the most accurate goods data can begained easily Additionally the accurate information aboutthe inventory quantity can be obtained as well The studyof American organs concerned shows that the accuracyrate of the inventory can reach 995 for the retail enter-prises applying information technology to inventory man-agement while other enterprises can only reach 80ndash85[2 3]
With the help of information technology enterpriseinformatization can be improved meanwhile industrial in-formation sharing can be promoted Real-time dynamic indi-cators in the supply chain such as inventory analysis marketand customer analysis and other data need monitoring byRFID sensor and are transmitted to the server throughinternet network Thus data information from differentchannels is gathered through cloud calculating data center ofthe internet of things so as to draw information strategiesigniting the profit point
Although complex product can be traced more accu-rately in real time with RFID technology one of the majorobstacles to adoption is the cost of RFID implementationRFID technology incurs huge cost including not only theinstallation investment but the costs of tags and readers aswell Motivated by the RFID investment issue we aim toexplore the prospects by mainly focusing on the optimalinvestment strategies in order to maximize the profits under
conditions with or without the perishable products valuetracing when the demand is stochastic in a two-level supplychain involving a manufacturer and a retailer We considerboth the centralized and decentralized scenario
Particularly the main research questions that this paperaddresses are as follows
(i) What are the levels of the optimal investment thatmake RFID adoption economically feasible in three-level centralized and decentralized assembly supplychains
(ii) How to combine the actual supply chain problemsuch as the shelf shrinkage errors in assemblyprocess and misplaced products to implement thetechnical innovation investment to be able to realizegreater investment returns
The remainder of this paper is organized as follows In thefollowing section we give a quick idea of the topics coveredin the literature review In addition literatures related tothis study will be reviewed In Section 3 we introduce thesystem architecture and benefit evaluation mainly involvingassembly manufacturing system based on multi-agent andRFIDThemodel analysis and themain results of this researchare presented in detail in Sections 4 to 6 The numericalanalysis is examined in Section 7 and we offer a summarytogether with a critique of the model and a direction forfuture research in the final section
2 Literature Review
RFID is a term that has been around for several years Inrecent years the analysis of RFID technology investment onvarious industries has attracted the attention of more andmore scholars As an exploratory research in essence morespecially the investment analysis based on mathematicalmodels is extremely scarce This section mainly builds onthree streams of literature the potential benefits and mostcommon application of RFID technology RFID investmenton supply chain with contracts and two- or three-levelsupply chain coordination as well as the development ofan RFID and multi-agent system based on manufacturingcontrol for industrial applications and dynamic logisticsprocess
The transaction and transportation errors misplacementdelay delivery and shrinkage errors are the main causes ofinventory inaccuracy all of which have been discussed asareas where RFID can increase accuracyThere are numerouspapers in the literature that have considered the advantagesof RFID technology The benefits under different categoriesare presented as follows Lee and Ozer [4] study a single-item periodic-review inventory system with replenishmentpolicy(sS) They integrate RFID technology with uncertaindemands and random distribution of transaction errors andobserve the inventory cost related to transaction errorsAtali et al [5] extend the abovementioned models theydevelop two models based on shrinkage such as theftsand damages misplacement and transaction or scanningerrors They consider that RFID can effectively reduce
Mathematical Problems in Engineering 3
Software agentarchitecture
Portable devicefor inventory
checking
Interactivesystem
Wirelesscommunication
RFID tagsreader
antenna
Informationextraction agent
Error detectingagent
Goods schedulingagent
Informationintegration agent
Stockshelfallocation
Real-timereplenishment
Marketinganalysis
Customerbehaviour
Phys
ical
laye
rA
gent
laye
rAp
plic
atio
nla
yer
Assembly systemarchitecture
Subprocess (1)
Subprocess (2)
Process (2)
Process (1)
Agent node
Agent nodeAgent node Process (i)
Three-levelsupply chain
RFID tag RFID tag RFID tag
Suppliers Manufacturer Retailer Customer
RFID
+ ag
ent
Figure 1 Architecture of the information technology in complex product assembly system
the mistake rate and improve inventory visibility Tajima [6]first mentions that the shrinkage errors include employeetheft shoplifting administration and paperwork errors ven-dor fraud and unavailable products for sale Besides RFIDhas been discussed as a solution to black market saleswhich could also improve inventory records by reducinghuman errors in material handling (as discussed elsewhere[7 8]) Ngai et al [9] analyze a case study on mobilecommerce system based on RFID technology with strongfunction on locating tracking and managing the containersGaukler et al [10] focus on the investment cost of RFIDtechnology and assume that the RFID tag cost can beshared by all supply chain members Besides they arguethat RFID can improve stock control policies as well asinventory replenishment policies They extend the previousmodel to analyze an item-level RFID application in two-level supply chain They propose two cases of centralizedand decentralized decision with or without RFID and mainlydiscuss how the manufacturer and the retailer can optimizetheir ownprofitswithout cooperationHeese [11] indicate thatRFID technology is more beneficial in decentralized supplychains Although RFID cannot eliminate all errors it canbe quickly detected and effectively handled Several authorssuch as Dutta et al [12] Rekik et al [13] Szmerekovsky andZhang [14] Bottani and Rizzi [15] Tu et al [16] Wang etal [17] and Whitaker et al [18] were attracted by its useof eliminating these errors They all pay close attention to
the impact of RFID on inventory inaccuracy due to variety oferrors
3 Overview of System Architecture andBenefit Evaluation
In this section we mainly discuss the system platformarchitecture based on multi-agent and RFID Combiningthese two new technologies together it has become one ofthe potential candidates for all assembly manufacturing andsupply chain systems in the future
As is shown in Figure 1 all the assembly transition andlogistics distribution are guided and controlled respectivelythrough multi-agent and it is like the human brain whichnot only improves agility of manufacturing system but alsomakesmanufacturing systemcharacterized by heterogeneousand geographically distributed In addition in order toimprove the efficiency of raw material identification thematerial can be identified with RFID tag When the partsset needed by some assemblies are taken out from thewarehouse or some assembly tasks are completed RFIDtags are immediately adopted to identify the parts set ornew assembly When the materials are transported to thedestination according to the design route the content of tagshould be updated The construction and update of RFIDtag are unified with events in assembly executive process
4 Mathematical Problems in Engineering
Supplier 1Q1
120572
Supplier 2Q2
120572Qi
qm
qm
Manufacturermin(120572Qi q)
Retailermin(120572120573Qi q D)
D(x)
120572120573120573
Customer
Figure 2 The schematic diagram of system model
The assembly executive state can be reflected through tagstate In that case all transitions can be regarded as mutual-lycoordinated andmutuallyindependent equal entity throughcertain protocol with certain limits of authority Besides eachentity has certain structural patterns and completes differentwork driven by respective local data
The control system may be realized through a multi-agent system mainly including assembly agent and logisticsagent Figure 1 shows functional models of the two typesof agent It can be seen that assembly agent firstly readsRFID tag information gives assembly task promptly thenreads task scheduling and assembly technology respectivelyfrom assembly database and conducts guide and processinspection control of assembly operation After the assem-bly is finished task information in the database shouldbe updated Then the logistics agent identifies RFID andobtains material information from assembly database andthen guides the transport process By using distributeddatabase to realize distributed ontology we can ensure thedistributivity of the system the real-time updating anddata consistency of the system As mentioned before theautomotive assembly management is based on multi-agentand RFID which includes application layer agent layer andphysical layThe bottommodule is mainly responsible for theprocessing of various businesses in the whole system and thetransmission of various data into upper-layer managementsystem after saving them in the database besides the datacollection and processing mainly aim to collect various datain field production The intermediate layer is responsiblefor monitoring the adaptive configuration of field collectionnodes (intelligent terminal) to realize the collection andfiltration of RFIDdata tomonitor collection event of primarylayer and information event of upper-layer system and tocommand parsing and sending the data into business logiclayer
4 Notations and Model Scenarios
This paper targets the assembly system and supply chaininvolving two suppliers one manufacturer and one retailerThe schematic diagram of system model is shown as illus-trated Figure 2The theoretical framework of assembly supplychain is established on a hypothesis that information issymmetric and complete we also assume the partners arecompletely rational and themarket is completely competitiveThe following summary of notations shown at the end of thepaper are used in this paper
In order to explore the description and notation of thissystem there are two different scenarios for our model thecentralized scenario and the decentralized one Under thefirst one it is assumed that a central decision maker deter-mineswhether or not to invest in information technology andthe order quantity to maximize the total profit In the otherscenario there is no cooperation or information sharingamong the suppliers the manufacturer and the retailer Eachmember tries to pursue his own maximum profits
Under the above-discussed structure there are two subsi-tuations whether the information technology station is in theassembly supply chain or not Once the information systemis adopted it will contribute to optimizing the goods storedin warehouse and ensure inventory accuracy and safety
Therefore we can consider using real-time monitoringtechnology which is based on multi-agent and RFID to helpenterprises monitor inventory accurately and avoid losses ofenterprises However within the shrinkage of the error-proneassembly system and supply chain inventory inaccuracy thecost from technology investment has risen up dramaticallyIn this paper we only consider the variable cost resultedfrom the application of themulti-agent and RFID technologythat is the cost of multi-agent public software platform andRFID tag 119888
119905 When the retailer employs the technology that is
120573 = 1 the complex production assembly system of upstreamsuppliers and the manufacturer will not be improved bythese so that the maximum effect of the technology in thesupply chain could not be exerted When the suppliers adoptmulti-agent and RFID that is 120572 = 1 the downstreamretailers can use the RFID labels tagged on commodities bythe manufacturer which is beneficial to the retailer from this(120573 = 1) At this time the suppliers or the manufacturerundertake the technology investment alone however theretailer can free-ride all theseThus the supplierrsquos enthusiasmfor implementing multi-agent and RFID is totally weakenedTo make the upstream have a growing interest in investingin information technology reduce the losses resulted frominaccurate inventory and increase the performance of thesupply chain the downstream in supply chain can encouragethe suppliers and themanufacturer with some compensationsand reduce the impacts of the free-ride effect Based on thisthis paper will also study the supply chain coordination whenmulti-agent and RFID technology are invested among thethree members
5 Optimal Strategy in Centralized Scenario
In order to achieve the highest performance of the wholeassembly supply chain all the members make their owndecision together Therefore it is necessary to analyze theconditions on which the optimal technology investment isimplemented in centralized scenario
51 Optimal Decision in Centralized Supply Chain withoutMulti-Agent and RFID Technology
511 Two Suppliers with the Same Yields When the orderquantity is 119876 and the actual inventory which can be used to
Mathematical Problems in Engineering 5
0 2 4 6 8 1070
80
90
100
110
120
130
140
150
160
170
ct
Qclowast sc
3
(a)
0 2 4 6 8 10200
400
600
800
1000
1200
1400
1600
ct
Πclowast sc
3
(b)
Figure 3 Variation of 119876119888lowast
sc3 and Π119888lowast
sc3 with 119888119905
satisfy consumersrsquo demands by the normal sales links is 120572120573119876the expected sales of whole supply chain are 119864min(119863 120572120573119876)meanwhile the surplus is 119864(120572120573119876 minus 119863)+ Then we can easilyget the expected profit of the whole supply chain
Π119888
sc1 = 119901119898min (119863 120572120573119876) + V[120572120573119876 minus 119863]+ minus 2119888119876 (1)
Using the following equalities
119864min (119863 120572120573119876) = 120572120573119876 minus int120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909
119864(120572120573119876 minus 119863)+
= 120572120573119876 minus 119864min (119909 120572120573119876)
= int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909
(2)
the expected profit function associated with the same yieldsof two suppliers is given by
Π119888
sc1 = 119901119898 int120572
120572
int
120573
120573
[120572120573119876 minus int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909]
times 119892 (120573) ℎ (120572) 119889120573 119889120572
+ 119904int
120572
120572
int
120573
120573
[int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909]
times 119892 (120573) ℎ (120572) 119889120573 119889120572 minus 2119888119876
(3)
Such an assumption which is explored by several authorssuch as Heese [11] enables us to assume that the customerdemand is subject to uniformly distribution Therefore infact the above equation can be simplified further to
Π119888
sc1 = 119901119898120583120572120583120573119876 minus119901119898minus 119904119898
4120583119909
sdot (1205902
120572+ 1205832
120572)
times (1205902
120573+ 1205832
120573)1198762minus 2119888119876
(4)
Next we calculate the second derivative about 119876 andknow that 1205972Π119888sc1120597119876
2lt 0 therefore Π119888sc1 is a concave
function about 119876 In the particular case of a uniformlydistributed demand the optimal order quantity and optimalexpected profit of the whole supply chain can be written asfollows
119876119888lowast
sc1 =2120583119909(119901119898120583120572120583120573minus 119888)
(119901119898minus 119904119898) (1205902120572+ 1205832120572) (1205902
120573+ 1205832
120573)
Π119888lowast
sc1 =(119901119898120583120572120583120573minus 119888)2
120583119909
(119901119898minus 119904119898) (1205902120572+ 1205832120572) (1205902
120573+ 1205832
120573)
(5)
The Figures 3(a) and 3(b) represent the variation of 119876119888lowastsc3and Π119888lowastsc3 with RIFD investment cost 119888
119905respectively
512 Two Suppliers with Different Yields There are someproblems within the current operational process which makethe internal production not well synchronized so the twosuppliers with different yields are also discussed as follows
Π119888
sc2 = 119901119898 sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898[119863 minusmin (120572120573119876
1 120572120573119876
2)]+
+ V[min (1205721205731198761 120572120573119876
2) minus 119863]
+
minus 119888 (1198761+ 1198762)
(6)
6 Mathematical Problems in Engineering
For the different yield problem of two suppliers in orderto derive the optimal order decision we must distinguish the
different positions of the distributions of 119863(119909) and 120572120573119876119894to
get the expression of the expected profit Then the aboveequation for each configuration is shown in
Π119888
sc2=
Π119888
sc2 = 1199011198981205721205731198761 minus 119904119898 (119863 minus 1205721205731198761) minus 119888 (1198761 + 1198762) 1205721205731198761 lt 1205721205731198762 lt 119863 or 1205721205731198761lt 119863 lt 120572120573119876
2
Π119888
sc2 = 1199011198981205721205731198762 minus 119904119898 (119863 minus 1205721205731198762) minus 119888 (1198761 + 1198762) 1205721205731198762 lt 1205721205731198761 lt 119863 or 1205721205731198762lt 119863 lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198762 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198762lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198761 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198761lt 120572120573119876
2
(7)
To refresh the equation set we obtain the optimal expect-ed profit of the whole supply chain
Π119888lowast
sc2 = (119901119898 + 119904119898 minus V) sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898119863 + V sdotmin (120572120573119876
1 120572120573119876
2) minus 119888 (119876
1+ 1198762)
(8)
52 Optimal Decision in Centralized Supply Chain withMulti-Agent and RFID Technology Next we investigate the central-ized systemwith technology input in detailThe RFID systemcan identify items conveniently by virtue of the characteristicsof noncontact remote distance and read-write so as toimprove the real time of assembly field monitoring andpromote synchronization of logistic flow and informationflow What is more multi-agent system including agentassembly nodes and agent logistics nodes can be modeleduniformly to establish the mapping relation between RFIDtag and assembly executive state Moreover the feasibilityof assembly executive process can be enhanced so as to getreal time and accuracy of assembly manufacturer processmonitoring Under such circumstances all synchronizationprogress status and any errors in assembly supply chainprocess can be reflected through the updated information ofRFID tag
Above all as multi-agent and RFID system provides anaccurate information of the current inventory it contributesto the monitoring and management of the products inrealtime Meanwhile there is also the technology investmentcost 119888
119905 Therefore the unit purchasing cost is 119888 + 119888
119905 The
excepted profits are as follows
Π119888
sc3 = 119901119898min (119863119876) + 119904119898[119876 minus 119863]
+minus 2 (119888 + 119888
119905) 119876 (9)
where 119864min(119909 119876) = 119876 minus int1198760(119876 minus 119909)119891(119909)119889119909 and [119909 minus 119876]+ =
119876 minus 119864min(119909 119876) = int1198760(119876 minus 119909)119891(119909)119889119909 Since 1205972Π119888sc3120597119876
2=
minus119901119898minus 1199041198982120583119909lt 0 the preceding equation is a concave
function about 119876 that is it has the only optimal solution119876lowast which achieves the maximum profit of the whole supply
chain
DifferentiatingΠ119888sc3 with respect to119876 the optimal order-ing quantity and profit of the whole supply chain are givenby
119876119888lowast
sc3 = 2120583119909119901119898minus 119888 minus 119888
119905
119901119898minus 119904119898
Π119888lowast
sc3 =(119901119898minus 119888 minus 119905)
2
119901119898minus 119904119898
120583119909
(10)
53 The Advantages of Deployment with Technology Invest-ment In this section we focus on seeking answers fromthe following questions how to solve such issues as theassembly manufacture errors and shelf shrinkage by meansof multi-agent and RFID system more effectively What arethe levels of optimal investment that enjoy the technologyeconomically feasible in centralized supply chain
Since all members take the overall interests of the wholesupply chain into account they pursue the global profitmaximization and carry on the technology innovation withinformation sharing in the centralized scenario As we allknow if they do not introduce technologies they will sufferthe impacts of assembly errors and inaccurate inventoryConversely they implement it but undertake the technicalcost
To analyze the profit and loss with technology invest-ments the benefit function ΔΠ119888 is introduced Clearly whenΔΠ119888= 0 there exists a break-even point 1198881015840
119905which makes
technical investment always profitable In other words theincreased profits generated by innovative technology arealways larger than the investment cost ofmulti-agent softwareand RFID tags In detail one essential condition is to satisfythe inequality ΔΠ119888 gt 0
Proposition 1 The threshold value of technology investmentcost is 1198881015840
119905= 119901119898minus 119888 minus ((119901
119898120583120573120583120572minus 119888)radic(120590
2
120573+ 1205832
120573)(1205902120572+ 1205832120572))
When 119888119905lt 1198881015840
119905 the optimal solution is to make investment for
situation in the centralized scenario when 119888119905gt 1198881015840
119905 without
any investment on innovative technology being beneficial forthe whole supply chain
As can be seen from the above expression we find that119888119905has relationship not only with 120583
120572and 120583
120573 but also with the
selling price of manufacturer as well It further proves thatthe higher the selling price 119901
119898is the higher the technology
Mathematical Problems in Engineering 7
0 02 04 06 08 10
20
40
60
80
100
120
120572
120590120572 = 015
120590120572 = 025120590120572 = 035
c t
Figure 4 Variation of 119888119905with 120572 for different values of 120590
120572
cost that can be accepted by the supply chain system will beMeanwhile for a given 120583
120572 ΔΠ can be greater or less than
0 depending on the value of 120583119909 It appears that the benefit
achieved by the deployment of the multi-agent and RFIDsystem is comparable to the profit without any technologyinvestment Figure 4 from the analysis above represents thevariation of 119888
119905with 120572 for different values of 120590
120572 The more the
customer demand and the less effective the assembly systemis (that is the error rate 120572 is higher) the more importantthe technology investment will be for the decision whetherto adopt the information technology and the members inassembly supply chain can be benefited from the orderingquantity if we implement it Additionally the comparison ofthe Figure 5 reveals the variation of Δ119876 and ΔΠ with 120572 fordifferent demand
6 Optimal Strategy in Decentralized Scenario
In this section we mainly evaluate and analyze the impactof technology investment among three supply chain partnersOwning to independence relation they pursue themaximumprofits respectively Consequently the main issue will befocused on which partner takes the priority to employmulti-agent and RFID system and bear the higher costsThen two approaches are presented Similar to the previoussection the optimal benefits with or without adoption oftechnology by numerical solutions under the decentraliza-tion are also proposed In addition the retailer places anorder decision in terms of the wholesale price charged bythe manufacturer which book from the supplier and theoptimal order quantity has been the focus of description andexplanation
61 Optimal Decision in Decentralized Supply Chain withoutMulti-Agent and RFID Technology
611 The Basic Model of Two Suppliers According to theabove analysis the profit function of supplier 119894 that normallydepended on 119876
119894in decentralized scenario is given by
Π119863
119904119894
= 119908119894sdotmin (120572119876
119894 119902) minus 119904
119894[119902 minus 120572119876
119894]+
minus
2
sum
119894=1
119888119876119894 (11)
To make analysis and computation more convenientthe holding cost incurred by the supplier 119894 with less actualquantity delivered can be omitted Then we assume 119896
119894(119909) equiv
int119909
0120572119894119889119867119894(120572119894) according to the following formulas deduced
119864 [min (120572119894119876119894 119902)] = int
119902119876119894
0
120572119894119876119894ℎ119894(120572119894) 119889120572119894
+ int
1
119902119876119894
119902ℎ119894(120572119894) 119889120572119894
= 119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)
119864 [(119902 minus 120572119894119876119894)+
] = int
119902119876119894
0
(119902 minus 120572119894119876119894) ℎ119894(120572119894) 119889120572119894
= 119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)
(12)
We can easily get the expected profit of supplier
119864 [Π119863
119904119894
] = 119908119894[119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)]
minus 119904119894[119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)]
minus
2
sum
119894=1
119888119876119894
(13)
The first partial derivative ofΠ119863119904119894
with respect to119876119894can be
written as
120597Π119863
119904119894
120597119876119894
= 119908119894[119896119894(119902
119876119894
) + 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)]
minus 119904119894[119902ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
) minus 119896119894(119902
119876119894
)] minus 119888
= (119908119894+ 119904119894) 119896119894(119902
119876119894
) minus 119888
(14)
8 Mathematical Problems in Engineering
0
5000
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔΠ
=Π
c sc3minusΠ
c sc1
minus15000
minus10000
minus5000
(a)
minus500
0
500
1000
1500
2000
2500
3000
3500
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔQ
=Qc sc
3minusQc sc
1
(b)
Figure 5 Variation of Δ119876 and ΔΠ with 120572 for different values of 120583119909
Developing 120597Π119863119904119894
120597119876119894= 0 leads to the following expres-
sion meanwhile 1205972Π119863119904119894
1205971198762
119894= minus(119908
119894+ 119904119894)(11990221198763
119894) lt 0
1198911(1198761 1198762) = 119888 minus (119908
1+ 1199041) 1198961(119902
1198761
)
1198912(1198761 1198762) = 119888 minus (119908
2+ 1199042) 1198962(119902
1198762
)
(15)
For such setting we always have (1205971198911(1198761 1198762)1205971198762) minus
(1205971198912(1198761 1198762)1205971198762) = minus(119908
2+ 1199042)(11990221198763
2ℎ2)(119902119876
2) lt 0 for any
1198761and 119876
2 Thus as can be seen from the analysis above we
have the following important observation
Proposition 2 For any given order quantity from the man-ufacturer the sufficient conditions guaranteeing the existenceand uniqueness of the Nash equilibrium solution for thesuppliers under decentralized scenario are [1198761015840
1
lowast
1198761015840
2
lowast
]
612 The Best Response of The Manufacturer In the nextstage for Stackelberg leader-follower game we analyze themanufacturerrsquos best response
Π119863
1198981= int
119863119902
120572
[120572119902119908 minus 119904119898(119909 minus 120572119902)] ℎ (120572) 119889120572
+ int
120572
119863119902
119902119908ℎ (120572) 119889120572 minus 119888119902
(16)
where the first item represents that the manufacturer cannotsatisfy the retailerrsquos orders that is the manufacturerrsquos salesrevenue when 119863 gt 120572119902 The second item stands for the man-ufacturerrsquos sales revenue when 119863 lt 120572119902 From the equationabove we can get 1205972Π119863
11989811205971199022= minus(119908 + 119904
119898)(1199091199023ℎ)(120572) lt 0
which found that the manufacturerrsquos profit function Π1198631198981
isa concave function about the order quantity 119902 that is thereis only one optimal order quantity 119902lowast which makes themanufacturerrsquos profit be the maximum
int
119909119902lowast
120572
120572ℎ (120572) 119889120572 =119888
119908 + 119904119898
(17)
The optimal profit for manufacturer is given by
Π119863lowast
1198981= 119908119909 minus (119908 + 119904
119898) 119902119867(
119909
119902lowast) (18)
613 The Best Policy of the Retailer The retailerrsquos expectedprofit can be written as follow
Π119863
1199031= 119901119898int
120573
120573
119864min (119909 120573119902) 119892 (120573) 119889120573
+ 119904int
120573
120573
119864(120573119902 minus 119909)+
119892 (120573) 119889119909 119889120573 minus 119908119902
(19)
where 119864min(119909 120573119902) = 120573119902 minus int1205731199020(120573119902 minus 119909)119891(119909)119889119909 and 119864(120573119902 minus
119909)+= 120573119902 minus 119864min(119909 120573119902) = int120573119902
0(120573119902 minus 119909)119891(119909)119889119909 then we
simplify above equation
Π119863
1199031= minus119901119898minus 119904119898
4120583119909
(1205902
120573+ 1205832
120573) 1199022+ 119901119898120583120573119902 minus 119908119902 (20)
Mathematical Problems in Engineering 9
The optimal ordering quantity and profit of the retailerare respectively
119902lowast
1= 2120583119909
119901119898120583120573minus 119908
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
Π119863lowast
1199031
=
(119901119898120583120573minus 119908)2
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
120583119909
(21)
62 Optimal Decision in Decentralized Supply Chain withMulti-Agent and RFID Technology In order to achieve thehighest performance of the supply chain it is necessaryto analyze the optimal decision in decentralized supplychain with multi-agent and RFID technology As we allknown if the retailer invests in information technologythe upstream ones cannot benefit from this otherwise theopposite Obviously from the perspective of the supply chainit will be better for the whole supply chain with the upstreamtomake an RampD expenditureTherefore here we assume thatthe technology investment can be actively supported by thesuppliers and manufacturer as a whole
The retailer can benefit from the free-ride RFID adoptionand also 120573 = 1 Thus the retailerrsquos expected profit function isas follow
Π119863
1199032= 119901119898119864min (119909 119902) + 119904
119898119864(119902 minus 119909)
+
= 119901119898[119902 minus int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909]
+ 119904119898int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909 minus 119901119908119902
(22)
Since 1205972Π11987721198631205971199022 = minus(119901119898minus 119904119898)119891(119902) lt 0 the profit of
retailer is a concave function about 119902 Then we solve the firstderivative and get the corresponding optimal order quantityand total profit of the retailer
119902lowast
2= 2120583119909
119901119898minus 119901119908
119901119898minus 119904119898
Π119863lowast
1199032=(119901119898minus 119901119908)2
119901119898minus 119904119898
120583119909
(23)
Due to 120590120573gt 0 and 0 lt 120583
120573lt 1 it is easy to prove that
Π119863lowast
1199031lt Π119863lowast
1199032is tenable In another word after implementing
the information technology the retailer can remotelymonitorthe inventory and track its position in real time directlywhich avoids the impacts of the worse service inefficienttransportation out of stock or overstock and other inac-curate inventory problems so that the retailer needs notundertake cost for this Thus the retailerrsquos profit increasesafter the upstream has deployed the information technologyThe Figure 6 respectively shows the impact of changes with120583119909and 119888119905on the variation of Π119863
119903and ΔΠ We can treat the
suppliers and the manufacturer as the same decision-makingsubject in this section
Proposition 3 If 119888119905lt 119888dagger
119905 the manufacturerrsquos profit increases
after investing information technology so that he is willing toimplement the technology If 119888
119905gt 119888dagger
119905 the increased cost resulted
from the suppliersrsquo application of the multi-agent and RFIDsystem is larger than the obtained income so the suppliersand manufacturer have no motivation to invest technologyand is unwilling to do where 119888dagger
119905= 119901119908minus 119888 minus [119901
119908minus (119901119908+
119904119898)119866(119902119876
lowast
1)](119901119898120583120573minus 119901119908)(1205902
120573+ 1205832
120573)(119901119898minus 119901119908)
It is concluded that 119888dagger119905is the highest technology cost
which can be accepted by the upstream firm in decentralizedassembly supply chain At this time the income that thetechnology brings to the suppliers or the manufacturer justequals the newly increased cost resulted from the applicationof the technology When the investment cost is higher than119888dagger
119905 the suppliers or manufacturer will not choose to employ
the technology actively On the contrary if this cost is lowerthan 119888dagger
119905 the income that the supplier or manufacturer obtains
by information technology is higher than the technologyinvestment so that they will all have enormous enthusiasmin investing it
According to the above propositions in the situationof 1198881015840119905gt 119888119905gt 119888dagger
119905 although the suppliersrsquo application of
information technology can increase the profit of the supplychain his profit will reduce Furthermore the upstream firmhas nomotivation to usemulti-agent andRFID system so thatthewhole supply chain cannot profit from the technology andthe maximum profit of the supply chain cannot be realizedThus it is necessary to study the supply chain coordinationin the situation of 1198881015840
119905lt 119888119905lt 119888dagger
119905to make the supplier
have enthusiasm to adopt this technology and reduce theinaccuracy of the supply chain inventory as well as increasethe performance of the supply chain and its members
7 Numerical Analysis
Finally a numerical example is taken to validate the ratio-nality and feasibility of the theoretics and method Whenthe customer demand follows uniform distribution pattern119909 sim 119880(0 200) we insert the following constant values intothe corresponding optimal expressions 119901
119908= 20 119888 = 12
119901119908= 20 119901
119898= 30 V = 8 and 119904
119898= 5 when 0 lt 119888
119905lt 78
the upstream ones are unwilling to use RFID andmulti-agenttechnology because the profit will be reduced after adoptingit
Furthermore according to Figure 7 we can find thatthe increased profit of the manufacturer and the retaileris a linear function about 120573 The increased profit of themanufacturer monotonously reduces as the shelf inventoryerror rate increases while the increased profit of the retailermonotonously increases as the coefficient 120573 increases Whenthe factor of the inventory error 0 lt 120573 lt 04 themanufacturerrsquos profit is beneficial from reasonable utilizationof information technology at this time the upstream firmis willing to make a investment If 120573 gt 02 the retailerrsquosprofit increases after he has deployed RFID and multi-agent technology Therefore choosing the factor of the shelfinventory error rate at the interval of 02 lt 120573 lt 04 can
10 Mathematical Problems in Engineering
0 50 100 150 2000
200
400
600
800
1000
1200
120583x
ΠDlowast
r1
ΠDlowast
r2
ΠDlowast
r
(a)
0 2 4 6 8 10minus250
minus200
minus150
minus100
minus50
0
50
100
ΔΠ
=Π
Dlowast
m2minusΠ
Dlowast
m1
ct
(b)
Figure 6 Variation of Π119863119903with 120583
119909and ΔΠ with 119888
119905
minus1000
minus500
0
500
1000
1500
2000
0 02 04 06 08 1120573
ΔΠ
120573 sim ΔΠr
120573 sim ΔΠm
120573 sim ΔΠr 25120573 sim ΔΠm 25
ct = 1 ct =
ct = ct =1
Figure 7 Variation of ΔΠ119903and ΔΠ
119898with 120573 for different values of
119888119905
ensure that the profit increases to make both the upstreamand downstream firm achieve a win-win situation
Moreover the suppliers aim at encouraging the retailer toorder more goods but the retailer directs at freely riding theinnovative technology from the upstream ones Thus theycan consider the coordination model based on the revenuesharing That is the suppliers and manufacturer undertakethe technology investment cost alone and give price subsidyto the retailer on the condition that the wholesale price isnot changed Or the retailer gives parts of sales revenue tothe upstream ones at the end of a sales season in order to
stimulate and encourage the suppliers to increase the RampDinvestment
Being restrained by personal reason the members of thesupply chain will first consider their own benefit and will takethe maximization of the benefit of the whole supply chaininto consideration on the premise that their own benefit issatisfied Thus to ensure that the members are willing toaccept the revenue sharing contract it is necessary to guaran-tee that the profit obtained by both parties under this contractwith the supply chain that has adopted this technology isnot less than the one that has been obtained in decentralizedscenario before the contract is made In other words it isworth considering to ensure that the members of the supplychain can achieve win-win situation with the restraint of thecontract In other words the coordination mechanism is toensure the following two inequalities tenable ΔΠ
119903gt 0 and
ΔΠ119898gt 0
8 Concluding Remarks
The information technology has been heralded as a majorbreakthrough to enhance the efficiency of assembly sup-ply chain This paper mainly aims to explore the impactof information technology on supply chain managementespecially the prospects of multi-agent and RFID invest-ment value Meanwhile the possibility and reliability of themodel are examined through the qualitative and quantitativeanalyse of the multi-agent and RFID system investmentAdditionally supply chain partnership is an important factorof performance in supply chain operations It is significantto strengthen the supply chain cooperation managementFinally this paper mainly aims at a perfectly competitivemarket and carries out the research in the situation that themarket demands are uniformly distributed Future researches
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
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2 Mathematical Problems in Engineering
Obviously the wide application of information technol-ogy will free people from the heavy labour Some large-scale retail enterprises such as Wal-Mart and METRO haveobtained obvious effects by trying out RFID technology inthe aspects of clothes and daily necessities However thehigh cost of RFID equipment limits its wider popularizationand application to more supply chains and enterprisesTherefore how to coordinate the upstream and downstreamfirms in the assembly system to use the RFID technologyto improve the performance of the supply chain is of greatsignificance
According to the report of American Shipper the averageoccurrence rate of demand exceeding supply and out-of-stock situations is 8 in global retail business Surprisinglyfor a 8000m2 retail store with the annual sales volume ofRMB 150 million it will lose RMB 84 million sales volumeonly due to the stockout per year The replenishment speedis 3 times faster than that of goods without the tags AfterWal-Mart adopts electronic product code (EPC) supportedby RFID technology to monitor goods the stockout ratereduces 16 For the goods tagged with RFID labels manualordering reduces by 10 RFID can decrease the quantity ofsafety inventory effectively and make quick response to thestockout [1] After BestBuy adopts RFID goods availabilityhas been added to 93 from 80 At present a famousBritish retailer TESCO introduces a device called smart shelfwhich can record each move of all products on the shelvesThis is also one of applications of RFID technology At thesame time RFID antennae are installed at the entrance andexit of the warehouse which are connected with warehousemanagement system Thus when the goods enter and leavethe warehouse electronic label information can be readpromptly Meanwhile the most accurate goods data can begained easily Additionally the accurate information aboutthe inventory quantity can be obtained as well The studyof American organs concerned shows that the accuracyrate of the inventory can reach 995 for the retail enter-prises applying information technology to inventory man-agement while other enterprises can only reach 80ndash85[2 3]
With the help of information technology enterpriseinformatization can be improved meanwhile industrial in-formation sharing can be promoted Real-time dynamic indi-cators in the supply chain such as inventory analysis marketand customer analysis and other data need monitoring byRFID sensor and are transmitted to the server throughinternet network Thus data information from differentchannels is gathered through cloud calculating data center ofthe internet of things so as to draw information strategiesigniting the profit point
Although complex product can be traced more accu-rately in real time with RFID technology one of the majorobstacles to adoption is the cost of RFID implementationRFID technology incurs huge cost including not only theinstallation investment but the costs of tags and readers aswell Motivated by the RFID investment issue we aim toexplore the prospects by mainly focusing on the optimalinvestment strategies in order to maximize the profits under
conditions with or without the perishable products valuetracing when the demand is stochastic in a two-level supplychain involving a manufacturer and a retailer We considerboth the centralized and decentralized scenario
Particularly the main research questions that this paperaddresses are as follows
(i) What are the levels of the optimal investment thatmake RFID adoption economically feasible in three-level centralized and decentralized assembly supplychains
(ii) How to combine the actual supply chain problemsuch as the shelf shrinkage errors in assemblyprocess and misplaced products to implement thetechnical innovation investment to be able to realizegreater investment returns
The remainder of this paper is organized as follows In thefollowing section we give a quick idea of the topics coveredin the literature review In addition literatures related tothis study will be reviewed In Section 3 we introduce thesystem architecture and benefit evaluation mainly involvingassembly manufacturing system based on multi-agent andRFIDThemodel analysis and themain results of this researchare presented in detail in Sections 4 to 6 The numericalanalysis is examined in Section 7 and we offer a summarytogether with a critique of the model and a direction forfuture research in the final section
2 Literature Review
RFID is a term that has been around for several years Inrecent years the analysis of RFID technology investment onvarious industries has attracted the attention of more andmore scholars As an exploratory research in essence morespecially the investment analysis based on mathematicalmodels is extremely scarce This section mainly builds onthree streams of literature the potential benefits and mostcommon application of RFID technology RFID investmenton supply chain with contracts and two- or three-levelsupply chain coordination as well as the development ofan RFID and multi-agent system based on manufacturingcontrol for industrial applications and dynamic logisticsprocess
The transaction and transportation errors misplacementdelay delivery and shrinkage errors are the main causes ofinventory inaccuracy all of which have been discussed asareas where RFID can increase accuracyThere are numerouspapers in the literature that have considered the advantagesof RFID technology The benefits under different categoriesare presented as follows Lee and Ozer [4] study a single-item periodic-review inventory system with replenishmentpolicy(sS) They integrate RFID technology with uncertaindemands and random distribution of transaction errors andobserve the inventory cost related to transaction errorsAtali et al [5] extend the abovementioned models theydevelop two models based on shrinkage such as theftsand damages misplacement and transaction or scanningerrors They consider that RFID can effectively reduce
Mathematical Problems in Engineering 3
Software agentarchitecture
Portable devicefor inventory
checking
Interactivesystem
Wirelesscommunication
RFID tagsreader
antenna
Informationextraction agent
Error detectingagent
Goods schedulingagent
Informationintegration agent
Stockshelfallocation
Real-timereplenishment
Marketinganalysis
Customerbehaviour
Phys
ical
laye
rA
gent
laye
rAp
plic
atio
nla
yer
Assembly systemarchitecture
Subprocess (1)
Subprocess (2)
Process (2)
Process (1)
Agent node
Agent nodeAgent node Process (i)
Three-levelsupply chain
RFID tag RFID tag RFID tag
Suppliers Manufacturer Retailer Customer
RFID
+ ag
ent
Figure 1 Architecture of the information technology in complex product assembly system
the mistake rate and improve inventory visibility Tajima [6]first mentions that the shrinkage errors include employeetheft shoplifting administration and paperwork errors ven-dor fraud and unavailable products for sale Besides RFIDhas been discussed as a solution to black market saleswhich could also improve inventory records by reducinghuman errors in material handling (as discussed elsewhere[7 8]) Ngai et al [9] analyze a case study on mobilecommerce system based on RFID technology with strongfunction on locating tracking and managing the containersGaukler et al [10] focus on the investment cost of RFIDtechnology and assume that the RFID tag cost can beshared by all supply chain members Besides they arguethat RFID can improve stock control policies as well asinventory replenishment policies They extend the previousmodel to analyze an item-level RFID application in two-level supply chain They propose two cases of centralizedand decentralized decision with or without RFID and mainlydiscuss how the manufacturer and the retailer can optimizetheir ownprofitswithout cooperationHeese [11] indicate thatRFID technology is more beneficial in decentralized supplychains Although RFID cannot eliminate all errors it canbe quickly detected and effectively handled Several authorssuch as Dutta et al [12] Rekik et al [13] Szmerekovsky andZhang [14] Bottani and Rizzi [15] Tu et al [16] Wang etal [17] and Whitaker et al [18] were attracted by its useof eliminating these errors They all pay close attention to
the impact of RFID on inventory inaccuracy due to variety oferrors
3 Overview of System Architecture andBenefit Evaluation
In this section we mainly discuss the system platformarchitecture based on multi-agent and RFID Combiningthese two new technologies together it has become one ofthe potential candidates for all assembly manufacturing andsupply chain systems in the future
As is shown in Figure 1 all the assembly transition andlogistics distribution are guided and controlled respectivelythrough multi-agent and it is like the human brain whichnot only improves agility of manufacturing system but alsomakesmanufacturing systemcharacterized by heterogeneousand geographically distributed In addition in order toimprove the efficiency of raw material identification thematerial can be identified with RFID tag When the partsset needed by some assemblies are taken out from thewarehouse or some assembly tasks are completed RFIDtags are immediately adopted to identify the parts set ornew assembly When the materials are transported to thedestination according to the design route the content of tagshould be updated The construction and update of RFIDtag are unified with events in assembly executive process
4 Mathematical Problems in Engineering
Supplier 1Q1
120572
Supplier 2Q2
120572Qi
qm
qm
Manufacturermin(120572Qi q)
Retailermin(120572120573Qi q D)
D(x)
120572120573120573
Customer
Figure 2 The schematic diagram of system model
The assembly executive state can be reflected through tagstate In that case all transitions can be regarded as mutual-lycoordinated andmutuallyindependent equal entity throughcertain protocol with certain limits of authority Besides eachentity has certain structural patterns and completes differentwork driven by respective local data
The control system may be realized through a multi-agent system mainly including assembly agent and logisticsagent Figure 1 shows functional models of the two typesof agent It can be seen that assembly agent firstly readsRFID tag information gives assembly task promptly thenreads task scheduling and assembly technology respectivelyfrom assembly database and conducts guide and processinspection control of assembly operation After the assem-bly is finished task information in the database shouldbe updated Then the logistics agent identifies RFID andobtains material information from assembly database andthen guides the transport process By using distributeddatabase to realize distributed ontology we can ensure thedistributivity of the system the real-time updating anddata consistency of the system As mentioned before theautomotive assembly management is based on multi-agentand RFID which includes application layer agent layer andphysical layThe bottommodule is mainly responsible for theprocessing of various businesses in the whole system and thetransmission of various data into upper-layer managementsystem after saving them in the database besides the datacollection and processing mainly aim to collect various datain field production The intermediate layer is responsiblefor monitoring the adaptive configuration of field collectionnodes (intelligent terminal) to realize the collection andfiltration of RFIDdata tomonitor collection event of primarylayer and information event of upper-layer system and tocommand parsing and sending the data into business logiclayer
4 Notations and Model Scenarios
This paper targets the assembly system and supply chaininvolving two suppliers one manufacturer and one retailerThe schematic diagram of system model is shown as illus-trated Figure 2The theoretical framework of assembly supplychain is established on a hypothesis that information issymmetric and complete we also assume the partners arecompletely rational and themarket is completely competitiveThe following summary of notations shown at the end of thepaper are used in this paper
In order to explore the description and notation of thissystem there are two different scenarios for our model thecentralized scenario and the decentralized one Under thefirst one it is assumed that a central decision maker deter-mineswhether or not to invest in information technology andthe order quantity to maximize the total profit In the otherscenario there is no cooperation or information sharingamong the suppliers the manufacturer and the retailer Eachmember tries to pursue his own maximum profits
Under the above-discussed structure there are two subsi-tuations whether the information technology station is in theassembly supply chain or not Once the information systemis adopted it will contribute to optimizing the goods storedin warehouse and ensure inventory accuracy and safety
Therefore we can consider using real-time monitoringtechnology which is based on multi-agent and RFID to helpenterprises monitor inventory accurately and avoid losses ofenterprises However within the shrinkage of the error-proneassembly system and supply chain inventory inaccuracy thecost from technology investment has risen up dramaticallyIn this paper we only consider the variable cost resultedfrom the application of themulti-agent and RFID technologythat is the cost of multi-agent public software platform andRFID tag 119888
119905 When the retailer employs the technology that is
120573 = 1 the complex production assembly system of upstreamsuppliers and the manufacturer will not be improved bythese so that the maximum effect of the technology in thesupply chain could not be exerted When the suppliers adoptmulti-agent and RFID that is 120572 = 1 the downstreamretailers can use the RFID labels tagged on commodities bythe manufacturer which is beneficial to the retailer from this(120573 = 1) At this time the suppliers or the manufacturerundertake the technology investment alone however theretailer can free-ride all theseThus the supplierrsquos enthusiasmfor implementing multi-agent and RFID is totally weakenedTo make the upstream have a growing interest in investingin information technology reduce the losses resulted frominaccurate inventory and increase the performance of thesupply chain the downstream in supply chain can encouragethe suppliers and themanufacturer with some compensationsand reduce the impacts of the free-ride effect Based on thisthis paper will also study the supply chain coordination whenmulti-agent and RFID technology are invested among thethree members
5 Optimal Strategy in Centralized Scenario
In order to achieve the highest performance of the wholeassembly supply chain all the members make their owndecision together Therefore it is necessary to analyze theconditions on which the optimal technology investment isimplemented in centralized scenario
51 Optimal Decision in Centralized Supply Chain withoutMulti-Agent and RFID Technology
511 Two Suppliers with the Same Yields When the orderquantity is 119876 and the actual inventory which can be used to
Mathematical Problems in Engineering 5
0 2 4 6 8 1070
80
90
100
110
120
130
140
150
160
170
ct
Qclowast sc
3
(a)
0 2 4 6 8 10200
400
600
800
1000
1200
1400
1600
ct
Πclowast sc
3
(b)
Figure 3 Variation of 119876119888lowast
sc3 and Π119888lowast
sc3 with 119888119905
satisfy consumersrsquo demands by the normal sales links is 120572120573119876the expected sales of whole supply chain are 119864min(119863 120572120573119876)meanwhile the surplus is 119864(120572120573119876 minus 119863)+ Then we can easilyget the expected profit of the whole supply chain
Π119888
sc1 = 119901119898min (119863 120572120573119876) + V[120572120573119876 minus 119863]+ minus 2119888119876 (1)
Using the following equalities
119864min (119863 120572120573119876) = 120572120573119876 minus int120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909
119864(120572120573119876 minus 119863)+
= 120572120573119876 minus 119864min (119909 120572120573119876)
= int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909
(2)
the expected profit function associated with the same yieldsof two suppliers is given by
Π119888
sc1 = 119901119898 int120572
120572
int
120573
120573
[120572120573119876 minus int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909]
times 119892 (120573) ℎ (120572) 119889120573 119889120572
+ 119904int
120572
120572
int
120573
120573
[int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909]
times 119892 (120573) ℎ (120572) 119889120573 119889120572 minus 2119888119876
(3)
Such an assumption which is explored by several authorssuch as Heese [11] enables us to assume that the customerdemand is subject to uniformly distribution Therefore infact the above equation can be simplified further to
Π119888
sc1 = 119901119898120583120572120583120573119876 minus119901119898minus 119904119898
4120583119909
sdot (1205902
120572+ 1205832
120572)
times (1205902
120573+ 1205832
120573)1198762minus 2119888119876
(4)
Next we calculate the second derivative about 119876 andknow that 1205972Π119888sc1120597119876
2lt 0 therefore Π119888sc1 is a concave
function about 119876 In the particular case of a uniformlydistributed demand the optimal order quantity and optimalexpected profit of the whole supply chain can be written asfollows
119876119888lowast
sc1 =2120583119909(119901119898120583120572120583120573minus 119888)
(119901119898minus 119904119898) (1205902120572+ 1205832120572) (1205902
120573+ 1205832
120573)
Π119888lowast
sc1 =(119901119898120583120572120583120573minus 119888)2
120583119909
(119901119898minus 119904119898) (1205902120572+ 1205832120572) (1205902
120573+ 1205832
120573)
(5)
The Figures 3(a) and 3(b) represent the variation of 119876119888lowastsc3and Π119888lowastsc3 with RIFD investment cost 119888
119905respectively
512 Two Suppliers with Different Yields There are someproblems within the current operational process which makethe internal production not well synchronized so the twosuppliers with different yields are also discussed as follows
Π119888
sc2 = 119901119898 sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898[119863 minusmin (120572120573119876
1 120572120573119876
2)]+
+ V[min (1205721205731198761 120572120573119876
2) minus 119863]
+
minus 119888 (1198761+ 1198762)
(6)
6 Mathematical Problems in Engineering
For the different yield problem of two suppliers in orderto derive the optimal order decision we must distinguish the
different positions of the distributions of 119863(119909) and 120572120573119876119894to
get the expression of the expected profit Then the aboveequation for each configuration is shown in
Π119888
sc2=
Π119888
sc2 = 1199011198981205721205731198761 minus 119904119898 (119863 minus 1205721205731198761) minus 119888 (1198761 + 1198762) 1205721205731198761 lt 1205721205731198762 lt 119863 or 1205721205731198761lt 119863 lt 120572120573119876
2
Π119888
sc2 = 1199011198981205721205731198762 minus 119904119898 (119863 minus 1205721205731198762) minus 119888 (1198761 + 1198762) 1205721205731198762 lt 1205721205731198761 lt 119863 or 1205721205731198762lt 119863 lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198762 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198762lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198761 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198761lt 120572120573119876
2
(7)
To refresh the equation set we obtain the optimal expect-ed profit of the whole supply chain
Π119888lowast
sc2 = (119901119898 + 119904119898 minus V) sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898119863 + V sdotmin (120572120573119876
1 120572120573119876
2) minus 119888 (119876
1+ 1198762)
(8)
52 Optimal Decision in Centralized Supply Chain withMulti-Agent and RFID Technology Next we investigate the central-ized systemwith technology input in detailThe RFID systemcan identify items conveniently by virtue of the characteristicsof noncontact remote distance and read-write so as toimprove the real time of assembly field monitoring andpromote synchronization of logistic flow and informationflow What is more multi-agent system including agentassembly nodes and agent logistics nodes can be modeleduniformly to establish the mapping relation between RFIDtag and assembly executive state Moreover the feasibilityof assembly executive process can be enhanced so as to getreal time and accuracy of assembly manufacturer processmonitoring Under such circumstances all synchronizationprogress status and any errors in assembly supply chainprocess can be reflected through the updated information ofRFID tag
Above all as multi-agent and RFID system provides anaccurate information of the current inventory it contributesto the monitoring and management of the products inrealtime Meanwhile there is also the technology investmentcost 119888
119905 Therefore the unit purchasing cost is 119888 + 119888
119905 The
excepted profits are as follows
Π119888
sc3 = 119901119898min (119863119876) + 119904119898[119876 minus 119863]
+minus 2 (119888 + 119888
119905) 119876 (9)
where 119864min(119909 119876) = 119876 minus int1198760(119876 minus 119909)119891(119909)119889119909 and [119909 minus 119876]+ =
119876 minus 119864min(119909 119876) = int1198760(119876 minus 119909)119891(119909)119889119909 Since 1205972Π119888sc3120597119876
2=
minus119901119898minus 1199041198982120583119909lt 0 the preceding equation is a concave
function about 119876 that is it has the only optimal solution119876lowast which achieves the maximum profit of the whole supply
chain
DifferentiatingΠ119888sc3 with respect to119876 the optimal order-ing quantity and profit of the whole supply chain are givenby
119876119888lowast
sc3 = 2120583119909119901119898minus 119888 minus 119888
119905
119901119898minus 119904119898
Π119888lowast
sc3 =(119901119898minus 119888 minus 119905)
2
119901119898minus 119904119898
120583119909
(10)
53 The Advantages of Deployment with Technology Invest-ment In this section we focus on seeking answers fromthe following questions how to solve such issues as theassembly manufacture errors and shelf shrinkage by meansof multi-agent and RFID system more effectively What arethe levels of optimal investment that enjoy the technologyeconomically feasible in centralized supply chain
Since all members take the overall interests of the wholesupply chain into account they pursue the global profitmaximization and carry on the technology innovation withinformation sharing in the centralized scenario As we allknow if they do not introduce technologies they will sufferthe impacts of assembly errors and inaccurate inventoryConversely they implement it but undertake the technicalcost
To analyze the profit and loss with technology invest-ments the benefit function ΔΠ119888 is introduced Clearly whenΔΠ119888= 0 there exists a break-even point 1198881015840
119905which makes
technical investment always profitable In other words theincreased profits generated by innovative technology arealways larger than the investment cost ofmulti-agent softwareand RFID tags In detail one essential condition is to satisfythe inequality ΔΠ119888 gt 0
Proposition 1 The threshold value of technology investmentcost is 1198881015840
119905= 119901119898minus 119888 minus ((119901
119898120583120573120583120572minus 119888)radic(120590
2
120573+ 1205832
120573)(1205902120572+ 1205832120572))
When 119888119905lt 1198881015840
119905 the optimal solution is to make investment for
situation in the centralized scenario when 119888119905gt 1198881015840
119905 without
any investment on innovative technology being beneficial forthe whole supply chain
As can be seen from the above expression we find that119888119905has relationship not only with 120583
120572and 120583
120573 but also with the
selling price of manufacturer as well It further proves thatthe higher the selling price 119901
119898is the higher the technology
Mathematical Problems in Engineering 7
0 02 04 06 08 10
20
40
60
80
100
120
120572
120590120572 = 015
120590120572 = 025120590120572 = 035
c t
Figure 4 Variation of 119888119905with 120572 for different values of 120590
120572
cost that can be accepted by the supply chain system will beMeanwhile for a given 120583
120572 ΔΠ can be greater or less than
0 depending on the value of 120583119909 It appears that the benefit
achieved by the deployment of the multi-agent and RFIDsystem is comparable to the profit without any technologyinvestment Figure 4 from the analysis above represents thevariation of 119888
119905with 120572 for different values of 120590
120572 The more the
customer demand and the less effective the assembly systemis (that is the error rate 120572 is higher) the more importantthe technology investment will be for the decision whetherto adopt the information technology and the members inassembly supply chain can be benefited from the orderingquantity if we implement it Additionally the comparison ofthe Figure 5 reveals the variation of Δ119876 and ΔΠ with 120572 fordifferent demand
6 Optimal Strategy in Decentralized Scenario
In this section we mainly evaluate and analyze the impactof technology investment among three supply chain partnersOwning to independence relation they pursue themaximumprofits respectively Consequently the main issue will befocused on which partner takes the priority to employmulti-agent and RFID system and bear the higher costsThen two approaches are presented Similar to the previoussection the optimal benefits with or without adoption oftechnology by numerical solutions under the decentraliza-tion are also proposed In addition the retailer places anorder decision in terms of the wholesale price charged bythe manufacturer which book from the supplier and theoptimal order quantity has been the focus of description andexplanation
61 Optimal Decision in Decentralized Supply Chain withoutMulti-Agent and RFID Technology
611 The Basic Model of Two Suppliers According to theabove analysis the profit function of supplier 119894 that normallydepended on 119876
119894in decentralized scenario is given by
Π119863
119904119894
= 119908119894sdotmin (120572119876
119894 119902) minus 119904
119894[119902 minus 120572119876
119894]+
minus
2
sum
119894=1
119888119876119894 (11)
To make analysis and computation more convenientthe holding cost incurred by the supplier 119894 with less actualquantity delivered can be omitted Then we assume 119896
119894(119909) equiv
int119909
0120572119894119889119867119894(120572119894) according to the following formulas deduced
119864 [min (120572119894119876119894 119902)] = int
119902119876119894
0
120572119894119876119894ℎ119894(120572119894) 119889120572119894
+ int
1
119902119876119894
119902ℎ119894(120572119894) 119889120572119894
= 119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)
119864 [(119902 minus 120572119894119876119894)+
] = int
119902119876119894
0
(119902 minus 120572119894119876119894) ℎ119894(120572119894) 119889120572119894
= 119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)
(12)
We can easily get the expected profit of supplier
119864 [Π119863
119904119894
] = 119908119894[119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)]
minus 119904119894[119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)]
minus
2
sum
119894=1
119888119876119894
(13)
The first partial derivative ofΠ119863119904119894
with respect to119876119894can be
written as
120597Π119863
119904119894
120597119876119894
= 119908119894[119896119894(119902
119876119894
) + 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)]
minus 119904119894[119902ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
) minus 119896119894(119902
119876119894
)] minus 119888
= (119908119894+ 119904119894) 119896119894(119902
119876119894
) minus 119888
(14)
8 Mathematical Problems in Engineering
0
5000
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔΠ
=Π
c sc3minusΠ
c sc1
minus15000
minus10000
minus5000
(a)
minus500
0
500
1000
1500
2000
2500
3000
3500
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔQ
=Qc sc
3minusQc sc
1
(b)
Figure 5 Variation of Δ119876 and ΔΠ with 120572 for different values of 120583119909
Developing 120597Π119863119904119894
120597119876119894= 0 leads to the following expres-
sion meanwhile 1205972Π119863119904119894
1205971198762
119894= minus(119908
119894+ 119904119894)(11990221198763
119894) lt 0
1198911(1198761 1198762) = 119888 minus (119908
1+ 1199041) 1198961(119902
1198761
)
1198912(1198761 1198762) = 119888 minus (119908
2+ 1199042) 1198962(119902
1198762
)
(15)
For such setting we always have (1205971198911(1198761 1198762)1205971198762) minus
(1205971198912(1198761 1198762)1205971198762) = minus(119908
2+ 1199042)(11990221198763
2ℎ2)(119902119876
2) lt 0 for any
1198761and 119876
2 Thus as can be seen from the analysis above we
have the following important observation
Proposition 2 For any given order quantity from the man-ufacturer the sufficient conditions guaranteeing the existenceand uniqueness of the Nash equilibrium solution for thesuppliers under decentralized scenario are [1198761015840
1
lowast
1198761015840
2
lowast
]
612 The Best Response of The Manufacturer In the nextstage for Stackelberg leader-follower game we analyze themanufacturerrsquos best response
Π119863
1198981= int
119863119902
120572
[120572119902119908 minus 119904119898(119909 minus 120572119902)] ℎ (120572) 119889120572
+ int
120572
119863119902
119902119908ℎ (120572) 119889120572 minus 119888119902
(16)
where the first item represents that the manufacturer cannotsatisfy the retailerrsquos orders that is the manufacturerrsquos salesrevenue when 119863 gt 120572119902 The second item stands for the man-ufacturerrsquos sales revenue when 119863 lt 120572119902 From the equationabove we can get 1205972Π119863
11989811205971199022= minus(119908 + 119904
119898)(1199091199023ℎ)(120572) lt 0
which found that the manufacturerrsquos profit function Π1198631198981
isa concave function about the order quantity 119902 that is thereis only one optimal order quantity 119902lowast which makes themanufacturerrsquos profit be the maximum
int
119909119902lowast
120572
120572ℎ (120572) 119889120572 =119888
119908 + 119904119898
(17)
The optimal profit for manufacturer is given by
Π119863lowast
1198981= 119908119909 minus (119908 + 119904
119898) 119902119867(
119909
119902lowast) (18)
613 The Best Policy of the Retailer The retailerrsquos expectedprofit can be written as follow
Π119863
1199031= 119901119898int
120573
120573
119864min (119909 120573119902) 119892 (120573) 119889120573
+ 119904int
120573
120573
119864(120573119902 minus 119909)+
119892 (120573) 119889119909 119889120573 minus 119908119902
(19)
where 119864min(119909 120573119902) = 120573119902 minus int1205731199020(120573119902 minus 119909)119891(119909)119889119909 and 119864(120573119902 minus
119909)+= 120573119902 minus 119864min(119909 120573119902) = int120573119902
0(120573119902 minus 119909)119891(119909)119889119909 then we
simplify above equation
Π119863
1199031= minus119901119898minus 119904119898
4120583119909
(1205902
120573+ 1205832
120573) 1199022+ 119901119898120583120573119902 minus 119908119902 (20)
Mathematical Problems in Engineering 9
The optimal ordering quantity and profit of the retailerare respectively
119902lowast
1= 2120583119909
119901119898120583120573minus 119908
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
Π119863lowast
1199031
=
(119901119898120583120573minus 119908)2
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
120583119909
(21)
62 Optimal Decision in Decentralized Supply Chain withMulti-Agent and RFID Technology In order to achieve thehighest performance of the supply chain it is necessaryto analyze the optimal decision in decentralized supplychain with multi-agent and RFID technology As we allknown if the retailer invests in information technologythe upstream ones cannot benefit from this otherwise theopposite Obviously from the perspective of the supply chainit will be better for the whole supply chain with the upstreamtomake an RampD expenditureTherefore here we assume thatthe technology investment can be actively supported by thesuppliers and manufacturer as a whole
The retailer can benefit from the free-ride RFID adoptionand also 120573 = 1 Thus the retailerrsquos expected profit function isas follow
Π119863
1199032= 119901119898119864min (119909 119902) + 119904
119898119864(119902 minus 119909)
+
= 119901119898[119902 minus int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909]
+ 119904119898int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909 minus 119901119908119902
(22)
Since 1205972Π11987721198631205971199022 = minus(119901119898minus 119904119898)119891(119902) lt 0 the profit of
retailer is a concave function about 119902 Then we solve the firstderivative and get the corresponding optimal order quantityand total profit of the retailer
119902lowast
2= 2120583119909
119901119898minus 119901119908
119901119898minus 119904119898
Π119863lowast
1199032=(119901119898minus 119901119908)2
119901119898minus 119904119898
120583119909
(23)
Due to 120590120573gt 0 and 0 lt 120583
120573lt 1 it is easy to prove that
Π119863lowast
1199031lt Π119863lowast
1199032is tenable In another word after implementing
the information technology the retailer can remotelymonitorthe inventory and track its position in real time directlywhich avoids the impacts of the worse service inefficienttransportation out of stock or overstock and other inac-curate inventory problems so that the retailer needs notundertake cost for this Thus the retailerrsquos profit increasesafter the upstream has deployed the information technologyThe Figure 6 respectively shows the impact of changes with120583119909and 119888119905on the variation of Π119863
119903and ΔΠ We can treat the
suppliers and the manufacturer as the same decision-makingsubject in this section
Proposition 3 If 119888119905lt 119888dagger
119905 the manufacturerrsquos profit increases
after investing information technology so that he is willing toimplement the technology If 119888
119905gt 119888dagger
119905 the increased cost resulted
from the suppliersrsquo application of the multi-agent and RFIDsystem is larger than the obtained income so the suppliersand manufacturer have no motivation to invest technologyand is unwilling to do where 119888dagger
119905= 119901119908minus 119888 minus [119901
119908minus (119901119908+
119904119898)119866(119902119876
lowast
1)](119901119898120583120573minus 119901119908)(1205902
120573+ 1205832
120573)(119901119898minus 119901119908)
It is concluded that 119888dagger119905is the highest technology cost
which can be accepted by the upstream firm in decentralizedassembly supply chain At this time the income that thetechnology brings to the suppliers or the manufacturer justequals the newly increased cost resulted from the applicationof the technology When the investment cost is higher than119888dagger
119905 the suppliers or manufacturer will not choose to employ
the technology actively On the contrary if this cost is lowerthan 119888dagger
119905 the income that the supplier or manufacturer obtains
by information technology is higher than the technologyinvestment so that they will all have enormous enthusiasmin investing it
According to the above propositions in the situationof 1198881015840119905gt 119888119905gt 119888dagger
119905 although the suppliersrsquo application of
information technology can increase the profit of the supplychain his profit will reduce Furthermore the upstream firmhas nomotivation to usemulti-agent andRFID system so thatthewhole supply chain cannot profit from the technology andthe maximum profit of the supply chain cannot be realizedThus it is necessary to study the supply chain coordinationin the situation of 1198881015840
119905lt 119888119905lt 119888dagger
119905to make the supplier
have enthusiasm to adopt this technology and reduce theinaccuracy of the supply chain inventory as well as increasethe performance of the supply chain and its members
7 Numerical Analysis
Finally a numerical example is taken to validate the ratio-nality and feasibility of the theoretics and method Whenthe customer demand follows uniform distribution pattern119909 sim 119880(0 200) we insert the following constant values intothe corresponding optimal expressions 119901
119908= 20 119888 = 12
119901119908= 20 119901
119898= 30 V = 8 and 119904
119898= 5 when 0 lt 119888
119905lt 78
the upstream ones are unwilling to use RFID andmulti-agenttechnology because the profit will be reduced after adoptingit
Furthermore according to Figure 7 we can find thatthe increased profit of the manufacturer and the retaileris a linear function about 120573 The increased profit of themanufacturer monotonously reduces as the shelf inventoryerror rate increases while the increased profit of the retailermonotonously increases as the coefficient 120573 increases Whenthe factor of the inventory error 0 lt 120573 lt 04 themanufacturerrsquos profit is beneficial from reasonable utilizationof information technology at this time the upstream firmis willing to make a investment If 120573 gt 02 the retailerrsquosprofit increases after he has deployed RFID and multi-agent technology Therefore choosing the factor of the shelfinventory error rate at the interval of 02 lt 120573 lt 04 can
10 Mathematical Problems in Engineering
0 50 100 150 2000
200
400
600
800
1000
1200
120583x
ΠDlowast
r1
ΠDlowast
r2
ΠDlowast
r
(a)
0 2 4 6 8 10minus250
minus200
minus150
minus100
minus50
0
50
100
ΔΠ
=Π
Dlowast
m2minusΠ
Dlowast
m1
ct
(b)
Figure 6 Variation of Π119863119903with 120583
119909and ΔΠ with 119888
119905
minus1000
minus500
0
500
1000
1500
2000
0 02 04 06 08 1120573
ΔΠ
120573 sim ΔΠr
120573 sim ΔΠm
120573 sim ΔΠr 25120573 sim ΔΠm 25
ct = 1 ct =
ct = ct =1
Figure 7 Variation of ΔΠ119903and ΔΠ
119898with 120573 for different values of
119888119905
ensure that the profit increases to make both the upstreamand downstream firm achieve a win-win situation
Moreover the suppliers aim at encouraging the retailer toorder more goods but the retailer directs at freely riding theinnovative technology from the upstream ones Thus theycan consider the coordination model based on the revenuesharing That is the suppliers and manufacturer undertakethe technology investment cost alone and give price subsidyto the retailer on the condition that the wholesale price isnot changed Or the retailer gives parts of sales revenue tothe upstream ones at the end of a sales season in order to
stimulate and encourage the suppliers to increase the RampDinvestment
Being restrained by personal reason the members of thesupply chain will first consider their own benefit and will takethe maximization of the benefit of the whole supply chaininto consideration on the premise that their own benefit issatisfied Thus to ensure that the members are willing toaccept the revenue sharing contract it is necessary to guaran-tee that the profit obtained by both parties under this contractwith the supply chain that has adopted this technology isnot less than the one that has been obtained in decentralizedscenario before the contract is made In other words it isworth considering to ensure that the members of the supplychain can achieve win-win situation with the restraint of thecontract In other words the coordination mechanism is toensure the following two inequalities tenable ΔΠ
119903gt 0 and
ΔΠ119898gt 0
8 Concluding Remarks
The information technology has been heralded as a majorbreakthrough to enhance the efficiency of assembly sup-ply chain This paper mainly aims to explore the impactof information technology on supply chain managementespecially the prospects of multi-agent and RFID invest-ment value Meanwhile the possibility and reliability of themodel are examined through the qualitative and quantitativeanalyse of the multi-agent and RFID system investmentAdditionally supply chain partnership is an important factorof performance in supply chain operations It is significantto strengthen the supply chain cooperation managementFinally this paper mainly aims at a perfectly competitivemarket and carries out the research in the situation that themarket demands are uniformly distributed Future researches
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
Submit your manuscripts athttpwwwhindawicom
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical Problems in Engineering
Hindawi Publishing Corporationhttpwwwhindawicom
Differential EquationsInternational Journal of
Volume 2014
Applied MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Probability and StatisticsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical PhysicsAdvances in
Complex AnalysisJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
OptimizationJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
CombinatoricsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Operations ResearchAdvances in
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Function Spaces
Abstract and Applied AnalysisHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of Mathematics and Mathematical Sciences
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
The Scientific World JournalHindawi Publishing Corporation httpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Algebra
Discrete Dynamics in Nature and Society
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Decision SciencesAdvances in
Discrete MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom
Volume 2014 Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Stochastic AnalysisInternational Journal of
Mathematical Problems in Engineering 3
Software agentarchitecture
Portable devicefor inventory
checking
Interactivesystem
Wirelesscommunication
RFID tagsreader
antenna
Informationextraction agent
Error detectingagent
Goods schedulingagent
Informationintegration agent
Stockshelfallocation
Real-timereplenishment
Marketinganalysis
Customerbehaviour
Phys
ical
laye
rA
gent
laye
rAp
plic
atio
nla
yer
Assembly systemarchitecture
Subprocess (1)
Subprocess (2)
Process (2)
Process (1)
Agent node
Agent nodeAgent node Process (i)
Three-levelsupply chain
RFID tag RFID tag RFID tag
Suppliers Manufacturer Retailer Customer
RFID
+ ag
ent
Figure 1 Architecture of the information technology in complex product assembly system
the mistake rate and improve inventory visibility Tajima [6]first mentions that the shrinkage errors include employeetheft shoplifting administration and paperwork errors ven-dor fraud and unavailable products for sale Besides RFIDhas been discussed as a solution to black market saleswhich could also improve inventory records by reducinghuman errors in material handling (as discussed elsewhere[7 8]) Ngai et al [9] analyze a case study on mobilecommerce system based on RFID technology with strongfunction on locating tracking and managing the containersGaukler et al [10] focus on the investment cost of RFIDtechnology and assume that the RFID tag cost can beshared by all supply chain members Besides they arguethat RFID can improve stock control policies as well asinventory replenishment policies They extend the previousmodel to analyze an item-level RFID application in two-level supply chain They propose two cases of centralizedand decentralized decision with or without RFID and mainlydiscuss how the manufacturer and the retailer can optimizetheir ownprofitswithout cooperationHeese [11] indicate thatRFID technology is more beneficial in decentralized supplychains Although RFID cannot eliminate all errors it canbe quickly detected and effectively handled Several authorssuch as Dutta et al [12] Rekik et al [13] Szmerekovsky andZhang [14] Bottani and Rizzi [15] Tu et al [16] Wang etal [17] and Whitaker et al [18] were attracted by its useof eliminating these errors They all pay close attention to
the impact of RFID on inventory inaccuracy due to variety oferrors
3 Overview of System Architecture andBenefit Evaluation
In this section we mainly discuss the system platformarchitecture based on multi-agent and RFID Combiningthese two new technologies together it has become one ofthe potential candidates for all assembly manufacturing andsupply chain systems in the future
As is shown in Figure 1 all the assembly transition andlogistics distribution are guided and controlled respectivelythrough multi-agent and it is like the human brain whichnot only improves agility of manufacturing system but alsomakesmanufacturing systemcharacterized by heterogeneousand geographically distributed In addition in order toimprove the efficiency of raw material identification thematerial can be identified with RFID tag When the partsset needed by some assemblies are taken out from thewarehouse or some assembly tasks are completed RFIDtags are immediately adopted to identify the parts set ornew assembly When the materials are transported to thedestination according to the design route the content of tagshould be updated The construction and update of RFIDtag are unified with events in assembly executive process
4 Mathematical Problems in Engineering
Supplier 1Q1
120572
Supplier 2Q2
120572Qi
qm
qm
Manufacturermin(120572Qi q)
Retailermin(120572120573Qi q D)
D(x)
120572120573120573
Customer
Figure 2 The schematic diagram of system model
The assembly executive state can be reflected through tagstate In that case all transitions can be regarded as mutual-lycoordinated andmutuallyindependent equal entity throughcertain protocol with certain limits of authority Besides eachentity has certain structural patterns and completes differentwork driven by respective local data
The control system may be realized through a multi-agent system mainly including assembly agent and logisticsagent Figure 1 shows functional models of the two typesof agent It can be seen that assembly agent firstly readsRFID tag information gives assembly task promptly thenreads task scheduling and assembly technology respectivelyfrom assembly database and conducts guide and processinspection control of assembly operation After the assem-bly is finished task information in the database shouldbe updated Then the logistics agent identifies RFID andobtains material information from assembly database andthen guides the transport process By using distributeddatabase to realize distributed ontology we can ensure thedistributivity of the system the real-time updating anddata consistency of the system As mentioned before theautomotive assembly management is based on multi-agentand RFID which includes application layer agent layer andphysical layThe bottommodule is mainly responsible for theprocessing of various businesses in the whole system and thetransmission of various data into upper-layer managementsystem after saving them in the database besides the datacollection and processing mainly aim to collect various datain field production The intermediate layer is responsiblefor monitoring the adaptive configuration of field collectionnodes (intelligent terminal) to realize the collection andfiltration of RFIDdata tomonitor collection event of primarylayer and information event of upper-layer system and tocommand parsing and sending the data into business logiclayer
4 Notations and Model Scenarios
This paper targets the assembly system and supply chaininvolving two suppliers one manufacturer and one retailerThe schematic diagram of system model is shown as illus-trated Figure 2The theoretical framework of assembly supplychain is established on a hypothesis that information issymmetric and complete we also assume the partners arecompletely rational and themarket is completely competitiveThe following summary of notations shown at the end of thepaper are used in this paper
In order to explore the description and notation of thissystem there are two different scenarios for our model thecentralized scenario and the decentralized one Under thefirst one it is assumed that a central decision maker deter-mineswhether or not to invest in information technology andthe order quantity to maximize the total profit In the otherscenario there is no cooperation or information sharingamong the suppliers the manufacturer and the retailer Eachmember tries to pursue his own maximum profits
Under the above-discussed structure there are two subsi-tuations whether the information technology station is in theassembly supply chain or not Once the information systemis adopted it will contribute to optimizing the goods storedin warehouse and ensure inventory accuracy and safety
Therefore we can consider using real-time monitoringtechnology which is based on multi-agent and RFID to helpenterprises monitor inventory accurately and avoid losses ofenterprises However within the shrinkage of the error-proneassembly system and supply chain inventory inaccuracy thecost from technology investment has risen up dramaticallyIn this paper we only consider the variable cost resultedfrom the application of themulti-agent and RFID technologythat is the cost of multi-agent public software platform andRFID tag 119888
119905 When the retailer employs the technology that is
120573 = 1 the complex production assembly system of upstreamsuppliers and the manufacturer will not be improved bythese so that the maximum effect of the technology in thesupply chain could not be exerted When the suppliers adoptmulti-agent and RFID that is 120572 = 1 the downstreamretailers can use the RFID labels tagged on commodities bythe manufacturer which is beneficial to the retailer from this(120573 = 1) At this time the suppliers or the manufacturerundertake the technology investment alone however theretailer can free-ride all theseThus the supplierrsquos enthusiasmfor implementing multi-agent and RFID is totally weakenedTo make the upstream have a growing interest in investingin information technology reduce the losses resulted frominaccurate inventory and increase the performance of thesupply chain the downstream in supply chain can encouragethe suppliers and themanufacturer with some compensationsand reduce the impacts of the free-ride effect Based on thisthis paper will also study the supply chain coordination whenmulti-agent and RFID technology are invested among thethree members
5 Optimal Strategy in Centralized Scenario
In order to achieve the highest performance of the wholeassembly supply chain all the members make their owndecision together Therefore it is necessary to analyze theconditions on which the optimal technology investment isimplemented in centralized scenario
51 Optimal Decision in Centralized Supply Chain withoutMulti-Agent and RFID Technology
511 Two Suppliers with the Same Yields When the orderquantity is 119876 and the actual inventory which can be used to
Mathematical Problems in Engineering 5
0 2 4 6 8 1070
80
90
100
110
120
130
140
150
160
170
ct
Qclowast sc
3
(a)
0 2 4 6 8 10200
400
600
800
1000
1200
1400
1600
ct
Πclowast sc
3
(b)
Figure 3 Variation of 119876119888lowast
sc3 and Π119888lowast
sc3 with 119888119905
satisfy consumersrsquo demands by the normal sales links is 120572120573119876the expected sales of whole supply chain are 119864min(119863 120572120573119876)meanwhile the surplus is 119864(120572120573119876 minus 119863)+ Then we can easilyget the expected profit of the whole supply chain
Π119888
sc1 = 119901119898min (119863 120572120573119876) + V[120572120573119876 minus 119863]+ minus 2119888119876 (1)
Using the following equalities
119864min (119863 120572120573119876) = 120572120573119876 minus int120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909
119864(120572120573119876 minus 119863)+
= 120572120573119876 minus 119864min (119909 120572120573119876)
= int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909
(2)
the expected profit function associated with the same yieldsof two suppliers is given by
Π119888
sc1 = 119901119898 int120572
120572
int
120573
120573
[120572120573119876 minus int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909]
times 119892 (120573) ℎ (120572) 119889120573 119889120572
+ 119904int
120572
120572
int
120573
120573
[int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909]
times 119892 (120573) ℎ (120572) 119889120573 119889120572 minus 2119888119876
(3)
Such an assumption which is explored by several authorssuch as Heese [11] enables us to assume that the customerdemand is subject to uniformly distribution Therefore infact the above equation can be simplified further to
Π119888
sc1 = 119901119898120583120572120583120573119876 minus119901119898minus 119904119898
4120583119909
sdot (1205902
120572+ 1205832
120572)
times (1205902
120573+ 1205832
120573)1198762minus 2119888119876
(4)
Next we calculate the second derivative about 119876 andknow that 1205972Π119888sc1120597119876
2lt 0 therefore Π119888sc1 is a concave
function about 119876 In the particular case of a uniformlydistributed demand the optimal order quantity and optimalexpected profit of the whole supply chain can be written asfollows
119876119888lowast
sc1 =2120583119909(119901119898120583120572120583120573minus 119888)
(119901119898minus 119904119898) (1205902120572+ 1205832120572) (1205902
120573+ 1205832
120573)
Π119888lowast
sc1 =(119901119898120583120572120583120573minus 119888)2
120583119909
(119901119898minus 119904119898) (1205902120572+ 1205832120572) (1205902
120573+ 1205832
120573)
(5)
The Figures 3(a) and 3(b) represent the variation of 119876119888lowastsc3and Π119888lowastsc3 with RIFD investment cost 119888
119905respectively
512 Two Suppliers with Different Yields There are someproblems within the current operational process which makethe internal production not well synchronized so the twosuppliers with different yields are also discussed as follows
Π119888
sc2 = 119901119898 sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898[119863 minusmin (120572120573119876
1 120572120573119876
2)]+
+ V[min (1205721205731198761 120572120573119876
2) minus 119863]
+
minus 119888 (1198761+ 1198762)
(6)
6 Mathematical Problems in Engineering
For the different yield problem of two suppliers in orderto derive the optimal order decision we must distinguish the
different positions of the distributions of 119863(119909) and 120572120573119876119894to
get the expression of the expected profit Then the aboveequation for each configuration is shown in
Π119888
sc2=
Π119888
sc2 = 1199011198981205721205731198761 minus 119904119898 (119863 minus 1205721205731198761) minus 119888 (1198761 + 1198762) 1205721205731198761 lt 1205721205731198762 lt 119863 or 1205721205731198761lt 119863 lt 120572120573119876
2
Π119888
sc2 = 1199011198981205721205731198762 minus 119904119898 (119863 minus 1205721205731198762) minus 119888 (1198761 + 1198762) 1205721205731198762 lt 1205721205731198761 lt 119863 or 1205721205731198762lt 119863 lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198762 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198762lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198761 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198761lt 120572120573119876
2
(7)
To refresh the equation set we obtain the optimal expect-ed profit of the whole supply chain
Π119888lowast
sc2 = (119901119898 + 119904119898 minus V) sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898119863 + V sdotmin (120572120573119876
1 120572120573119876
2) minus 119888 (119876
1+ 1198762)
(8)
52 Optimal Decision in Centralized Supply Chain withMulti-Agent and RFID Technology Next we investigate the central-ized systemwith technology input in detailThe RFID systemcan identify items conveniently by virtue of the characteristicsof noncontact remote distance and read-write so as toimprove the real time of assembly field monitoring andpromote synchronization of logistic flow and informationflow What is more multi-agent system including agentassembly nodes and agent logistics nodes can be modeleduniformly to establish the mapping relation between RFIDtag and assembly executive state Moreover the feasibilityof assembly executive process can be enhanced so as to getreal time and accuracy of assembly manufacturer processmonitoring Under such circumstances all synchronizationprogress status and any errors in assembly supply chainprocess can be reflected through the updated information ofRFID tag
Above all as multi-agent and RFID system provides anaccurate information of the current inventory it contributesto the monitoring and management of the products inrealtime Meanwhile there is also the technology investmentcost 119888
119905 Therefore the unit purchasing cost is 119888 + 119888
119905 The
excepted profits are as follows
Π119888
sc3 = 119901119898min (119863119876) + 119904119898[119876 minus 119863]
+minus 2 (119888 + 119888
119905) 119876 (9)
where 119864min(119909 119876) = 119876 minus int1198760(119876 minus 119909)119891(119909)119889119909 and [119909 minus 119876]+ =
119876 minus 119864min(119909 119876) = int1198760(119876 minus 119909)119891(119909)119889119909 Since 1205972Π119888sc3120597119876
2=
minus119901119898minus 1199041198982120583119909lt 0 the preceding equation is a concave
function about 119876 that is it has the only optimal solution119876lowast which achieves the maximum profit of the whole supply
chain
DifferentiatingΠ119888sc3 with respect to119876 the optimal order-ing quantity and profit of the whole supply chain are givenby
119876119888lowast
sc3 = 2120583119909119901119898minus 119888 minus 119888
119905
119901119898minus 119904119898
Π119888lowast
sc3 =(119901119898minus 119888 minus 119905)
2
119901119898minus 119904119898
120583119909
(10)
53 The Advantages of Deployment with Technology Invest-ment In this section we focus on seeking answers fromthe following questions how to solve such issues as theassembly manufacture errors and shelf shrinkage by meansof multi-agent and RFID system more effectively What arethe levels of optimal investment that enjoy the technologyeconomically feasible in centralized supply chain
Since all members take the overall interests of the wholesupply chain into account they pursue the global profitmaximization and carry on the technology innovation withinformation sharing in the centralized scenario As we allknow if they do not introduce technologies they will sufferthe impacts of assembly errors and inaccurate inventoryConversely they implement it but undertake the technicalcost
To analyze the profit and loss with technology invest-ments the benefit function ΔΠ119888 is introduced Clearly whenΔΠ119888= 0 there exists a break-even point 1198881015840
119905which makes
technical investment always profitable In other words theincreased profits generated by innovative technology arealways larger than the investment cost ofmulti-agent softwareand RFID tags In detail one essential condition is to satisfythe inequality ΔΠ119888 gt 0
Proposition 1 The threshold value of technology investmentcost is 1198881015840
119905= 119901119898minus 119888 minus ((119901
119898120583120573120583120572minus 119888)radic(120590
2
120573+ 1205832
120573)(1205902120572+ 1205832120572))
When 119888119905lt 1198881015840
119905 the optimal solution is to make investment for
situation in the centralized scenario when 119888119905gt 1198881015840
119905 without
any investment on innovative technology being beneficial forthe whole supply chain
As can be seen from the above expression we find that119888119905has relationship not only with 120583
120572and 120583
120573 but also with the
selling price of manufacturer as well It further proves thatthe higher the selling price 119901
119898is the higher the technology
Mathematical Problems in Engineering 7
0 02 04 06 08 10
20
40
60
80
100
120
120572
120590120572 = 015
120590120572 = 025120590120572 = 035
c t
Figure 4 Variation of 119888119905with 120572 for different values of 120590
120572
cost that can be accepted by the supply chain system will beMeanwhile for a given 120583
120572 ΔΠ can be greater or less than
0 depending on the value of 120583119909 It appears that the benefit
achieved by the deployment of the multi-agent and RFIDsystem is comparable to the profit without any technologyinvestment Figure 4 from the analysis above represents thevariation of 119888
119905with 120572 for different values of 120590
120572 The more the
customer demand and the less effective the assembly systemis (that is the error rate 120572 is higher) the more importantthe technology investment will be for the decision whetherto adopt the information technology and the members inassembly supply chain can be benefited from the orderingquantity if we implement it Additionally the comparison ofthe Figure 5 reveals the variation of Δ119876 and ΔΠ with 120572 fordifferent demand
6 Optimal Strategy in Decentralized Scenario
In this section we mainly evaluate and analyze the impactof technology investment among three supply chain partnersOwning to independence relation they pursue themaximumprofits respectively Consequently the main issue will befocused on which partner takes the priority to employmulti-agent and RFID system and bear the higher costsThen two approaches are presented Similar to the previoussection the optimal benefits with or without adoption oftechnology by numerical solutions under the decentraliza-tion are also proposed In addition the retailer places anorder decision in terms of the wholesale price charged bythe manufacturer which book from the supplier and theoptimal order quantity has been the focus of description andexplanation
61 Optimal Decision in Decentralized Supply Chain withoutMulti-Agent and RFID Technology
611 The Basic Model of Two Suppliers According to theabove analysis the profit function of supplier 119894 that normallydepended on 119876
119894in decentralized scenario is given by
Π119863
119904119894
= 119908119894sdotmin (120572119876
119894 119902) minus 119904
119894[119902 minus 120572119876
119894]+
minus
2
sum
119894=1
119888119876119894 (11)
To make analysis and computation more convenientthe holding cost incurred by the supplier 119894 with less actualquantity delivered can be omitted Then we assume 119896
119894(119909) equiv
int119909
0120572119894119889119867119894(120572119894) according to the following formulas deduced
119864 [min (120572119894119876119894 119902)] = int
119902119876119894
0
120572119894119876119894ℎ119894(120572119894) 119889120572119894
+ int
1
119902119876119894
119902ℎ119894(120572119894) 119889120572119894
= 119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)
119864 [(119902 minus 120572119894119876119894)+
] = int
119902119876119894
0
(119902 minus 120572119894119876119894) ℎ119894(120572119894) 119889120572119894
= 119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)
(12)
We can easily get the expected profit of supplier
119864 [Π119863
119904119894
] = 119908119894[119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)]
minus 119904119894[119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)]
minus
2
sum
119894=1
119888119876119894
(13)
The first partial derivative ofΠ119863119904119894
with respect to119876119894can be
written as
120597Π119863
119904119894
120597119876119894
= 119908119894[119896119894(119902
119876119894
) + 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)]
minus 119904119894[119902ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
) minus 119896119894(119902
119876119894
)] minus 119888
= (119908119894+ 119904119894) 119896119894(119902
119876119894
) minus 119888
(14)
8 Mathematical Problems in Engineering
0
5000
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔΠ
=Π
c sc3minusΠ
c sc1
minus15000
minus10000
minus5000
(a)
minus500
0
500
1000
1500
2000
2500
3000
3500
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔQ
=Qc sc
3minusQc sc
1
(b)
Figure 5 Variation of Δ119876 and ΔΠ with 120572 for different values of 120583119909
Developing 120597Π119863119904119894
120597119876119894= 0 leads to the following expres-
sion meanwhile 1205972Π119863119904119894
1205971198762
119894= minus(119908
119894+ 119904119894)(11990221198763
119894) lt 0
1198911(1198761 1198762) = 119888 minus (119908
1+ 1199041) 1198961(119902
1198761
)
1198912(1198761 1198762) = 119888 minus (119908
2+ 1199042) 1198962(119902
1198762
)
(15)
For such setting we always have (1205971198911(1198761 1198762)1205971198762) minus
(1205971198912(1198761 1198762)1205971198762) = minus(119908
2+ 1199042)(11990221198763
2ℎ2)(119902119876
2) lt 0 for any
1198761and 119876
2 Thus as can be seen from the analysis above we
have the following important observation
Proposition 2 For any given order quantity from the man-ufacturer the sufficient conditions guaranteeing the existenceand uniqueness of the Nash equilibrium solution for thesuppliers under decentralized scenario are [1198761015840
1
lowast
1198761015840
2
lowast
]
612 The Best Response of The Manufacturer In the nextstage for Stackelberg leader-follower game we analyze themanufacturerrsquos best response
Π119863
1198981= int
119863119902
120572
[120572119902119908 minus 119904119898(119909 minus 120572119902)] ℎ (120572) 119889120572
+ int
120572
119863119902
119902119908ℎ (120572) 119889120572 minus 119888119902
(16)
where the first item represents that the manufacturer cannotsatisfy the retailerrsquos orders that is the manufacturerrsquos salesrevenue when 119863 gt 120572119902 The second item stands for the man-ufacturerrsquos sales revenue when 119863 lt 120572119902 From the equationabove we can get 1205972Π119863
11989811205971199022= minus(119908 + 119904
119898)(1199091199023ℎ)(120572) lt 0
which found that the manufacturerrsquos profit function Π1198631198981
isa concave function about the order quantity 119902 that is thereis only one optimal order quantity 119902lowast which makes themanufacturerrsquos profit be the maximum
int
119909119902lowast
120572
120572ℎ (120572) 119889120572 =119888
119908 + 119904119898
(17)
The optimal profit for manufacturer is given by
Π119863lowast
1198981= 119908119909 minus (119908 + 119904
119898) 119902119867(
119909
119902lowast) (18)
613 The Best Policy of the Retailer The retailerrsquos expectedprofit can be written as follow
Π119863
1199031= 119901119898int
120573
120573
119864min (119909 120573119902) 119892 (120573) 119889120573
+ 119904int
120573
120573
119864(120573119902 minus 119909)+
119892 (120573) 119889119909 119889120573 minus 119908119902
(19)
where 119864min(119909 120573119902) = 120573119902 minus int1205731199020(120573119902 minus 119909)119891(119909)119889119909 and 119864(120573119902 minus
119909)+= 120573119902 minus 119864min(119909 120573119902) = int120573119902
0(120573119902 minus 119909)119891(119909)119889119909 then we
simplify above equation
Π119863
1199031= minus119901119898minus 119904119898
4120583119909
(1205902
120573+ 1205832
120573) 1199022+ 119901119898120583120573119902 minus 119908119902 (20)
Mathematical Problems in Engineering 9
The optimal ordering quantity and profit of the retailerare respectively
119902lowast
1= 2120583119909
119901119898120583120573minus 119908
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
Π119863lowast
1199031
=
(119901119898120583120573minus 119908)2
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
120583119909
(21)
62 Optimal Decision in Decentralized Supply Chain withMulti-Agent and RFID Technology In order to achieve thehighest performance of the supply chain it is necessaryto analyze the optimal decision in decentralized supplychain with multi-agent and RFID technology As we allknown if the retailer invests in information technologythe upstream ones cannot benefit from this otherwise theopposite Obviously from the perspective of the supply chainit will be better for the whole supply chain with the upstreamtomake an RampD expenditureTherefore here we assume thatthe technology investment can be actively supported by thesuppliers and manufacturer as a whole
The retailer can benefit from the free-ride RFID adoptionand also 120573 = 1 Thus the retailerrsquos expected profit function isas follow
Π119863
1199032= 119901119898119864min (119909 119902) + 119904
119898119864(119902 minus 119909)
+
= 119901119898[119902 minus int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909]
+ 119904119898int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909 minus 119901119908119902
(22)
Since 1205972Π11987721198631205971199022 = minus(119901119898minus 119904119898)119891(119902) lt 0 the profit of
retailer is a concave function about 119902 Then we solve the firstderivative and get the corresponding optimal order quantityand total profit of the retailer
119902lowast
2= 2120583119909
119901119898minus 119901119908
119901119898minus 119904119898
Π119863lowast
1199032=(119901119898minus 119901119908)2
119901119898minus 119904119898
120583119909
(23)
Due to 120590120573gt 0 and 0 lt 120583
120573lt 1 it is easy to prove that
Π119863lowast
1199031lt Π119863lowast
1199032is tenable In another word after implementing
the information technology the retailer can remotelymonitorthe inventory and track its position in real time directlywhich avoids the impacts of the worse service inefficienttransportation out of stock or overstock and other inac-curate inventory problems so that the retailer needs notundertake cost for this Thus the retailerrsquos profit increasesafter the upstream has deployed the information technologyThe Figure 6 respectively shows the impact of changes with120583119909and 119888119905on the variation of Π119863
119903and ΔΠ We can treat the
suppliers and the manufacturer as the same decision-makingsubject in this section
Proposition 3 If 119888119905lt 119888dagger
119905 the manufacturerrsquos profit increases
after investing information technology so that he is willing toimplement the technology If 119888
119905gt 119888dagger
119905 the increased cost resulted
from the suppliersrsquo application of the multi-agent and RFIDsystem is larger than the obtained income so the suppliersand manufacturer have no motivation to invest technologyand is unwilling to do where 119888dagger
119905= 119901119908minus 119888 minus [119901
119908minus (119901119908+
119904119898)119866(119902119876
lowast
1)](119901119898120583120573minus 119901119908)(1205902
120573+ 1205832
120573)(119901119898minus 119901119908)
It is concluded that 119888dagger119905is the highest technology cost
which can be accepted by the upstream firm in decentralizedassembly supply chain At this time the income that thetechnology brings to the suppliers or the manufacturer justequals the newly increased cost resulted from the applicationof the technology When the investment cost is higher than119888dagger
119905 the suppliers or manufacturer will not choose to employ
the technology actively On the contrary if this cost is lowerthan 119888dagger
119905 the income that the supplier or manufacturer obtains
by information technology is higher than the technologyinvestment so that they will all have enormous enthusiasmin investing it
According to the above propositions in the situationof 1198881015840119905gt 119888119905gt 119888dagger
119905 although the suppliersrsquo application of
information technology can increase the profit of the supplychain his profit will reduce Furthermore the upstream firmhas nomotivation to usemulti-agent andRFID system so thatthewhole supply chain cannot profit from the technology andthe maximum profit of the supply chain cannot be realizedThus it is necessary to study the supply chain coordinationin the situation of 1198881015840
119905lt 119888119905lt 119888dagger
119905to make the supplier
have enthusiasm to adopt this technology and reduce theinaccuracy of the supply chain inventory as well as increasethe performance of the supply chain and its members
7 Numerical Analysis
Finally a numerical example is taken to validate the ratio-nality and feasibility of the theoretics and method Whenthe customer demand follows uniform distribution pattern119909 sim 119880(0 200) we insert the following constant values intothe corresponding optimal expressions 119901
119908= 20 119888 = 12
119901119908= 20 119901
119898= 30 V = 8 and 119904
119898= 5 when 0 lt 119888
119905lt 78
the upstream ones are unwilling to use RFID andmulti-agenttechnology because the profit will be reduced after adoptingit
Furthermore according to Figure 7 we can find thatthe increased profit of the manufacturer and the retaileris a linear function about 120573 The increased profit of themanufacturer monotonously reduces as the shelf inventoryerror rate increases while the increased profit of the retailermonotonously increases as the coefficient 120573 increases Whenthe factor of the inventory error 0 lt 120573 lt 04 themanufacturerrsquos profit is beneficial from reasonable utilizationof information technology at this time the upstream firmis willing to make a investment If 120573 gt 02 the retailerrsquosprofit increases after he has deployed RFID and multi-agent technology Therefore choosing the factor of the shelfinventory error rate at the interval of 02 lt 120573 lt 04 can
10 Mathematical Problems in Engineering
0 50 100 150 2000
200
400
600
800
1000
1200
120583x
ΠDlowast
r1
ΠDlowast
r2
ΠDlowast
r
(a)
0 2 4 6 8 10minus250
minus200
minus150
minus100
minus50
0
50
100
ΔΠ
=Π
Dlowast
m2minusΠ
Dlowast
m1
ct
(b)
Figure 6 Variation of Π119863119903with 120583
119909and ΔΠ with 119888
119905
minus1000
minus500
0
500
1000
1500
2000
0 02 04 06 08 1120573
ΔΠ
120573 sim ΔΠr
120573 sim ΔΠm
120573 sim ΔΠr 25120573 sim ΔΠm 25
ct = 1 ct =
ct = ct =1
Figure 7 Variation of ΔΠ119903and ΔΠ
119898with 120573 for different values of
119888119905
ensure that the profit increases to make both the upstreamand downstream firm achieve a win-win situation
Moreover the suppliers aim at encouraging the retailer toorder more goods but the retailer directs at freely riding theinnovative technology from the upstream ones Thus theycan consider the coordination model based on the revenuesharing That is the suppliers and manufacturer undertakethe technology investment cost alone and give price subsidyto the retailer on the condition that the wholesale price isnot changed Or the retailer gives parts of sales revenue tothe upstream ones at the end of a sales season in order to
stimulate and encourage the suppliers to increase the RampDinvestment
Being restrained by personal reason the members of thesupply chain will first consider their own benefit and will takethe maximization of the benefit of the whole supply chaininto consideration on the premise that their own benefit issatisfied Thus to ensure that the members are willing toaccept the revenue sharing contract it is necessary to guaran-tee that the profit obtained by both parties under this contractwith the supply chain that has adopted this technology isnot less than the one that has been obtained in decentralizedscenario before the contract is made In other words it isworth considering to ensure that the members of the supplychain can achieve win-win situation with the restraint of thecontract In other words the coordination mechanism is toensure the following two inequalities tenable ΔΠ
119903gt 0 and
ΔΠ119898gt 0
8 Concluding Remarks
The information technology has been heralded as a majorbreakthrough to enhance the efficiency of assembly sup-ply chain This paper mainly aims to explore the impactof information technology on supply chain managementespecially the prospects of multi-agent and RFID invest-ment value Meanwhile the possibility and reliability of themodel are examined through the qualitative and quantitativeanalyse of the multi-agent and RFID system investmentAdditionally supply chain partnership is an important factorof performance in supply chain operations It is significantto strengthen the supply chain cooperation managementFinally this paper mainly aims at a perfectly competitivemarket and carries out the research in the situation that themarket demands are uniformly distributed Future researches
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
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Differential EquationsInternational Journal of
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Function Spaces
Abstract and Applied AnalysisHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
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Stochastic AnalysisInternational Journal of
4 Mathematical Problems in Engineering
Supplier 1Q1
120572
Supplier 2Q2
120572Qi
qm
qm
Manufacturermin(120572Qi q)
Retailermin(120572120573Qi q D)
D(x)
120572120573120573
Customer
Figure 2 The schematic diagram of system model
The assembly executive state can be reflected through tagstate In that case all transitions can be regarded as mutual-lycoordinated andmutuallyindependent equal entity throughcertain protocol with certain limits of authority Besides eachentity has certain structural patterns and completes differentwork driven by respective local data
The control system may be realized through a multi-agent system mainly including assembly agent and logisticsagent Figure 1 shows functional models of the two typesof agent It can be seen that assembly agent firstly readsRFID tag information gives assembly task promptly thenreads task scheduling and assembly technology respectivelyfrom assembly database and conducts guide and processinspection control of assembly operation After the assem-bly is finished task information in the database shouldbe updated Then the logistics agent identifies RFID andobtains material information from assembly database andthen guides the transport process By using distributeddatabase to realize distributed ontology we can ensure thedistributivity of the system the real-time updating anddata consistency of the system As mentioned before theautomotive assembly management is based on multi-agentand RFID which includes application layer agent layer andphysical layThe bottommodule is mainly responsible for theprocessing of various businesses in the whole system and thetransmission of various data into upper-layer managementsystem after saving them in the database besides the datacollection and processing mainly aim to collect various datain field production The intermediate layer is responsiblefor monitoring the adaptive configuration of field collectionnodes (intelligent terminal) to realize the collection andfiltration of RFIDdata tomonitor collection event of primarylayer and information event of upper-layer system and tocommand parsing and sending the data into business logiclayer
4 Notations and Model Scenarios
This paper targets the assembly system and supply chaininvolving two suppliers one manufacturer and one retailerThe schematic diagram of system model is shown as illus-trated Figure 2The theoretical framework of assembly supplychain is established on a hypothesis that information issymmetric and complete we also assume the partners arecompletely rational and themarket is completely competitiveThe following summary of notations shown at the end of thepaper are used in this paper
In order to explore the description and notation of thissystem there are two different scenarios for our model thecentralized scenario and the decentralized one Under thefirst one it is assumed that a central decision maker deter-mineswhether or not to invest in information technology andthe order quantity to maximize the total profit In the otherscenario there is no cooperation or information sharingamong the suppliers the manufacturer and the retailer Eachmember tries to pursue his own maximum profits
Under the above-discussed structure there are two subsi-tuations whether the information technology station is in theassembly supply chain or not Once the information systemis adopted it will contribute to optimizing the goods storedin warehouse and ensure inventory accuracy and safety
Therefore we can consider using real-time monitoringtechnology which is based on multi-agent and RFID to helpenterprises monitor inventory accurately and avoid losses ofenterprises However within the shrinkage of the error-proneassembly system and supply chain inventory inaccuracy thecost from technology investment has risen up dramaticallyIn this paper we only consider the variable cost resultedfrom the application of themulti-agent and RFID technologythat is the cost of multi-agent public software platform andRFID tag 119888
119905 When the retailer employs the technology that is
120573 = 1 the complex production assembly system of upstreamsuppliers and the manufacturer will not be improved bythese so that the maximum effect of the technology in thesupply chain could not be exerted When the suppliers adoptmulti-agent and RFID that is 120572 = 1 the downstreamretailers can use the RFID labels tagged on commodities bythe manufacturer which is beneficial to the retailer from this(120573 = 1) At this time the suppliers or the manufacturerundertake the technology investment alone however theretailer can free-ride all theseThus the supplierrsquos enthusiasmfor implementing multi-agent and RFID is totally weakenedTo make the upstream have a growing interest in investingin information technology reduce the losses resulted frominaccurate inventory and increase the performance of thesupply chain the downstream in supply chain can encouragethe suppliers and themanufacturer with some compensationsand reduce the impacts of the free-ride effect Based on thisthis paper will also study the supply chain coordination whenmulti-agent and RFID technology are invested among thethree members
5 Optimal Strategy in Centralized Scenario
In order to achieve the highest performance of the wholeassembly supply chain all the members make their owndecision together Therefore it is necessary to analyze theconditions on which the optimal technology investment isimplemented in centralized scenario
51 Optimal Decision in Centralized Supply Chain withoutMulti-Agent and RFID Technology
511 Two Suppliers with the Same Yields When the orderquantity is 119876 and the actual inventory which can be used to
Mathematical Problems in Engineering 5
0 2 4 6 8 1070
80
90
100
110
120
130
140
150
160
170
ct
Qclowast sc
3
(a)
0 2 4 6 8 10200
400
600
800
1000
1200
1400
1600
ct
Πclowast sc
3
(b)
Figure 3 Variation of 119876119888lowast
sc3 and Π119888lowast
sc3 with 119888119905
satisfy consumersrsquo demands by the normal sales links is 120572120573119876the expected sales of whole supply chain are 119864min(119863 120572120573119876)meanwhile the surplus is 119864(120572120573119876 minus 119863)+ Then we can easilyget the expected profit of the whole supply chain
Π119888
sc1 = 119901119898min (119863 120572120573119876) + V[120572120573119876 minus 119863]+ minus 2119888119876 (1)
Using the following equalities
119864min (119863 120572120573119876) = 120572120573119876 minus int120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909
119864(120572120573119876 minus 119863)+
= 120572120573119876 minus 119864min (119909 120572120573119876)
= int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909
(2)
the expected profit function associated with the same yieldsof two suppliers is given by
Π119888
sc1 = 119901119898 int120572
120572
int
120573
120573
[120572120573119876 minus int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909]
times 119892 (120573) ℎ (120572) 119889120573 119889120572
+ 119904int
120572
120572
int
120573
120573
[int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909]
times 119892 (120573) ℎ (120572) 119889120573 119889120572 minus 2119888119876
(3)
Such an assumption which is explored by several authorssuch as Heese [11] enables us to assume that the customerdemand is subject to uniformly distribution Therefore infact the above equation can be simplified further to
Π119888
sc1 = 119901119898120583120572120583120573119876 minus119901119898minus 119904119898
4120583119909
sdot (1205902
120572+ 1205832
120572)
times (1205902
120573+ 1205832
120573)1198762minus 2119888119876
(4)
Next we calculate the second derivative about 119876 andknow that 1205972Π119888sc1120597119876
2lt 0 therefore Π119888sc1 is a concave
function about 119876 In the particular case of a uniformlydistributed demand the optimal order quantity and optimalexpected profit of the whole supply chain can be written asfollows
119876119888lowast
sc1 =2120583119909(119901119898120583120572120583120573minus 119888)
(119901119898minus 119904119898) (1205902120572+ 1205832120572) (1205902
120573+ 1205832
120573)
Π119888lowast
sc1 =(119901119898120583120572120583120573minus 119888)2
120583119909
(119901119898minus 119904119898) (1205902120572+ 1205832120572) (1205902
120573+ 1205832
120573)
(5)
The Figures 3(a) and 3(b) represent the variation of 119876119888lowastsc3and Π119888lowastsc3 with RIFD investment cost 119888
119905respectively
512 Two Suppliers with Different Yields There are someproblems within the current operational process which makethe internal production not well synchronized so the twosuppliers with different yields are also discussed as follows
Π119888
sc2 = 119901119898 sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898[119863 minusmin (120572120573119876
1 120572120573119876
2)]+
+ V[min (1205721205731198761 120572120573119876
2) minus 119863]
+
minus 119888 (1198761+ 1198762)
(6)
6 Mathematical Problems in Engineering
For the different yield problem of two suppliers in orderto derive the optimal order decision we must distinguish the
different positions of the distributions of 119863(119909) and 120572120573119876119894to
get the expression of the expected profit Then the aboveequation for each configuration is shown in
Π119888
sc2=
Π119888
sc2 = 1199011198981205721205731198761 minus 119904119898 (119863 minus 1205721205731198761) minus 119888 (1198761 + 1198762) 1205721205731198761 lt 1205721205731198762 lt 119863 or 1205721205731198761lt 119863 lt 120572120573119876
2
Π119888
sc2 = 1199011198981205721205731198762 minus 119904119898 (119863 minus 1205721205731198762) minus 119888 (1198761 + 1198762) 1205721205731198762 lt 1205721205731198761 lt 119863 or 1205721205731198762lt 119863 lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198762 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198762lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198761 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198761lt 120572120573119876
2
(7)
To refresh the equation set we obtain the optimal expect-ed profit of the whole supply chain
Π119888lowast
sc2 = (119901119898 + 119904119898 minus V) sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898119863 + V sdotmin (120572120573119876
1 120572120573119876
2) minus 119888 (119876
1+ 1198762)
(8)
52 Optimal Decision in Centralized Supply Chain withMulti-Agent and RFID Technology Next we investigate the central-ized systemwith technology input in detailThe RFID systemcan identify items conveniently by virtue of the characteristicsof noncontact remote distance and read-write so as toimprove the real time of assembly field monitoring andpromote synchronization of logistic flow and informationflow What is more multi-agent system including agentassembly nodes and agent logistics nodes can be modeleduniformly to establish the mapping relation between RFIDtag and assembly executive state Moreover the feasibilityof assembly executive process can be enhanced so as to getreal time and accuracy of assembly manufacturer processmonitoring Under such circumstances all synchronizationprogress status and any errors in assembly supply chainprocess can be reflected through the updated information ofRFID tag
Above all as multi-agent and RFID system provides anaccurate information of the current inventory it contributesto the monitoring and management of the products inrealtime Meanwhile there is also the technology investmentcost 119888
119905 Therefore the unit purchasing cost is 119888 + 119888
119905 The
excepted profits are as follows
Π119888
sc3 = 119901119898min (119863119876) + 119904119898[119876 minus 119863]
+minus 2 (119888 + 119888
119905) 119876 (9)
where 119864min(119909 119876) = 119876 minus int1198760(119876 minus 119909)119891(119909)119889119909 and [119909 minus 119876]+ =
119876 minus 119864min(119909 119876) = int1198760(119876 minus 119909)119891(119909)119889119909 Since 1205972Π119888sc3120597119876
2=
minus119901119898minus 1199041198982120583119909lt 0 the preceding equation is a concave
function about 119876 that is it has the only optimal solution119876lowast which achieves the maximum profit of the whole supply
chain
DifferentiatingΠ119888sc3 with respect to119876 the optimal order-ing quantity and profit of the whole supply chain are givenby
119876119888lowast
sc3 = 2120583119909119901119898minus 119888 minus 119888
119905
119901119898minus 119904119898
Π119888lowast
sc3 =(119901119898minus 119888 minus 119905)
2
119901119898minus 119904119898
120583119909
(10)
53 The Advantages of Deployment with Technology Invest-ment In this section we focus on seeking answers fromthe following questions how to solve such issues as theassembly manufacture errors and shelf shrinkage by meansof multi-agent and RFID system more effectively What arethe levels of optimal investment that enjoy the technologyeconomically feasible in centralized supply chain
Since all members take the overall interests of the wholesupply chain into account they pursue the global profitmaximization and carry on the technology innovation withinformation sharing in the centralized scenario As we allknow if they do not introduce technologies they will sufferthe impacts of assembly errors and inaccurate inventoryConversely they implement it but undertake the technicalcost
To analyze the profit and loss with technology invest-ments the benefit function ΔΠ119888 is introduced Clearly whenΔΠ119888= 0 there exists a break-even point 1198881015840
119905which makes
technical investment always profitable In other words theincreased profits generated by innovative technology arealways larger than the investment cost ofmulti-agent softwareand RFID tags In detail one essential condition is to satisfythe inequality ΔΠ119888 gt 0
Proposition 1 The threshold value of technology investmentcost is 1198881015840
119905= 119901119898minus 119888 minus ((119901
119898120583120573120583120572minus 119888)radic(120590
2
120573+ 1205832
120573)(1205902120572+ 1205832120572))
When 119888119905lt 1198881015840
119905 the optimal solution is to make investment for
situation in the centralized scenario when 119888119905gt 1198881015840
119905 without
any investment on innovative technology being beneficial forthe whole supply chain
As can be seen from the above expression we find that119888119905has relationship not only with 120583
120572and 120583
120573 but also with the
selling price of manufacturer as well It further proves thatthe higher the selling price 119901
119898is the higher the technology
Mathematical Problems in Engineering 7
0 02 04 06 08 10
20
40
60
80
100
120
120572
120590120572 = 015
120590120572 = 025120590120572 = 035
c t
Figure 4 Variation of 119888119905with 120572 for different values of 120590
120572
cost that can be accepted by the supply chain system will beMeanwhile for a given 120583
120572 ΔΠ can be greater or less than
0 depending on the value of 120583119909 It appears that the benefit
achieved by the deployment of the multi-agent and RFIDsystem is comparable to the profit without any technologyinvestment Figure 4 from the analysis above represents thevariation of 119888
119905with 120572 for different values of 120590
120572 The more the
customer demand and the less effective the assembly systemis (that is the error rate 120572 is higher) the more importantthe technology investment will be for the decision whetherto adopt the information technology and the members inassembly supply chain can be benefited from the orderingquantity if we implement it Additionally the comparison ofthe Figure 5 reveals the variation of Δ119876 and ΔΠ with 120572 fordifferent demand
6 Optimal Strategy in Decentralized Scenario
In this section we mainly evaluate and analyze the impactof technology investment among three supply chain partnersOwning to independence relation they pursue themaximumprofits respectively Consequently the main issue will befocused on which partner takes the priority to employmulti-agent and RFID system and bear the higher costsThen two approaches are presented Similar to the previoussection the optimal benefits with or without adoption oftechnology by numerical solutions under the decentraliza-tion are also proposed In addition the retailer places anorder decision in terms of the wholesale price charged bythe manufacturer which book from the supplier and theoptimal order quantity has been the focus of description andexplanation
61 Optimal Decision in Decentralized Supply Chain withoutMulti-Agent and RFID Technology
611 The Basic Model of Two Suppliers According to theabove analysis the profit function of supplier 119894 that normallydepended on 119876
119894in decentralized scenario is given by
Π119863
119904119894
= 119908119894sdotmin (120572119876
119894 119902) minus 119904
119894[119902 minus 120572119876
119894]+
minus
2
sum
119894=1
119888119876119894 (11)
To make analysis and computation more convenientthe holding cost incurred by the supplier 119894 with less actualquantity delivered can be omitted Then we assume 119896
119894(119909) equiv
int119909
0120572119894119889119867119894(120572119894) according to the following formulas deduced
119864 [min (120572119894119876119894 119902)] = int
119902119876119894
0
120572119894119876119894ℎ119894(120572119894) 119889120572119894
+ int
1
119902119876119894
119902ℎ119894(120572119894) 119889120572119894
= 119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)
119864 [(119902 minus 120572119894119876119894)+
] = int
119902119876119894
0
(119902 minus 120572119894119876119894) ℎ119894(120572119894) 119889120572119894
= 119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)
(12)
We can easily get the expected profit of supplier
119864 [Π119863
119904119894
] = 119908119894[119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)]
minus 119904119894[119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)]
minus
2
sum
119894=1
119888119876119894
(13)
The first partial derivative ofΠ119863119904119894
with respect to119876119894can be
written as
120597Π119863
119904119894
120597119876119894
= 119908119894[119896119894(119902
119876119894
) + 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)]
minus 119904119894[119902ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
) minus 119896119894(119902
119876119894
)] minus 119888
= (119908119894+ 119904119894) 119896119894(119902
119876119894
) minus 119888
(14)
8 Mathematical Problems in Engineering
0
5000
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔΠ
=Π
c sc3minusΠ
c sc1
minus15000
minus10000
minus5000
(a)
minus500
0
500
1000
1500
2000
2500
3000
3500
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔQ
=Qc sc
3minusQc sc
1
(b)
Figure 5 Variation of Δ119876 and ΔΠ with 120572 for different values of 120583119909
Developing 120597Π119863119904119894
120597119876119894= 0 leads to the following expres-
sion meanwhile 1205972Π119863119904119894
1205971198762
119894= minus(119908
119894+ 119904119894)(11990221198763
119894) lt 0
1198911(1198761 1198762) = 119888 minus (119908
1+ 1199041) 1198961(119902
1198761
)
1198912(1198761 1198762) = 119888 minus (119908
2+ 1199042) 1198962(119902
1198762
)
(15)
For such setting we always have (1205971198911(1198761 1198762)1205971198762) minus
(1205971198912(1198761 1198762)1205971198762) = minus(119908
2+ 1199042)(11990221198763
2ℎ2)(119902119876
2) lt 0 for any
1198761and 119876
2 Thus as can be seen from the analysis above we
have the following important observation
Proposition 2 For any given order quantity from the man-ufacturer the sufficient conditions guaranteeing the existenceand uniqueness of the Nash equilibrium solution for thesuppliers under decentralized scenario are [1198761015840
1
lowast
1198761015840
2
lowast
]
612 The Best Response of The Manufacturer In the nextstage for Stackelberg leader-follower game we analyze themanufacturerrsquos best response
Π119863
1198981= int
119863119902
120572
[120572119902119908 minus 119904119898(119909 minus 120572119902)] ℎ (120572) 119889120572
+ int
120572
119863119902
119902119908ℎ (120572) 119889120572 minus 119888119902
(16)
where the first item represents that the manufacturer cannotsatisfy the retailerrsquos orders that is the manufacturerrsquos salesrevenue when 119863 gt 120572119902 The second item stands for the man-ufacturerrsquos sales revenue when 119863 lt 120572119902 From the equationabove we can get 1205972Π119863
11989811205971199022= minus(119908 + 119904
119898)(1199091199023ℎ)(120572) lt 0
which found that the manufacturerrsquos profit function Π1198631198981
isa concave function about the order quantity 119902 that is thereis only one optimal order quantity 119902lowast which makes themanufacturerrsquos profit be the maximum
int
119909119902lowast
120572
120572ℎ (120572) 119889120572 =119888
119908 + 119904119898
(17)
The optimal profit for manufacturer is given by
Π119863lowast
1198981= 119908119909 minus (119908 + 119904
119898) 119902119867(
119909
119902lowast) (18)
613 The Best Policy of the Retailer The retailerrsquos expectedprofit can be written as follow
Π119863
1199031= 119901119898int
120573
120573
119864min (119909 120573119902) 119892 (120573) 119889120573
+ 119904int
120573
120573
119864(120573119902 minus 119909)+
119892 (120573) 119889119909 119889120573 minus 119908119902
(19)
where 119864min(119909 120573119902) = 120573119902 minus int1205731199020(120573119902 minus 119909)119891(119909)119889119909 and 119864(120573119902 minus
119909)+= 120573119902 minus 119864min(119909 120573119902) = int120573119902
0(120573119902 minus 119909)119891(119909)119889119909 then we
simplify above equation
Π119863
1199031= minus119901119898minus 119904119898
4120583119909
(1205902
120573+ 1205832
120573) 1199022+ 119901119898120583120573119902 minus 119908119902 (20)
Mathematical Problems in Engineering 9
The optimal ordering quantity and profit of the retailerare respectively
119902lowast
1= 2120583119909
119901119898120583120573minus 119908
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
Π119863lowast
1199031
=
(119901119898120583120573minus 119908)2
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
120583119909
(21)
62 Optimal Decision in Decentralized Supply Chain withMulti-Agent and RFID Technology In order to achieve thehighest performance of the supply chain it is necessaryto analyze the optimal decision in decentralized supplychain with multi-agent and RFID technology As we allknown if the retailer invests in information technologythe upstream ones cannot benefit from this otherwise theopposite Obviously from the perspective of the supply chainit will be better for the whole supply chain with the upstreamtomake an RampD expenditureTherefore here we assume thatthe technology investment can be actively supported by thesuppliers and manufacturer as a whole
The retailer can benefit from the free-ride RFID adoptionand also 120573 = 1 Thus the retailerrsquos expected profit function isas follow
Π119863
1199032= 119901119898119864min (119909 119902) + 119904
119898119864(119902 minus 119909)
+
= 119901119898[119902 minus int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909]
+ 119904119898int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909 minus 119901119908119902
(22)
Since 1205972Π11987721198631205971199022 = minus(119901119898minus 119904119898)119891(119902) lt 0 the profit of
retailer is a concave function about 119902 Then we solve the firstderivative and get the corresponding optimal order quantityand total profit of the retailer
119902lowast
2= 2120583119909
119901119898minus 119901119908
119901119898minus 119904119898
Π119863lowast
1199032=(119901119898minus 119901119908)2
119901119898minus 119904119898
120583119909
(23)
Due to 120590120573gt 0 and 0 lt 120583
120573lt 1 it is easy to prove that
Π119863lowast
1199031lt Π119863lowast
1199032is tenable In another word after implementing
the information technology the retailer can remotelymonitorthe inventory and track its position in real time directlywhich avoids the impacts of the worse service inefficienttransportation out of stock or overstock and other inac-curate inventory problems so that the retailer needs notundertake cost for this Thus the retailerrsquos profit increasesafter the upstream has deployed the information technologyThe Figure 6 respectively shows the impact of changes with120583119909and 119888119905on the variation of Π119863
119903and ΔΠ We can treat the
suppliers and the manufacturer as the same decision-makingsubject in this section
Proposition 3 If 119888119905lt 119888dagger
119905 the manufacturerrsquos profit increases
after investing information technology so that he is willing toimplement the technology If 119888
119905gt 119888dagger
119905 the increased cost resulted
from the suppliersrsquo application of the multi-agent and RFIDsystem is larger than the obtained income so the suppliersand manufacturer have no motivation to invest technologyand is unwilling to do where 119888dagger
119905= 119901119908minus 119888 minus [119901
119908minus (119901119908+
119904119898)119866(119902119876
lowast
1)](119901119898120583120573minus 119901119908)(1205902
120573+ 1205832
120573)(119901119898minus 119901119908)
It is concluded that 119888dagger119905is the highest technology cost
which can be accepted by the upstream firm in decentralizedassembly supply chain At this time the income that thetechnology brings to the suppliers or the manufacturer justequals the newly increased cost resulted from the applicationof the technology When the investment cost is higher than119888dagger
119905 the suppliers or manufacturer will not choose to employ
the technology actively On the contrary if this cost is lowerthan 119888dagger
119905 the income that the supplier or manufacturer obtains
by information technology is higher than the technologyinvestment so that they will all have enormous enthusiasmin investing it
According to the above propositions in the situationof 1198881015840119905gt 119888119905gt 119888dagger
119905 although the suppliersrsquo application of
information technology can increase the profit of the supplychain his profit will reduce Furthermore the upstream firmhas nomotivation to usemulti-agent andRFID system so thatthewhole supply chain cannot profit from the technology andthe maximum profit of the supply chain cannot be realizedThus it is necessary to study the supply chain coordinationin the situation of 1198881015840
119905lt 119888119905lt 119888dagger
119905to make the supplier
have enthusiasm to adopt this technology and reduce theinaccuracy of the supply chain inventory as well as increasethe performance of the supply chain and its members
7 Numerical Analysis
Finally a numerical example is taken to validate the ratio-nality and feasibility of the theoretics and method Whenthe customer demand follows uniform distribution pattern119909 sim 119880(0 200) we insert the following constant values intothe corresponding optimal expressions 119901
119908= 20 119888 = 12
119901119908= 20 119901
119898= 30 V = 8 and 119904
119898= 5 when 0 lt 119888
119905lt 78
the upstream ones are unwilling to use RFID andmulti-agenttechnology because the profit will be reduced after adoptingit
Furthermore according to Figure 7 we can find thatthe increased profit of the manufacturer and the retaileris a linear function about 120573 The increased profit of themanufacturer monotonously reduces as the shelf inventoryerror rate increases while the increased profit of the retailermonotonously increases as the coefficient 120573 increases Whenthe factor of the inventory error 0 lt 120573 lt 04 themanufacturerrsquos profit is beneficial from reasonable utilizationof information technology at this time the upstream firmis willing to make a investment If 120573 gt 02 the retailerrsquosprofit increases after he has deployed RFID and multi-agent technology Therefore choosing the factor of the shelfinventory error rate at the interval of 02 lt 120573 lt 04 can
10 Mathematical Problems in Engineering
0 50 100 150 2000
200
400
600
800
1000
1200
120583x
ΠDlowast
r1
ΠDlowast
r2
ΠDlowast
r
(a)
0 2 4 6 8 10minus250
minus200
minus150
minus100
minus50
0
50
100
ΔΠ
=Π
Dlowast
m2minusΠ
Dlowast
m1
ct
(b)
Figure 6 Variation of Π119863119903with 120583
119909and ΔΠ with 119888
119905
minus1000
minus500
0
500
1000
1500
2000
0 02 04 06 08 1120573
ΔΠ
120573 sim ΔΠr
120573 sim ΔΠm
120573 sim ΔΠr 25120573 sim ΔΠm 25
ct = 1 ct =
ct = ct =1
Figure 7 Variation of ΔΠ119903and ΔΠ
119898with 120573 for different values of
119888119905
ensure that the profit increases to make both the upstreamand downstream firm achieve a win-win situation
Moreover the suppliers aim at encouraging the retailer toorder more goods but the retailer directs at freely riding theinnovative technology from the upstream ones Thus theycan consider the coordination model based on the revenuesharing That is the suppliers and manufacturer undertakethe technology investment cost alone and give price subsidyto the retailer on the condition that the wholesale price isnot changed Or the retailer gives parts of sales revenue tothe upstream ones at the end of a sales season in order to
stimulate and encourage the suppliers to increase the RampDinvestment
Being restrained by personal reason the members of thesupply chain will first consider their own benefit and will takethe maximization of the benefit of the whole supply chaininto consideration on the premise that their own benefit issatisfied Thus to ensure that the members are willing toaccept the revenue sharing contract it is necessary to guaran-tee that the profit obtained by both parties under this contractwith the supply chain that has adopted this technology isnot less than the one that has been obtained in decentralizedscenario before the contract is made In other words it isworth considering to ensure that the members of the supplychain can achieve win-win situation with the restraint of thecontract In other words the coordination mechanism is toensure the following two inequalities tenable ΔΠ
119903gt 0 and
ΔΠ119898gt 0
8 Concluding Remarks
The information technology has been heralded as a majorbreakthrough to enhance the efficiency of assembly sup-ply chain This paper mainly aims to explore the impactof information technology on supply chain managementespecially the prospects of multi-agent and RFID invest-ment value Meanwhile the possibility and reliability of themodel are examined through the qualitative and quantitativeanalyse of the multi-agent and RFID system investmentAdditionally supply chain partnership is an important factorof performance in supply chain operations It is significantto strengthen the supply chain cooperation managementFinally this paper mainly aims at a perfectly competitivemarket and carries out the research in the situation that themarket demands are uniformly distributed Future researches
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
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Mathematical Problems in Engineering 5
0 2 4 6 8 1070
80
90
100
110
120
130
140
150
160
170
ct
Qclowast sc
3
(a)
0 2 4 6 8 10200
400
600
800
1000
1200
1400
1600
ct
Πclowast sc
3
(b)
Figure 3 Variation of 119876119888lowast
sc3 and Π119888lowast
sc3 with 119888119905
satisfy consumersrsquo demands by the normal sales links is 120572120573119876the expected sales of whole supply chain are 119864min(119863 120572120573119876)meanwhile the surplus is 119864(120572120573119876 minus 119863)+ Then we can easilyget the expected profit of the whole supply chain
Π119888
sc1 = 119901119898min (119863 120572120573119876) + V[120572120573119876 minus 119863]+ minus 2119888119876 (1)
Using the following equalities
119864min (119863 120572120573119876) = 120572120573119876 minus int120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909
119864(120572120573119876 minus 119863)+
= 120572120573119876 minus 119864min (119909 120572120573119876)
= int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909
(2)
the expected profit function associated with the same yieldsof two suppliers is given by
Π119888
sc1 = 119901119898 int120572
120572
int
120573
120573
[120572120573119876 minus int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909]
times 119892 (120573) ℎ (120572) 119889120573 119889120572
+ 119904int
120572
120572
int
120573
120573
[int
120572120573119876
0
(120572120573119876 minus 119909)119891 (119909) 119889119909]
times 119892 (120573) ℎ (120572) 119889120573 119889120572 minus 2119888119876
(3)
Such an assumption which is explored by several authorssuch as Heese [11] enables us to assume that the customerdemand is subject to uniformly distribution Therefore infact the above equation can be simplified further to
Π119888
sc1 = 119901119898120583120572120583120573119876 minus119901119898minus 119904119898
4120583119909
sdot (1205902
120572+ 1205832
120572)
times (1205902
120573+ 1205832
120573)1198762minus 2119888119876
(4)
Next we calculate the second derivative about 119876 andknow that 1205972Π119888sc1120597119876
2lt 0 therefore Π119888sc1 is a concave
function about 119876 In the particular case of a uniformlydistributed demand the optimal order quantity and optimalexpected profit of the whole supply chain can be written asfollows
119876119888lowast
sc1 =2120583119909(119901119898120583120572120583120573minus 119888)
(119901119898minus 119904119898) (1205902120572+ 1205832120572) (1205902
120573+ 1205832
120573)
Π119888lowast
sc1 =(119901119898120583120572120583120573minus 119888)2
120583119909
(119901119898minus 119904119898) (1205902120572+ 1205832120572) (1205902
120573+ 1205832
120573)
(5)
The Figures 3(a) and 3(b) represent the variation of 119876119888lowastsc3and Π119888lowastsc3 with RIFD investment cost 119888
119905respectively
512 Two Suppliers with Different Yields There are someproblems within the current operational process which makethe internal production not well synchronized so the twosuppliers with different yields are also discussed as follows
Π119888
sc2 = 119901119898 sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898[119863 minusmin (120572120573119876
1 120572120573119876
2)]+
+ V[min (1205721205731198761 120572120573119876
2) minus 119863]
+
minus 119888 (1198761+ 1198762)
(6)
6 Mathematical Problems in Engineering
For the different yield problem of two suppliers in orderto derive the optimal order decision we must distinguish the
different positions of the distributions of 119863(119909) and 120572120573119876119894to
get the expression of the expected profit Then the aboveequation for each configuration is shown in
Π119888
sc2=
Π119888
sc2 = 1199011198981205721205731198761 minus 119904119898 (119863 minus 1205721205731198761) minus 119888 (1198761 + 1198762) 1205721205731198761 lt 1205721205731198762 lt 119863 or 1205721205731198761lt 119863 lt 120572120573119876
2
Π119888
sc2 = 1199011198981205721205731198762 minus 119904119898 (119863 minus 1205721205731198762) minus 119888 (1198761 + 1198762) 1205721205731198762 lt 1205721205731198761 lt 119863 or 1205721205731198762lt 119863 lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198762 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198762lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198761 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198761lt 120572120573119876
2
(7)
To refresh the equation set we obtain the optimal expect-ed profit of the whole supply chain
Π119888lowast
sc2 = (119901119898 + 119904119898 minus V) sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898119863 + V sdotmin (120572120573119876
1 120572120573119876
2) minus 119888 (119876
1+ 1198762)
(8)
52 Optimal Decision in Centralized Supply Chain withMulti-Agent and RFID Technology Next we investigate the central-ized systemwith technology input in detailThe RFID systemcan identify items conveniently by virtue of the characteristicsof noncontact remote distance and read-write so as toimprove the real time of assembly field monitoring andpromote synchronization of logistic flow and informationflow What is more multi-agent system including agentassembly nodes and agent logistics nodes can be modeleduniformly to establish the mapping relation between RFIDtag and assembly executive state Moreover the feasibilityof assembly executive process can be enhanced so as to getreal time and accuracy of assembly manufacturer processmonitoring Under such circumstances all synchronizationprogress status and any errors in assembly supply chainprocess can be reflected through the updated information ofRFID tag
Above all as multi-agent and RFID system provides anaccurate information of the current inventory it contributesto the monitoring and management of the products inrealtime Meanwhile there is also the technology investmentcost 119888
119905 Therefore the unit purchasing cost is 119888 + 119888
119905 The
excepted profits are as follows
Π119888
sc3 = 119901119898min (119863119876) + 119904119898[119876 minus 119863]
+minus 2 (119888 + 119888
119905) 119876 (9)
where 119864min(119909 119876) = 119876 minus int1198760(119876 minus 119909)119891(119909)119889119909 and [119909 minus 119876]+ =
119876 minus 119864min(119909 119876) = int1198760(119876 minus 119909)119891(119909)119889119909 Since 1205972Π119888sc3120597119876
2=
minus119901119898minus 1199041198982120583119909lt 0 the preceding equation is a concave
function about 119876 that is it has the only optimal solution119876lowast which achieves the maximum profit of the whole supply
chain
DifferentiatingΠ119888sc3 with respect to119876 the optimal order-ing quantity and profit of the whole supply chain are givenby
119876119888lowast
sc3 = 2120583119909119901119898minus 119888 minus 119888
119905
119901119898minus 119904119898
Π119888lowast
sc3 =(119901119898minus 119888 minus 119905)
2
119901119898minus 119904119898
120583119909
(10)
53 The Advantages of Deployment with Technology Invest-ment In this section we focus on seeking answers fromthe following questions how to solve such issues as theassembly manufacture errors and shelf shrinkage by meansof multi-agent and RFID system more effectively What arethe levels of optimal investment that enjoy the technologyeconomically feasible in centralized supply chain
Since all members take the overall interests of the wholesupply chain into account they pursue the global profitmaximization and carry on the technology innovation withinformation sharing in the centralized scenario As we allknow if they do not introduce technologies they will sufferthe impacts of assembly errors and inaccurate inventoryConversely they implement it but undertake the technicalcost
To analyze the profit and loss with technology invest-ments the benefit function ΔΠ119888 is introduced Clearly whenΔΠ119888= 0 there exists a break-even point 1198881015840
119905which makes
technical investment always profitable In other words theincreased profits generated by innovative technology arealways larger than the investment cost ofmulti-agent softwareand RFID tags In detail one essential condition is to satisfythe inequality ΔΠ119888 gt 0
Proposition 1 The threshold value of technology investmentcost is 1198881015840
119905= 119901119898minus 119888 minus ((119901
119898120583120573120583120572minus 119888)radic(120590
2
120573+ 1205832
120573)(1205902120572+ 1205832120572))
When 119888119905lt 1198881015840
119905 the optimal solution is to make investment for
situation in the centralized scenario when 119888119905gt 1198881015840
119905 without
any investment on innovative technology being beneficial forthe whole supply chain
As can be seen from the above expression we find that119888119905has relationship not only with 120583
120572and 120583
120573 but also with the
selling price of manufacturer as well It further proves thatthe higher the selling price 119901
119898is the higher the technology
Mathematical Problems in Engineering 7
0 02 04 06 08 10
20
40
60
80
100
120
120572
120590120572 = 015
120590120572 = 025120590120572 = 035
c t
Figure 4 Variation of 119888119905with 120572 for different values of 120590
120572
cost that can be accepted by the supply chain system will beMeanwhile for a given 120583
120572 ΔΠ can be greater or less than
0 depending on the value of 120583119909 It appears that the benefit
achieved by the deployment of the multi-agent and RFIDsystem is comparable to the profit without any technologyinvestment Figure 4 from the analysis above represents thevariation of 119888
119905with 120572 for different values of 120590
120572 The more the
customer demand and the less effective the assembly systemis (that is the error rate 120572 is higher) the more importantthe technology investment will be for the decision whetherto adopt the information technology and the members inassembly supply chain can be benefited from the orderingquantity if we implement it Additionally the comparison ofthe Figure 5 reveals the variation of Δ119876 and ΔΠ with 120572 fordifferent demand
6 Optimal Strategy in Decentralized Scenario
In this section we mainly evaluate and analyze the impactof technology investment among three supply chain partnersOwning to independence relation they pursue themaximumprofits respectively Consequently the main issue will befocused on which partner takes the priority to employmulti-agent and RFID system and bear the higher costsThen two approaches are presented Similar to the previoussection the optimal benefits with or without adoption oftechnology by numerical solutions under the decentraliza-tion are also proposed In addition the retailer places anorder decision in terms of the wholesale price charged bythe manufacturer which book from the supplier and theoptimal order quantity has been the focus of description andexplanation
61 Optimal Decision in Decentralized Supply Chain withoutMulti-Agent and RFID Technology
611 The Basic Model of Two Suppliers According to theabove analysis the profit function of supplier 119894 that normallydepended on 119876
119894in decentralized scenario is given by
Π119863
119904119894
= 119908119894sdotmin (120572119876
119894 119902) minus 119904
119894[119902 minus 120572119876
119894]+
minus
2
sum
119894=1
119888119876119894 (11)
To make analysis and computation more convenientthe holding cost incurred by the supplier 119894 with less actualquantity delivered can be omitted Then we assume 119896
119894(119909) equiv
int119909
0120572119894119889119867119894(120572119894) according to the following formulas deduced
119864 [min (120572119894119876119894 119902)] = int
119902119876119894
0
120572119894119876119894ℎ119894(120572119894) 119889120572119894
+ int
1
119902119876119894
119902ℎ119894(120572119894) 119889120572119894
= 119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)
119864 [(119902 minus 120572119894119876119894)+
] = int
119902119876119894
0
(119902 minus 120572119894119876119894) ℎ119894(120572119894) 119889120572119894
= 119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)
(12)
We can easily get the expected profit of supplier
119864 [Π119863
119904119894
] = 119908119894[119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)]
minus 119904119894[119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)]
minus
2
sum
119894=1
119888119876119894
(13)
The first partial derivative ofΠ119863119904119894
with respect to119876119894can be
written as
120597Π119863
119904119894
120597119876119894
= 119908119894[119896119894(119902
119876119894
) + 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)]
minus 119904119894[119902ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
) minus 119896119894(119902
119876119894
)] minus 119888
= (119908119894+ 119904119894) 119896119894(119902
119876119894
) minus 119888
(14)
8 Mathematical Problems in Engineering
0
5000
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔΠ
=Π
c sc3minusΠ
c sc1
minus15000
minus10000
minus5000
(a)
minus500
0
500
1000
1500
2000
2500
3000
3500
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔQ
=Qc sc
3minusQc sc
1
(b)
Figure 5 Variation of Δ119876 and ΔΠ with 120572 for different values of 120583119909
Developing 120597Π119863119904119894
120597119876119894= 0 leads to the following expres-
sion meanwhile 1205972Π119863119904119894
1205971198762
119894= minus(119908
119894+ 119904119894)(11990221198763
119894) lt 0
1198911(1198761 1198762) = 119888 minus (119908
1+ 1199041) 1198961(119902
1198761
)
1198912(1198761 1198762) = 119888 minus (119908
2+ 1199042) 1198962(119902
1198762
)
(15)
For such setting we always have (1205971198911(1198761 1198762)1205971198762) minus
(1205971198912(1198761 1198762)1205971198762) = minus(119908
2+ 1199042)(11990221198763
2ℎ2)(119902119876
2) lt 0 for any
1198761and 119876
2 Thus as can be seen from the analysis above we
have the following important observation
Proposition 2 For any given order quantity from the man-ufacturer the sufficient conditions guaranteeing the existenceand uniqueness of the Nash equilibrium solution for thesuppliers under decentralized scenario are [1198761015840
1
lowast
1198761015840
2
lowast
]
612 The Best Response of The Manufacturer In the nextstage for Stackelberg leader-follower game we analyze themanufacturerrsquos best response
Π119863
1198981= int
119863119902
120572
[120572119902119908 minus 119904119898(119909 minus 120572119902)] ℎ (120572) 119889120572
+ int
120572
119863119902
119902119908ℎ (120572) 119889120572 minus 119888119902
(16)
where the first item represents that the manufacturer cannotsatisfy the retailerrsquos orders that is the manufacturerrsquos salesrevenue when 119863 gt 120572119902 The second item stands for the man-ufacturerrsquos sales revenue when 119863 lt 120572119902 From the equationabove we can get 1205972Π119863
11989811205971199022= minus(119908 + 119904
119898)(1199091199023ℎ)(120572) lt 0
which found that the manufacturerrsquos profit function Π1198631198981
isa concave function about the order quantity 119902 that is thereis only one optimal order quantity 119902lowast which makes themanufacturerrsquos profit be the maximum
int
119909119902lowast
120572
120572ℎ (120572) 119889120572 =119888
119908 + 119904119898
(17)
The optimal profit for manufacturer is given by
Π119863lowast
1198981= 119908119909 minus (119908 + 119904
119898) 119902119867(
119909
119902lowast) (18)
613 The Best Policy of the Retailer The retailerrsquos expectedprofit can be written as follow
Π119863
1199031= 119901119898int
120573
120573
119864min (119909 120573119902) 119892 (120573) 119889120573
+ 119904int
120573
120573
119864(120573119902 minus 119909)+
119892 (120573) 119889119909 119889120573 minus 119908119902
(19)
where 119864min(119909 120573119902) = 120573119902 minus int1205731199020(120573119902 minus 119909)119891(119909)119889119909 and 119864(120573119902 minus
119909)+= 120573119902 minus 119864min(119909 120573119902) = int120573119902
0(120573119902 minus 119909)119891(119909)119889119909 then we
simplify above equation
Π119863
1199031= minus119901119898minus 119904119898
4120583119909
(1205902
120573+ 1205832
120573) 1199022+ 119901119898120583120573119902 minus 119908119902 (20)
Mathematical Problems in Engineering 9
The optimal ordering quantity and profit of the retailerare respectively
119902lowast
1= 2120583119909
119901119898120583120573minus 119908
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
Π119863lowast
1199031
=
(119901119898120583120573minus 119908)2
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
120583119909
(21)
62 Optimal Decision in Decentralized Supply Chain withMulti-Agent and RFID Technology In order to achieve thehighest performance of the supply chain it is necessaryto analyze the optimal decision in decentralized supplychain with multi-agent and RFID technology As we allknown if the retailer invests in information technologythe upstream ones cannot benefit from this otherwise theopposite Obviously from the perspective of the supply chainit will be better for the whole supply chain with the upstreamtomake an RampD expenditureTherefore here we assume thatthe technology investment can be actively supported by thesuppliers and manufacturer as a whole
The retailer can benefit from the free-ride RFID adoptionand also 120573 = 1 Thus the retailerrsquos expected profit function isas follow
Π119863
1199032= 119901119898119864min (119909 119902) + 119904
119898119864(119902 minus 119909)
+
= 119901119898[119902 minus int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909]
+ 119904119898int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909 minus 119901119908119902
(22)
Since 1205972Π11987721198631205971199022 = minus(119901119898minus 119904119898)119891(119902) lt 0 the profit of
retailer is a concave function about 119902 Then we solve the firstderivative and get the corresponding optimal order quantityand total profit of the retailer
119902lowast
2= 2120583119909
119901119898minus 119901119908
119901119898minus 119904119898
Π119863lowast
1199032=(119901119898minus 119901119908)2
119901119898minus 119904119898
120583119909
(23)
Due to 120590120573gt 0 and 0 lt 120583
120573lt 1 it is easy to prove that
Π119863lowast
1199031lt Π119863lowast
1199032is tenable In another word after implementing
the information technology the retailer can remotelymonitorthe inventory and track its position in real time directlywhich avoids the impacts of the worse service inefficienttransportation out of stock or overstock and other inac-curate inventory problems so that the retailer needs notundertake cost for this Thus the retailerrsquos profit increasesafter the upstream has deployed the information technologyThe Figure 6 respectively shows the impact of changes with120583119909and 119888119905on the variation of Π119863
119903and ΔΠ We can treat the
suppliers and the manufacturer as the same decision-makingsubject in this section
Proposition 3 If 119888119905lt 119888dagger
119905 the manufacturerrsquos profit increases
after investing information technology so that he is willing toimplement the technology If 119888
119905gt 119888dagger
119905 the increased cost resulted
from the suppliersrsquo application of the multi-agent and RFIDsystem is larger than the obtained income so the suppliersand manufacturer have no motivation to invest technologyand is unwilling to do where 119888dagger
119905= 119901119908minus 119888 minus [119901
119908minus (119901119908+
119904119898)119866(119902119876
lowast
1)](119901119898120583120573minus 119901119908)(1205902
120573+ 1205832
120573)(119901119898minus 119901119908)
It is concluded that 119888dagger119905is the highest technology cost
which can be accepted by the upstream firm in decentralizedassembly supply chain At this time the income that thetechnology brings to the suppliers or the manufacturer justequals the newly increased cost resulted from the applicationof the technology When the investment cost is higher than119888dagger
119905 the suppliers or manufacturer will not choose to employ
the technology actively On the contrary if this cost is lowerthan 119888dagger
119905 the income that the supplier or manufacturer obtains
by information technology is higher than the technologyinvestment so that they will all have enormous enthusiasmin investing it
According to the above propositions in the situationof 1198881015840119905gt 119888119905gt 119888dagger
119905 although the suppliersrsquo application of
information technology can increase the profit of the supplychain his profit will reduce Furthermore the upstream firmhas nomotivation to usemulti-agent andRFID system so thatthewhole supply chain cannot profit from the technology andthe maximum profit of the supply chain cannot be realizedThus it is necessary to study the supply chain coordinationin the situation of 1198881015840
119905lt 119888119905lt 119888dagger
119905to make the supplier
have enthusiasm to adopt this technology and reduce theinaccuracy of the supply chain inventory as well as increasethe performance of the supply chain and its members
7 Numerical Analysis
Finally a numerical example is taken to validate the ratio-nality and feasibility of the theoretics and method Whenthe customer demand follows uniform distribution pattern119909 sim 119880(0 200) we insert the following constant values intothe corresponding optimal expressions 119901
119908= 20 119888 = 12
119901119908= 20 119901
119898= 30 V = 8 and 119904
119898= 5 when 0 lt 119888
119905lt 78
the upstream ones are unwilling to use RFID andmulti-agenttechnology because the profit will be reduced after adoptingit
Furthermore according to Figure 7 we can find thatthe increased profit of the manufacturer and the retaileris a linear function about 120573 The increased profit of themanufacturer monotonously reduces as the shelf inventoryerror rate increases while the increased profit of the retailermonotonously increases as the coefficient 120573 increases Whenthe factor of the inventory error 0 lt 120573 lt 04 themanufacturerrsquos profit is beneficial from reasonable utilizationof information technology at this time the upstream firmis willing to make a investment If 120573 gt 02 the retailerrsquosprofit increases after he has deployed RFID and multi-agent technology Therefore choosing the factor of the shelfinventory error rate at the interval of 02 lt 120573 lt 04 can
10 Mathematical Problems in Engineering
0 50 100 150 2000
200
400
600
800
1000
1200
120583x
ΠDlowast
r1
ΠDlowast
r2
ΠDlowast
r
(a)
0 2 4 6 8 10minus250
minus200
minus150
minus100
minus50
0
50
100
ΔΠ
=Π
Dlowast
m2minusΠ
Dlowast
m1
ct
(b)
Figure 6 Variation of Π119863119903with 120583
119909and ΔΠ with 119888
119905
minus1000
minus500
0
500
1000
1500
2000
0 02 04 06 08 1120573
ΔΠ
120573 sim ΔΠr
120573 sim ΔΠm
120573 sim ΔΠr 25120573 sim ΔΠm 25
ct = 1 ct =
ct = ct =1
Figure 7 Variation of ΔΠ119903and ΔΠ
119898with 120573 for different values of
119888119905
ensure that the profit increases to make both the upstreamand downstream firm achieve a win-win situation
Moreover the suppliers aim at encouraging the retailer toorder more goods but the retailer directs at freely riding theinnovative technology from the upstream ones Thus theycan consider the coordination model based on the revenuesharing That is the suppliers and manufacturer undertakethe technology investment cost alone and give price subsidyto the retailer on the condition that the wholesale price isnot changed Or the retailer gives parts of sales revenue tothe upstream ones at the end of a sales season in order to
stimulate and encourage the suppliers to increase the RampDinvestment
Being restrained by personal reason the members of thesupply chain will first consider their own benefit and will takethe maximization of the benefit of the whole supply chaininto consideration on the premise that their own benefit issatisfied Thus to ensure that the members are willing toaccept the revenue sharing contract it is necessary to guaran-tee that the profit obtained by both parties under this contractwith the supply chain that has adopted this technology isnot less than the one that has been obtained in decentralizedscenario before the contract is made In other words it isworth considering to ensure that the members of the supplychain can achieve win-win situation with the restraint of thecontract In other words the coordination mechanism is toensure the following two inequalities tenable ΔΠ
119903gt 0 and
ΔΠ119898gt 0
8 Concluding Remarks
The information technology has been heralded as a majorbreakthrough to enhance the efficiency of assembly sup-ply chain This paper mainly aims to explore the impactof information technology on supply chain managementespecially the prospects of multi-agent and RFID invest-ment value Meanwhile the possibility and reliability of themodel are examined through the qualitative and quantitativeanalyse of the multi-agent and RFID system investmentAdditionally supply chain partnership is an important factorof performance in supply chain operations It is significantto strengthen the supply chain cooperation managementFinally this paper mainly aims at a perfectly competitivemarket and carries out the research in the situation that themarket demands are uniformly distributed Future researches
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
Submit your manuscripts athttpwwwhindawicom
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
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Mathematical Problems in Engineering
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Differential EquationsInternational Journal of
Volume 2014
Applied MathematicsJournal of
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Probability and StatisticsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Journal of
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Mathematical PhysicsAdvances in
Complex AnalysisJournal of
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OptimizationJournal of
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CombinatoricsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of
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Operations ResearchAdvances in
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Function Spaces
Abstract and Applied AnalysisHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of Mathematics and Mathematical Sciences
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
The Scientific World JournalHindawi Publishing Corporation httpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Algebra
Discrete Dynamics in Nature and Society
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Decision SciencesAdvances in
Discrete MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom
Volume 2014 Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Stochastic AnalysisInternational Journal of
6 Mathematical Problems in Engineering
For the different yield problem of two suppliers in orderto derive the optimal order decision we must distinguish the
different positions of the distributions of 119863(119909) and 120572120573119876119894to
get the expression of the expected profit Then the aboveequation for each configuration is shown in
Π119888
sc2=
Π119888
sc2 = 1199011198981205721205731198761 minus 119904119898 (119863 minus 1205721205731198761) minus 119888 (1198761 + 1198762) 1205721205731198761 lt 1205721205731198762 lt 119863 or 1205721205731198761lt 119863 lt 120572120573119876
2
Π119888
sc2 = 1199011198981205721205731198762 minus 119904119898 (119863 minus 1205721205731198762) minus 119888 (1198761 + 1198762) 1205721205731198762 lt 1205721205731198761 lt 119863 or 1205721205731198762lt 119863 lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198762 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198762lt 120572120573119876
1
Π119888
sc2 = 119901119898119863 + V (1205721205731198761 minus 119863) minus 119888 (1198761 + 1198762) 119863 lt 1205721205731198761lt 120572120573119876
2
(7)
To refresh the equation set we obtain the optimal expect-ed profit of the whole supply chain
Π119888lowast
sc2 = (119901119898 + 119904119898 minus V) sdotmin (1205721205731198761 120572120573119876
2 119863)
minus 119904119898119863 + V sdotmin (120572120573119876
1 120572120573119876
2) minus 119888 (119876
1+ 1198762)
(8)
52 Optimal Decision in Centralized Supply Chain withMulti-Agent and RFID Technology Next we investigate the central-ized systemwith technology input in detailThe RFID systemcan identify items conveniently by virtue of the characteristicsof noncontact remote distance and read-write so as toimprove the real time of assembly field monitoring andpromote synchronization of logistic flow and informationflow What is more multi-agent system including agentassembly nodes and agent logistics nodes can be modeleduniformly to establish the mapping relation between RFIDtag and assembly executive state Moreover the feasibilityof assembly executive process can be enhanced so as to getreal time and accuracy of assembly manufacturer processmonitoring Under such circumstances all synchronizationprogress status and any errors in assembly supply chainprocess can be reflected through the updated information ofRFID tag
Above all as multi-agent and RFID system provides anaccurate information of the current inventory it contributesto the monitoring and management of the products inrealtime Meanwhile there is also the technology investmentcost 119888
119905 Therefore the unit purchasing cost is 119888 + 119888
119905 The
excepted profits are as follows
Π119888
sc3 = 119901119898min (119863119876) + 119904119898[119876 minus 119863]
+minus 2 (119888 + 119888
119905) 119876 (9)
where 119864min(119909 119876) = 119876 minus int1198760(119876 minus 119909)119891(119909)119889119909 and [119909 minus 119876]+ =
119876 minus 119864min(119909 119876) = int1198760(119876 minus 119909)119891(119909)119889119909 Since 1205972Π119888sc3120597119876
2=
minus119901119898minus 1199041198982120583119909lt 0 the preceding equation is a concave
function about 119876 that is it has the only optimal solution119876lowast which achieves the maximum profit of the whole supply
chain
DifferentiatingΠ119888sc3 with respect to119876 the optimal order-ing quantity and profit of the whole supply chain are givenby
119876119888lowast
sc3 = 2120583119909119901119898minus 119888 minus 119888
119905
119901119898minus 119904119898
Π119888lowast
sc3 =(119901119898minus 119888 minus 119905)
2
119901119898minus 119904119898
120583119909
(10)
53 The Advantages of Deployment with Technology Invest-ment In this section we focus on seeking answers fromthe following questions how to solve such issues as theassembly manufacture errors and shelf shrinkage by meansof multi-agent and RFID system more effectively What arethe levels of optimal investment that enjoy the technologyeconomically feasible in centralized supply chain
Since all members take the overall interests of the wholesupply chain into account they pursue the global profitmaximization and carry on the technology innovation withinformation sharing in the centralized scenario As we allknow if they do not introduce technologies they will sufferthe impacts of assembly errors and inaccurate inventoryConversely they implement it but undertake the technicalcost
To analyze the profit and loss with technology invest-ments the benefit function ΔΠ119888 is introduced Clearly whenΔΠ119888= 0 there exists a break-even point 1198881015840
119905which makes
technical investment always profitable In other words theincreased profits generated by innovative technology arealways larger than the investment cost ofmulti-agent softwareand RFID tags In detail one essential condition is to satisfythe inequality ΔΠ119888 gt 0
Proposition 1 The threshold value of technology investmentcost is 1198881015840
119905= 119901119898minus 119888 minus ((119901
119898120583120573120583120572minus 119888)radic(120590
2
120573+ 1205832
120573)(1205902120572+ 1205832120572))
When 119888119905lt 1198881015840
119905 the optimal solution is to make investment for
situation in the centralized scenario when 119888119905gt 1198881015840
119905 without
any investment on innovative technology being beneficial forthe whole supply chain
As can be seen from the above expression we find that119888119905has relationship not only with 120583
120572and 120583
120573 but also with the
selling price of manufacturer as well It further proves thatthe higher the selling price 119901
119898is the higher the technology
Mathematical Problems in Engineering 7
0 02 04 06 08 10
20
40
60
80
100
120
120572
120590120572 = 015
120590120572 = 025120590120572 = 035
c t
Figure 4 Variation of 119888119905with 120572 for different values of 120590
120572
cost that can be accepted by the supply chain system will beMeanwhile for a given 120583
120572 ΔΠ can be greater or less than
0 depending on the value of 120583119909 It appears that the benefit
achieved by the deployment of the multi-agent and RFIDsystem is comparable to the profit without any technologyinvestment Figure 4 from the analysis above represents thevariation of 119888
119905with 120572 for different values of 120590
120572 The more the
customer demand and the less effective the assembly systemis (that is the error rate 120572 is higher) the more importantthe technology investment will be for the decision whetherto adopt the information technology and the members inassembly supply chain can be benefited from the orderingquantity if we implement it Additionally the comparison ofthe Figure 5 reveals the variation of Δ119876 and ΔΠ with 120572 fordifferent demand
6 Optimal Strategy in Decentralized Scenario
In this section we mainly evaluate and analyze the impactof technology investment among three supply chain partnersOwning to independence relation they pursue themaximumprofits respectively Consequently the main issue will befocused on which partner takes the priority to employmulti-agent and RFID system and bear the higher costsThen two approaches are presented Similar to the previoussection the optimal benefits with or without adoption oftechnology by numerical solutions under the decentraliza-tion are also proposed In addition the retailer places anorder decision in terms of the wholesale price charged bythe manufacturer which book from the supplier and theoptimal order quantity has been the focus of description andexplanation
61 Optimal Decision in Decentralized Supply Chain withoutMulti-Agent and RFID Technology
611 The Basic Model of Two Suppliers According to theabove analysis the profit function of supplier 119894 that normallydepended on 119876
119894in decentralized scenario is given by
Π119863
119904119894
= 119908119894sdotmin (120572119876
119894 119902) minus 119904
119894[119902 minus 120572119876
119894]+
minus
2
sum
119894=1
119888119876119894 (11)
To make analysis and computation more convenientthe holding cost incurred by the supplier 119894 with less actualquantity delivered can be omitted Then we assume 119896
119894(119909) equiv
int119909
0120572119894119889119867119894(120572119894) according to the following formulas deduced
119864 [min (120572119894119876119894 119902)] = int
119902119876119894
0
120572119894119876119894ℎ119894(120572119894) 119889120572119894
+ int
1
119902119876119894
119902ℎ119894(120572119894) 119889120572119894
= 119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)
119864 [(119902 minus 120572119894119876119894)+
] = int
119902119876119894
0
(119902 minus 120572119894119876119894) ℎ119894(120572119894) 119889120572119894
= 119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)
(12)
We can easily get the expected profit of supplier
119864 [Π119863
119904119894
] = 119908119894[119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)]
minus 119904119894[119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)]
minus
2
sum
119894=1
119888119876119894
(13)
The first partial derivative ofΠ119863119904119894
with respect to119876119894can be
written as
120597Π119863
119904119894
120597119876119894
= 119908119894[119896119894(119902
119876119894
) + 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)]
minus 119904119894[119902ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
) minus 119896119894(119902
119876119894
)] minus 119888
= (119908119894+ 119904119894) 119896119894(119902
119876119894
) minus 119888
(14)
8 Mathematical Problems in Engineering
0
5000
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔΠ
=Π
c sc3minusΠ
c sc1
minus15000
minus10000
minus5000
(a)
minus500
0
500
1000
1500
2000
2500
3000
3500
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔQ
=Qc sc
3minusQc sc
1
(b)
Figure 5 Variation of Δ119876 and ΔΠ with 120572 for different values of 120583119909
Developing 120597Π119863119904119894
120597119876119894= 0 leads to the following expres-
sion meanwhile 1205972Π119863119904119894
1205971198762
119894= minus(119908
119894+ 119904119894)(11990221198763
119894) lt 0
1198911(1198761 1198762) = 119888 minus (119908
1+ 1199041) 1198961(119902
1198761
)
1198912(1198761 1198762) = 119888 minus (119908
2+ 1199042) 1198962(119902
1198762
)
(15)
For such setting we always have (1205971198911(1198761 1198762)1205971198762) minus
(1205971198912(1198761 1198762)1205971198762) = minus(119908
2+ 1199042)(11990221198763
2ℎ2)(119902119876
2) lt 0 for any
1198761and 119876
2 Thus as can be seen from the analysis above we
have the following important observation
Proposition 2 For any given order quantity from the man-ufacturer the sufficient conditions guaranteeing the existenceand uniqueness of the Nash equilibrium solution for thesuppliers under decentralized scenario are [1198761015840
1
lowast
1198761015840
2
lowast
]
612 The Best Response of The Manufacturer In the nextstage for Stackelberg leader-follower game we analyze themanufacturerrsquos best response
Π119863
1198981= int
119863119902
120572
[120572119902119908 minus 119904119898(119909 minus 120572119902)] ℎ (120572) 119889120572
+ int
120572
119863119902
119902119908ℎ (120572) 119889120572 minus 119888119902
(16)
where the first item represents that the manufacturer cannotsatisfy the retailerrsquos orders that is the manufacturerrsquos salesrevenue when 119863 gt 120572119902 The second item stands for the man-ufacturerrsquos sales revenue when 119863 lt 120572119902 From the equationabove we can get 1205972Π119863
11989811205971199022= minus(119908 + 119904
119898)(1199091199023ℎ)(120572) lt 0
which found that the manufacturerrsquos profit function Π1198631198981
isa concave function about the order quantity 119902 that is thereis only one optimal order quantity 119902lowast which makes themanufacturerrsquos profit be the maximum
int
119909119902lowast
120572
120572ℎ (120572) 119889120572 =119888
119908 + 119904119898
(17)
The optimal profit for manufacturer is given by
Π119863lowast
1198981= 119908119909 minus (119908 + 119904
119898) 119902119867(
119909
119902lowast) (18)
613 The Best Policy of the Retailer The retailerrsquos expectedprofit can be written as follow
Π119863
1199031= 119901119898int
120573
120573
119864min (119909 120573119902) 119892 (120573) 119889120573
+ 119904int
120573
120573
119864(120573119902 minus 119909)+
119892 (120573) 119889119909 119889120573 minus 119908119902
(19)
where 119864min(119909 120573119902) = 120573119902 minus int1205731199020(120573119902 minus 119909)119891(119909)119889119909 and 119864(120573119902 minus
119909)+= 120573119902 minus 119864min(119909 120573119902) = int120573119902
0(120573119902 minus 119909)119891(119909)119889119909 then we
simplify above equation
Π119863
1199031= minus119901119898minus 119904119898
4120583119909
(1205902
120573+ 1205832
120573) 1199022+ 119901119898120583120573119902 minus 119908119902 (20)
Mathematical Problems in Engineering 9
The optimal ordering quantity and profit of the retailerare respectively
119902lowast
1= 2120583119909
119901119898120583120573minus 119908
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
Π119863lowast
1199031
=
(119901119898120583120573minus 119908)2
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
120583119909
(21)
62 Optimal Decision in Decentralized Supply Chain withMulti-Agent and RFID Technology In order to achieve thehighest performance of the supply chain it is necessaryto analyze the optimal decision in decentralized supplychain with multi-agent and RFID technology As we allknown if the retailer invests in information technologythe upstream ones cannot benefit from this otherwise theopposite Obviously from the perspective of the supply chainit will be better for the whole supply chain with the upstreamtomake an RampD expenditureTherefore here we assume thatthe technology investment can be actively supported by thesuppliers and manufacturer as a whole
The retailer can benefit from the free-ride RFID adoptionand also 120573 = 1 Thus the retailerrsquos expected profit function isas follow
Π119863
1199032= 119901119898119864min (119909 119902) + 119904
119898119864(119902 minus 119909)
+
= 119901119898[119902 minus int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909]
+ 119904119898int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909 minus 119901119908119902
(22)
Since 1205972Π11987721198631205971199022 = minus(119901119898minus 119904119898)119891(119902) lt 0 the profit of
retailer is a concave function about 119902 Then we solve the firstderivative and get the corresponding optimal order quantityand total profit of the retailer
119902lowast
2= 2120583119909
119901119898minus 119901119908
119901119898minus 119904119898
Π119863lowast
1199032=(119901119898minus 119901119908)2
119901119898minus 119904119898
120583119909
(23)
Due to 120590120573gt 0 and 0 lt 120583
120573lt 1 it is easy to prove that
Π119863lowast
1199031lt Π119863lowast
1199032is tenable In another word after implementing
the information technology the retailer can remotelymonitorthe inventory and track its position in real time directlywhich avoids the impacts of the worse service inefficienttransportation out of stock or overstock and other inac-curate inventory problems so that the retailer needs notundertake cost for this Thus the retailerrsquos profit increasesafter the upstream has deployed the information technologyThe Figure 6 respectively shows the impact of changes with120583119909and 119888119905on the variation of Π119863
119903and ΔΠ We can treat the
suppliers and the manufacturer as the same decision-makingsubject in this section
Proposition 3 If 119888119905lt 119888dagger
119905 the manufacturerrsquos profit increases
after investing information technology so that he is willing toimplement the technology If 119888
119905gt 119888dagger
119905 the increased cost resulted
from the suppliersrsquo application of the multi-agent and RFIDsystem is larger than the obtained income so the suppliersand manufacturer have no motivation to invest technologyand is unwilling to do where 119888dagger
119905= 119901119908minus 119888 minus [119901
119908minus (119901119908+
119904119898)119866(119902119876
lowast
1)](119901119898120583120573minus 119901119908)(1205902
120573+ 1205832
120573)(119901119898minus 119901119908)
It is concluded that 119888dagger119905is the highest technology cost
which can be accepted by the upstream firm in decentralizedassembly supply chain At this time the income that thetechnology brings to the suppliers or the manufacturer justequals the newly increased cost resulted from the applicationof the technology When the investment cost is higher than119888dagger
119905 the suppliers or manufacturer will not choose to employ
the technology actively On the contrary if this cost is lowerthan 119888dagger
119905 the income that the supplier or manufacturer obtains
by information technology is higher than the technologyinvestment so that they will all have enormous enthusiasmin investing it
According to the above propositions in the situationof 1198881015840119905gt 119888119905gt 119888dagger
119905 although the suppliersrsquo application of
information technology can increase the profit of the supplychain his profit will reduce Furthermore the upstream firmhas nomotivation to usemulti-agent andRFID system so thatthewhole supply chain cannot profit from the technology andthe maximum profit of the supply chain cannot be realizedThus it is necessary to study the supply chain coordinationin the situation of 1198881015840
119905lt 119888119905lt 119888dagger
119905to make the supplier
have enthusiasm to adopt this technology and reduce theinaccuracy of the supply chain inventory as well as increasethe performance of the supply chain and its members
7 Numerical Analysis
Finally a numerical example is taken to validate the ratio-nality and feasibility of the theoretics and method Whenthe customer demand follows uniform distribution pattern119909 sim 119880(0 200) we insert the following constant values intothe corresponding optimal expressions 119901
119908= 20 119888 = 12
119901119908= 20 119901
119898= 30 V = 8 and 119904
119898= 5 when 0 lt 119888
119905lt 78
the upstream ones are unwilling to use RFID andmulti-agenttechnology because the profit will be reduced after adoptingit
Furthermore according to Figure 7 we can find thatthe increased profit of the manufacturer and the retaileris a linear function about 120573 The increased profit of themanufacturer monotonously reduces as the shelf inventoryerror rate increases while the increased profit of the retailermonotonously increases as the coefficient 120573 increases Whenthe factor of the inventory error 0 lt 120573 lt 04 themanufacturerrsquos profit is beneficial from reasonable utilizationof information technology at this time the upstream firmis willing to make a investment If 120573 gt 02 the retailerrsquosprofit increases after he has deployed RFID and multi-agent technology Therefore choosing the factor of the shelfinventory error rate at the interval of 02 lt 120573 lt 04 can
10 Mathematical Problems in Engineering
0 50 100 150 2000
200
400
600
800
1000
1200
120583x
ΠDlowast
r1
ΠDlowast
r2
ΠDlowast
r
(a)
0 2 4 6 8 10minus250
minus200
minus150
minus100
minus50
0
50
100
ΔΠ
=Π
Dlowast
m2minusΠ
Dlowast
m1
ct
(b)
Figure 6 Variation of Π119863119903with 120583
119909and ΔΠ with 119888
119905
minus1000
minus500
0
500
1000
1500
2000
0 02 04 06 08 1120573
ΔΠ
120573 sim ΔΠr
120573 sim ΔΠm
120573 sim ΔΠr 25120573 sim ΔΠm 25
ct = 1 ct =
ct = ct =1
Figure 7 Variation of ΔΠ119903and ΔΠ
119898with 120573 for different values of
119888119905
ensure that the profit increases to make both the upstreamand downstream firm achieve a win-win situation
Moreover the suppliers aim at encouraging the retailer toorder more goods but the retailer directs at freely riding theinnovative technology from the upstream ones Thus theycan consider the coordination model based on the revenuesharing That is the suppliers and manufacturer undertakethe technology investment cost alone and give price subsidyto the retailer on the condition that the wholesale price isnot changed Or the retailer gives parts of sales revenue tothe upstream ones at the end of a sales season in order to
stimulate and encourage the suppliers to increase the RampDinvestment
Being restrained by personal reason the members of thesupply chain will first consider their own benefit and will takethe maximization of the benefit of the whole supply chaininto consideration on the premise that their own benefit issatisfied Thus to ensure that the members are willing toaccept the revenue sharing contract it is necessary to guaran-tee that the profit obtained by both parties under this contractwith the supply chain that has adopted this technology isnot less than the one that has been obtained in decentralizedscenario before the contract is made In other words it isworth considering to ensure that the members of the supplychain can achieve win-win situation with the restraint of thecontract In other words the coordination mechanism is toensure the following two inequalities tenable ΔΠ
119903gt 0 and
ΔΠ119898gt 0
8 Concluding Remarks
The information technology has been heralded as a majorbreakthrough to enhance the efficiency of assembly sup-ply chain This paper mainly aims to explore the impactof information technology on supply chain managementespecially the prospects of multi-agent and RFID invest-ment value Meanwhile the possibility and reliability of themodel are examined through the qualitative and quantitativeanalyse of the multi-agent and RFID system investmentAdditionally supply chain partnership is an important factorof performance in supply chain operations It is significantto strengthen the supply chain cooperation managementFinally this paper mainly aims at a perfectly competitivemarket and carries out the research in the situation that themarket demands are uniformly distributed Future researches
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
Submit your manuscripts athttpwwwhindawicom
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
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Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical Problems in Engineering
Hindawi Publishing Corporationhttpwwwhindawicom
Differential EquationsInternational Journal of
Volume 2014
Applied MathematicsJournal of
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Probability and StatisticsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
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Mathematical PhysicsAdvances in
Complex AnalysisJournal of
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OptimizationJournal of
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CombinatoricsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of
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Operations ResearchAdvances in
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Function Spaces
Abstract and Applied AnalysisHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of Mathematics and Mathematical Sciences
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The Scientific World JournalHindawi Publishing Corporation httpwwwhindawicom Volume 2014
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Discrete Dynamics in Nature and Society
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Decision SciencesAdvances in
Discrete MathematicsJournal of
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Volume 2014 Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Stochastic AnalysisInternational Journal of
Mathematical Problems in Engineering 7
0 02 04 06 08 10
20
40
60
80
100
120
120572
120590120572 = 015
120590120572 = 025120590120572 = 035
c t
Figure 4 Variation of 119888119905with 120572 for different values of 120590
120572
cost that can be accepted by the supply chain system will beMeanwhile for a given 120583
120572 ΔΠ can be greater or less than
0 depending on the value of 120583119909 It appears that the benefit
achieved by the deployment of the multi-agent and RFIDsystem is comparable to the profit without any technologyinvestment Figure 4 from the analysis above represents thevariation of 119888
119905with 120572 for different values of 120590
120572 The more the
customer demand and the less effective the assembly systemis (that is the error rate 120572 is higher) the more importantthe technology investment will be for the decision whetherto adopt the information technology and the members inassembly supply chain can be benefited from the orderingquantity if we implement it Additionally the comparison ofthe Figure 5 reveals the variation of Δ119876 and ΔΠ with 120572 fordifferent demand
6 Optimal Strategy in Decentralized Scenario
In this section we mainly evaluate and analyze the impactof technology investment among three supply chain partnersOwning to independence relation they pursue themaximumprofits respectively Consequently the main issue will befocused on which partner takes the priority to employmulti-agent and RFID system and bear the higher costsThen two approaches are presented Similar to the previoussection the optimal benefits with or without adoption oftechnology by numerical solutions under the decentraliza-tion are also proposed In addition the retailer places anorder decision in terms of the wholesale price charged bythe manufacturer which book from the supplier and theoptimal order quantity has been the focus of description andexplanation
61 Optimal Decision in Decentralized Supply Chain withoutMulti-Agent and RFID Technology
611 The Basic Model of Two Suppliers According to theabove analysis the profit function of supplier 119894 that normallydepended on 119876
119894in decentralized scenario is given by
Π119863
119904119894
= 119908119894sdotmin (120572119876
119894 119902) minus 119904
119894[119902 minus 120572119876
119894]+
minus
2
sum
119894=1
119888119876119894 (11)
To make analysis and computation more convenientthe holding cost incurred by the supplier 119894 with less actualquantity delivered can be omitted Then we assume 119896
119894(119909) equiv
int119909
0120572119894119889119867119894(120572119894) according to the following formulas deduced
119864 [min (120572119894119876119894 119902)] = int
119902119876119894
0
120572119894119876119894ℎ119894(120572119894) 119889120572119894
+ int
1
119902119876119894
119902ℎ119894(120572119894) 119889120572119894
= 119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)
119864 [(119902 minus 120572119894119876119894)+
] = int
119902119876119894
0
(119902 minus 120572119894119876119894) ℎ119894(120572119894) 119889120572119894
= 119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)
(12)
We can easily get the expected profit of supplier
119864 [Π119863
119904119894
] = 119908119894[119876119894119896119894(119902
119876119894
) + 119902119867119894(119902
119876119894
)]
minus 119904119894[119902119867119894(119902
119876119894
) minus 119876119894119896119894(119902
119876119894
)]
minus
2
sum
119894=1
119888119876119894
(13)
The first partial derivative ofΠ119863119904119894
with respect to119876119894can be
written as
120597Π119863
119904119894
120597119876119894
= 119908119894[119896119894(119902
119876119894
) + 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)]
minus 119904119894[119902ℎ119894(119902
119876119894
)(minus119902
1198762
119894
)
minus 119876119894
119902
119876119894
ℎ119894(119902
119876119894
)(minus119902
1198762
119894
) minus 119896119894(119902
119876119894
)] minus 119888
= (119908119894+ 119904119894) 119896119894(119902
119876119894
) minus 119888
(14)
8 Mathematical Problems in Engineering
0
5000
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔΠ
=Π
c sc3minusΠ
c sc1
minus15000
minus10000
minus5000
(a)
minus500
0
500
1000
1500
2000
2500
3000
3500
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔQ
=Qc sc
3minusQc sc
1
(b)
Figure 5 Variation of Δ119876 and ΔΠ with 120572 for different values of 120583119909
Developing 120597Π119863119904119894
120597119876119894= 0 leads to the following expres-
sion meanwhile 1205972Π119863119904119894
1205971198762
119894= minus(119908
119894+ 119904119894)(11990221198763
119894) lt 0
1198911(1198761 1198762) = 119888 minus (119908
1+ 1199041) 1198961(119902
1198761
)
1198912(1198761 1198762) = 119888 minus (119908
2+ 1199042) 1198962(119902
1198762
)
(15)
For such setting we always have (1205971198911(1198761 1198762)1205971198762) minus
(1205971198912(1198761 1198762)1205971198762) = minus(119908
2+ 1199042)(11990221198763
2ℎ2)(119902119876
2) lt 0 for any
1198761and 119876
2 Thus as can be seen from the analysis above we
have the following important observation
Proposition 2 For any given order quantity from the man-ufacturer the sufficient conditions guaranteeing the existenceand uniqueness of the Nash equilibrium solution for thesuppliers under decentralized scenario are [1198761015840
1
lowast
1198761015840
2
lowast
]
612 The Best Response of The Manufacturer In the nextstage for Stackelberg leader-follower game we analyze themanufacturerrsquos best response
Π119863
1198981= int
119863119902
120572
[120572119902119908 minus 119904119898(119909 minus 120572119902)] ℎ (120572) 119889120572
+ int
120572
119863119902
119902119908ℎ (120572) 119889120572 minus 119888119902
(16)
where the first item represents that the manufacturer cannotsatisfy the retailerrsquos orders that is the manufacturerrsquos salesrevenue when 119863 gt 120572119902 The second item stands for the man-ufacturerrsquos sales revenue when 119863 lt 120572119902 From the equationabove we can get 1205972Π119863
11989811205971199022= minus(119908 + 119904
119898)(1199091199023ℎ)(120572) lt 0
which found that the manufacturerrsquos profit function Π1198631198981
isa concave function about the order quantity 119902 that is thereis only one optimal order quantity 119902lowast which makes themanufacturerrsquos profit be the maximum
int
119909119902lowast
120572
120572ℎ (120572) 119889120572 =119888
119908 + 119904119898
(17)
The optimal profit for manufacturer is given by
Π119863lowast
1198981= 119908119909 minus (119908 + 119904
119898) 119902119867(
119909
119902lowast) (18)
613 The Best Policy of the Retailer The retailerrsquos expectedprofit can be written as follow
Π119863
1199031= 119901119898int
120573
120573
119864min (119909 120573119902) 119892 (120573) 119889120573
+ 119904int
120573
120573
119864(120573119902 minus 119909)+
119892 (120573) 119889119909 119889120573 minus 119908119902
(19)
where 119864min(119909 120573119902) = 120573119902 minus int1205731199020(120573119902 minus 119909)119891(119909)119889119909 and 119864(120573119902 minus
119909)+= 120573119902 minus 119864min(119909 120573119902) = int120573119902
0(120573119902 minus 119909)119891(119909)119889119909 then we
simplify above equation
Π119863
1199031= minus119901119898minus 119904119898
4120583119909
(1205902
120573+ 1205832
120573) 1199022+ 119901119898120583120573119902 minus 119908119902 (20)
Mathematical Problems in Engineering 9
The optimal ordering quantity and profit of the retailerare respectively
119902lowast
1= 2120583119909
119901119898120583120573minus 119908
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
Π119863lowast
1199031
=
(119901119898120583120573minus 119908)2
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
120583119909
(21)
62 Optimal Decision in Decentralized Supply Chain withMulti-Agent and RFID Technology In order to achieve thehighest performance of the supply chain it is necessaryto analyze the optimal decision in decentralized supplychain with multi-agent and RFID technology As we allknown if the retailer invests in information technologythe upstream ones cannot benefit from this otherwise theopposite Obviously from the perspective of the supply chainit will be better for the whole supply chain with the upstreamtomake an RampD expenditureTherefore here we assume thatthe technology investment can be actively supported by thesuppliers and manufacturer as a whole
The retailer can benefit from the free-ride RFID adoptionand also 120573 = 1 Thus the retailerrsquos expected profit function isas follow
Π119863
1199032= 119901119898119864min (119909 119902) + 119904
119898119864(119902 minus 119909)
+
= 119901119898[119902 minus int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909]
+ 119904119898int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909 minus 119901119908119902
(22)
Since 1205972Π11987721198631205971199022 = minus(119901119898minus 119904119898)119891(119902) lt 0 the profit of
retailer is a concave function about 119902 Then we solve the firstderivative and get the corresponding optimal order quantityand total profit of the retailer
119902lowast
2= 2120583119909
119901119898minus 119901119908
119901119898minus 119904119898
Π119863lowast
1199032=(119901119898minus 119901119908)2
119901119898minus 119904119898
120583119909
(23)
Due to 120590120573gt 0 and 0 lt 120583
120573lt 1 it is easy to prove that
Π119863lowast
1199031lt Π119863lowast
1199032is tenable In another word after implementing
the information technology the retailer can remotelymonitorthe inventory and track its position in real time directlywhich avoids the impacts of the worse service inefficienttransportation out of stock or overstock and other inac-curate inventory problems so that the retailer needs notundertake cost for this Thus the retailerrsquos profit increasesafter the upstream has deployed the information technologyThe Figure 6 respectively shows the impact of changes with120583119909and 119888119905on the variation of Π119863
119903and ΔΠ We can treat the
suppliers and the manufacturer as the same decision-makingsubject in this section
Proposition 3 If 119888119905lt 119888dagger
119905 the manufacturerrsquos profit increases
after investing information technology so that he is willing toimplement the technology If 119888
119905gt 119888dagger
119905 the increased cost resulted
from the suppliersrsquo application of the multi-agent and RFIDsystem is larger than the obtained income so the suppliersand manufacturer have no motivation to invest technologyand is unwilling to do where 119888dagger
119905= 119901119908minus 119888 minus [119901
119908minus (119901119908+
119904119898)119866(119902119876
lowast
1)](119901119898120583120573minus 119901119908)(1205902
120573+ 1205832
120573)(119901119898minus 119901119908)
It is concluded that 119888dagger119905is the highest technology cost
which can be accepted by the upstream firm in decentralizedassembly supply chain At this time the income that thetechnology brings to the suppliers or the manufacturer justequals the newly increased cost resulted from the applicationof the technology When the investment cost is higher than119888dagger
119905 the suppliers or manufacturer will not choose to employ
the technology actively On the contrary if this cost is lowerthan 119888dagger
119905 the income that the supplier or manufacturer obtains
by information technology is higher than the technologyinvestment so that they will all have enormous enthusiasmin investing it
According to the above propositions in the situationof 1198881015840119905gt 119888119905gt 119888dagger
119905 although the suppliersrsquo application of
information technology can increase the profit of the supplychain his profit will reduce Furthermore the upstream firmhas nomotivation to usemulti-agent andRFID system so thatthewhole supply chain cannot profit from the technology andthe maximum profit of the supply chain cannot be realizedThus it is necessary to study the supply chain coordinationin the situation of 1198881015840
119905lt 119888119905lt 119888dagger
119905to make the supplier
have enthusiasm to adopt this technology and reduce theinaccuracy of the supply chain inventory as well as increasethe performance of the supply chain and its members
7 Numerical Analysis
Finally a numerical example is taken to validate the ratio-nality and feasibility of the theoretics and method Whenthe customer demand follows uniform distribution pattern119909 sim 119880(0 200) we insert the following constant values intothe corresponding optimal expressions 119901
119908= 20 119888 = 12
119901119908= 20 119901
119898= 30 V = 8 and 119904
119898= 5 when 0 lt 119888
119905lt 78
the upstream ones are unwilling to use RFID andmulti-agenttechnology because the profit will be reduced after adoptingit
Furthermore according to Figure 7 we can find thatthe increased profit of the manufacturer and the retaileris a linear function about 120573 The increased profit of themanufacturer monotonously reduces as the shelf inventoryerror rate increases while the increased profit of the retailermonotonously increases as the coefficient 120573 increases Whenthe factor of the inventory error 0 lt 120573 lt 04 themanufacturerrsquos profit is beneficial from reasonable utilizationof information technology at this time the upstream firmis willing to make a investment If 120573 gt 02 the retailerrsquosprofit increases after he has deployed RFID and multi-agent technology Therefore choosing the factor of the shelfinventory error rate at the interval of 02 lt 120573 lt 04 can
10 Mathematical Problems in Engineering
0 50 100 150 2000
200
400
600
800
1000
1200
120583x
ΠDlowast
r1
ΠDlowast
r2
ΠDlowast
r
(a)
0 2 4 6 8 10minus250
minus200
minus150
minus100
minus50
0
50
100
ΔΠ
=Π
Dlowast
m2minusΠ
Dlowast
m1
ct
(b)
Figure 6 Variation of Π119863119903with 120583
119909and ΔΠ with 119888
119905
minus1000
minus500
0
500
1000
1500
2000
0 02 04 06 08 1120573
ΔΠ
120573 sim ΔΠr
120573 sim ΔΠm
120573 sim ΔΠr 25120573 sim ΔΠm 25
ct = 1 ct =
ct = ct =1
Figure 7 Variation of ΔΠ119903and ΔΠ
119898with 120573 for different values of
119888119905
ensure that the profit increases to make both the upstreamand downstream firm achieve a win-win situation
Moreover the suppliers aim at encouraging the retailer toorder more goods but the retailer directs at freely riding theinnovative technology from the upstream ones Thus theycan consider the coordination model based on the revenuesharing That is the suppliers and manufacturer undertakethe technology investment cost alone and give price subsidyto the retailer on the condition that the wholesale price isnot changed Or the retailer gives parts of sales revenue tothe upstream ones at the end of a sales season in order to
stimulate and encourage the suppliers to increase the RampDinvestment
Being restrained by personal reason the members of thesupply chain will first consider their own benefit and will takethe maximization of the benefit of the whole supply chaininto consideration on the premise that their own benefit issatisfied Thus to ensure that the members are willing toaccept the revenue sharing contract it is necessary to guaran-tee that the profit obtained by both parties under this contractwith the supply chain that has adopted this technology isnot less than the one that has been obtained in decentralizedscenario before the contract is made In other words it isworth considering to ensure that the members of the supplychain can achieve win-win situation with the restraint of thecontract In other words the coordination mechanism is toensure the following two inequalities tenable ΔΠ
119903gt 0 and
ΔΠ119898gt 0
8 Concluding Remarks
The information technology has been heralded as a majorbreakthrough to enhance the efficiency of assembly sup-ply chain This paper mainly aims to explore the impactof information technology on supply chain managementespecially the prospects of multi-agent and RFID invest-ment value Meanwhile the possibility and reliability of themodel are examined through the qualitative and quantitativeanalyse of the multi-agent and RFID system investmentAdditionally supply chain partnership is an important factorof performance in supply chain operations It is significantto strengthen the supply chain cooperation managementFinally this paper mainly aims at a perfectly competitivemarket and carries out the research in the situation that themarket demands are uniformly distributed Future researches
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
Submit your manuscripts athttpwwwhindawicom
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical Problems in Engineering
Hindawi Publishing Corporationhttpwwwhindawicom
Differential EquationsInternational Journal of
Volume 2014
Applied MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Probability and StatisticsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical PhysicsAdvances in
Complex AnalysisJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
OptimizationJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
CombinatoricsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Operations ResearchAdvances in
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Function Spaces
Abstract and Applied AnalysisHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of Mathematics and Mathematical Sciences
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
The Scientific World JournalHindawi Publishing Corporation httpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Algebra
Discrete Dynamics in Nature and Society
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Decision SciencesAdvances in
Discrete MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom
Volume 2014 Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Stochastic AnalysisInternational Journal of
8 Mathematical Problems in Engineering
0
5000
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔΠ
=Π
c sc3minusΠ
c sc1
minus15000
minus10000
minus5000
(a)
minus500
0
500
1000
1500
2000
2500
3000
3500
0 02 04 06 08 1120572
120583x = 50
120583x = 100120583x = 150
ΔQ
=Qc sc
3minusQc sc
1
(b)
Figure 5 Variation of Δ119876 and ΔΠ with 120572 for different values of 120583119909
Developing 120597Π119863119904119894
120597119876119894= 0 leads to the following expres-
sion meanwhile 1205972Π119863119904119894
1205971198762
119894= minus(119908
119894+ 119904119894)(11990221198763
119894) lt 0
1198911(1198761 1198762) = 119888 minus (119908
1+ 1199041) 1198961(119902
1198761
)
1198912(1198761 1198762) = 119888 minus (119908
2+ 1199042) 1198962(119902
1198762
)
(15)
For such setting we always have (1205971198911(1198761 1198762)1205971198762) minus
(1205971198912(1198761 1198762)1205971198762) = minus(119908
2+ 1199042)(11990221198763
2ℎ2)(119902119876
2) lt 0 for any
1198761and 119876
2 Thus as can be seen from the analysis above we
have the following important observation
Proposition 2 For any given order quantity from the man-ufacturer the sufficient conditions guaranteeing the existenceand uniqueness of the Nash equilibrium solution for thesuppliers under decentralized scenario are [1198761015840
1
lowast
1198761015840
2
lowast
]
612 The Best Response of The Manufacturer In the nextstage for Stackelberg leader-follower game we analyze themanufacturerrsquos best response
Π119863
1198981= int
119863119902
120572
[120572119902119908 minus 119904119898(119909 minus 120572119902)] ℎ (120572) 119889120572
+ int
120572
119863119902
119902119908ℎ (120572) 119889120572 minus 119888119902
(16)
where the first item represents that the manufacturer cannotsatisfy the retailerrsquos orders that is the manufacturerrsquos salesrevenue when 119863 gt 120572119902 The second item stands for the man-ufacturerrsquos sales revenue when 119863 lt 120572119902 From the equationabove we can get 1205972Π119863
11989811205971199022= minus(119908 + 119904
119898)(1199091199023ℎ)(120572) lt 0
which found that the manufacturerrsquos profit function Π1198631198981
isa concave function about the order quantity 119902 that is thereis only one optimal order quantity 119902lowast which makes themanufacturerrsquos profit be the maximum
int
119909119902lowast
120572
120572ℎ (120572) 119889120572 =119888
119908 + 119904119898
(17)
The optimal profit for manufacturer is given by
Π119863lowast
1198981= 119908119909 minus (119908 + 119904
119898) 119902119867(
119909
119902lowast) (18)
613 The Best Policy of the Retailer The retailerrsquos expectedprofit can be written as follow
Π119863
1199031= 119901119898int
120573
120573
119864min (119909 120573119902) 119892 (120573) 119889120573
+ 119904int
120573
120573
119864(120573119902 minus 119909)+
119892 (120573) 119889119909 119889120573 minus 119908119902
(19)
where 119864min(119909 120573119902) = 120573119902 minus int1205731199020(120573119902 minus 119909)119891(119909)119889119909 and 119864(120573119902 minus
119909)+= 120573119902 minus 119864min(119909 120573119902) = int120573119902
0(120573119902 minus 119909)119891(119909)119889119909 then we
simplify above equation
Π119863
1199031= minus119901119898minus 119904119898
4120583119909
(1205902
120573+ 1205832
120573) 1199022+ 119901119898120583120573119902 minus 119908119902 (20)
Mathematical Problems in Engineering 9
The optimal ordering quantity and profit of the retailerare respectively
119902lowast
1= 2120583119909
119901119898120583120573minus 119908
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
Π119863lowast
1199031
=
(119901119898120583120573minus 119908)2
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
120583119909
(21)
62 Optimal Decision in Decentralized Supply Chain withMulti-Agent and RFID Technology In order to achieve thehighest performance of the supply chain it is necessaryto analyze the optimal decision in decentralized supplychain with multi-agent and RFID technology As we allknown if the retailer invests in information technologythe upstream ones cannot benefit from this otherwise theopposite Obviously from the perspective of the supply chainit will be better for the whole supply chain with the upstreamtomake an RampD expenditureTherefore here we assume thatthe technology investment can be actively supported by thesuppliers and manufacturer as a whole
The retailer can benefit from the free-ride RFID adoptionand also 120573 = 1 Thus the retailerrsquos expected profit function isas follow
Π119863
1199032= 119901119898119864min (119909 119902) + 119904
119898119864(119902 minus 119909)
+
= 119901119898[119902 minus int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909]
+ 119904119898int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909 minus 119901119908119902
(22)
Since 1205972Π11987721198631205971199022 = minus(119901119898minus 119904119898)119891(119902) lt 0 the profit of
retailer is a concave function about 119902 Then we solve the firstderivative and get the corresponding optimal order quantityand total profit of the retailer
119902lowast
2= 2120583119909
119901119898minus 119901119908
119901119898minus 119904119898
Π119863lowast
1199032=(119901119898minus 119901119908)2
119901119898minus 119904119898
120583119909
(23)
Due to 120590120573gt 0 and 0 lt 120583
120573lt 1 it is easy to prove that
Π119863lowast
1199031lt Π119863lowast
1199032is tenable In another word after implementing
the information technology the retailer can remotelymonitorthe inventory and track its position in real time directlywhich avoids the impacts of the worse service inefficienttransportation out of stock or overstock and other inac-curate inventory problems so that the retailer needs notundertake cost for this Thus the retailerrsquos profit increasesafter the upstream has deployed the information technologyThe Figure 6 respectively shows the impact of changes with120583119909and 119888119905on the variation of Π119863
119903and ΔΠ We can treat the
suppliers and the manufacturer as the same decision-makingsubject in this section
Proposition 3 If 119888119905lt 119888dagger
119905 the manufacturerrsquos profit increases
after investing information technology so that he is willing toimplement the technology If 119888
119905gt 119888dagger
119905 the increased cost resulted
from the suppliersrsquo application of the multi-agent and RFIDsystem is larger than the obtained income so the suppliersand manufacturer have no motivation to invest technologyand is unwilling to do where 119888dagger
119905= 119901119908minus 119888 minus [119901
119908minus (119901119908+
119904119898)119866(119902119876
lowast
1)](119901119898120583120573minus 119901119908)(1205902
120573+ 1205832
120573)(119901119898minus 119901119908)
It is concluded that 119888dagger119905is the highest technology cost
which can be accepted by the upstream firm in decentralizedassembly supply chain At this time the income that thetechnology brings to the suppliers or the manufacturer justequals the newly increased cost resulted from the applicationof the technology When the investment cost is higher than119888dagger
119905 the suppliers or manufacturer will not choose to employ
the technology actively On the contrary if this cost is lowerthan 119888dagger
119905 the income that the supplier or manufacturer obtains
by information technology is higher than the technologyinvestment so that they will all have enormous enthusiasmin investing it
According to the above propositions in the situationof 1198881015840119905gt 119888119905gt 119888dagger
119905 although the suppliersrsquo application of
information technology can increase the profit of the supplychain his profit will reduce Furthermore the upstream firmhas nomotivation to usemulti-agent andRFID system so thatthewhole supply chain cannot profit from the technology andthe maximum profit of the supply chain cannot be realizedThus it is necessary to study the supply chain coordinationin the situation of 1198881015840
119905lt 119888119905lt 119888dagger
119905to make the supplier
have enthusiasm to adopt this technology and reduce theinaccuracy of the supply chain inventory as well as increasethe performance of the supply chain and its members
7 Numerical Analysis
Finally a numerical example is taken to validate the ratio-nality and feasibility of the theoretics and method Whenthe customer demand follows uniform distribution pattern119909 sim 119880(0 200) we insert the following constant values intothe corresponding optimal expressions 119901
119908= 20 119888 = 12
119901119908= 20 119901
119898= 30 V = 8 and 119904
119898= 5 when 0 lt 119888
119905lt 78
the upstream ones are unwilling to use RFID andmulti-agenttechnology because the profit will be reduced after adoptingit
Furthermore according to Figure 7 we can find thatthe increased profit of the manufacturer and the retaileris a linear function about 120573 The increased profit of themanufacturer monotonously reduces as the shelf inventoryerror rate increases while the increased profit of the retailermonotonously increases as the coefficient 120573 increases Whenthe factor of the inventory error 0 lt 120573 lt 04 themanufacturerrsquos profit is beneficial from reasonable utilizationof information technology at this time the upstream firmis willing to make a investment If 120573 gt 02 the retailerrsquosprofit increases after he has deployed RFID and multi-agent technology Therefore choosing the factor of the shelfinventory error rate at the interval of 02 lt 120573 lt 04 can
10 Mathematical Problems in Engineering
0 50 100 150 2000
200
400
600
800
1000
1200
120583x
ΠDlowast
r1
ΠDlowast
r2
ΠDlowast
r
(a)
0 2 4 6 8 10minus250
minus200
minus150
minus100
minus50
0
50
100
ΔΠ
=Π
Dlowast
m2minusΠ
Dlowast
m1
ct
(b)
Figure 6 Variation of Π119863119903with 120583
119909and ΔΠ with 119888
119905
minus1000
minus500
0
500
1000
1500
2000
0 02 04 06 08 1120573
ΔΠ
120573 sim ΔΠr
120573 sim ΔΠm
120573 sim ΔΠr 25120573 sim ΔΠm 25
ct = 1 ct =
ct = ct =1
Figure 7 Variation of ΔΠ119903and ΔΠ
119898with 120573 for different values of
119888119905
ensure that the profit increases to make both the upstreamand downstream firm achieve a win-win situation
Moreover the suppliers aim at encouraging the retailer toorder more goods but the retailer directs at freely riding theinnovative technology from the upstream ones Thus theycan consider the coordination model based on the revenuesharing That is the suppliers and manufacturer undertakethe technology investment cost alone and give price subsidyto the retailer on the condition that the wholesale price isnot changed Or the retailer gives parts of sales revenue tothe upstream ones at the end of a sales season in order to
stimulate and encourage the suppliers to increase the RampDinvestment
Being restrained by personal reason the members of thesupply chain will first consider their own benefit and will takethe maximization of the benefit of the whole supply chaininto consideration on the premise that their own benefit issatisfied Thus to ensure that the members are willing toaccept the revenue sharing contract it is necessary to guaran-tee that the profit obtained by both parties under this contractwith the supply chain that has adopted this technology isnot less than the one that has been obtained in decentralizedscenario before the contract is made In other words it isworth considering to ensure that the members of the supplychain can achieve win-win situation with the restraint of thecontract In other words the coordination mechanism is toensure the following two inequalities tenable ΔΠ
119903gt 0 and
ΔΠ119898gt 0
8 Concluding Remarks
The information technology has been heralded as a majorbreakthrough to enhance the efficiency of assembly sup-ply chain This paper mainly aims to explore the impactof information technology on supply chain managementespecially the prospects of multi-agent and RFID invest-ment value Meanwhile the possibility and reliability of themodel are examined through the qualitative and quantitativeanalyse of the multi-agent and RFID system investmentAdditionally supply chain partnership is an important factorof performance in supply chain operations It is significantto strengthen the supply chain cooperation managementFinally this paper mainly aims at a perfectly competitivemarket and carries out the research in the situation that themarket demands are uniformly distributed Future researches
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
Submit your manuscripts athttpwwwhindawicom
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical Problems in Engineering
Hindawi Publishing Corporationhttpwwwhindawicom
Differential EquationsInternational Journal of
Volume 2014
Applied MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Probability and StatisticsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical PhysicsAdvances in
Complex AnalysisJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
OptimizationJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
CombinatoricsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Operations ResearchAdvances in
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Function Spaces
Abstract and Applied AnalysisHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of Mathematics and Mathematical Sciences
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
The Scientific World JournalHindawi Publishing Corporation httpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Algebra
Discrete Dynamics in Nature and Society
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Decision SciencesAdvances in
Discrete MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom
Volume 2014 Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Stochastic AnalysisInternational Journal of
Mathematical Problems in Engineering 9
The optimal ordering quantity and profit of the retailerare respectively
119902lowast
1= 2120583119909
119901119898120583120573minus 119908
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
Π119863lowast
1199031
=
(119901119898120583120573minus 119908)2
(119901119898minus 119904) (120590
2
120573+ 1205832
120573)
120583119909
(21)
62 Optimal Decision in Decentralized Supply Chain withMulti-Agent and RFID Technology In order to achieve thehighest performance of the supply chain it is necessaryto analyze the optimal decision in decentralized supplychain with multi-agent and RFID technology As we allknown if the retailer invests in information technologythe upstream ones cannot benefit from this otherwise theopposite Obviously from the perspective of the supply chainit will be better for the whole supply chain with the upstreamtomake an RampD expenditureTherefore here we assume thatthe technology investment can be actively supported by thesuppliers and manufacturer as a whole
The retailer can benefit from the free-ride RFID adoptionand also 120573 = 1 Thus the retailerrsquos expected profit function isas follow
Π119863
1199032= 119901119898119864min (119909 119902) + 119904
119898119864(119902 minus 119909)
+
= 119901119898[119902 minus int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909]
+ 119904119898int
119902
0
(119902 minus 119909) 119891 (119909) 119889119909 minus 119901119908119902
(22)
Since 1205972Π11987721198631205971199022 = minus(119901119898minus 119904119898)119891(119902) lt 0 the profit of
retailer is a concave function about 119902 Then we solve the firstderivative and get the corresponding optimal order quantityand total profit of the retailer
119902lowast
2= 2120583119909
119901119898minus 119901119908
119901119898minus 119904119898
Π119863lowast
1199032=(119901119898minus 119901119908)2
119901119898minus 119904119898
120583119909
(23)
Due to 120590120573gt 0 and 0 lt 120583
120573lt 1 it is easy to prove that
Π119863lowast
1199031lt Π119863lowast
1199032is tenable In another word after implementing
the information technology the retailer can remotelymonitorthe inventory and track its position in real time directlywhich avoids the impacts of the worse service inefficienttransportation out of stock or overstock and other inac-curate inventory problems so that the retailer needs notundertake cost for this Thus the retailerrsquos profit increasesafter the upstream has deployed the information technologyThe Figure 6 respectively shows the impact of changes with120583119909and 119888119905on the variation of Π119863
119903and ΔΠ We can treat the
suppliers and the manufacturer as the same decision-makingsubject in this section
Proposition 3 If 119888119905lt 119888dagger
119905 the manufacturerrsquos profit increases
after investing information technology so that he is willing toimplement the technology If 119888
119905gt 119888dagger
119905 the increased cost resulted
from the suppliersrsquo application of the multi-agent and RFIDsystem is larger than the obtained income so the suppliersand manufacturer have no motivation to invest technologyand is unwilling to do where 119888dagger
119905= 119901119908minus 119888 minus [119901
119908minus (119901119908+
119904119898)119866(119902119876
lowast
1)](119901119898120583120573minus 119901119908)(1205902
120573+ 1205832
120573)(119901119898minus 119901119908)
It is concluded that 119888dagger119905is the highest technology cost
which can be accepted by the upstream firm in decentralizedassembly supply chain At this time the income that thetechnology brings to the suppliers or the manufacturer justequals the newly increased cost resulted from the applicationof the technology When the investment cost is higher than119888dagger
119905 the suppliers or manufacturer will not choose to employ
the technology actively On the contrary if this cost is lowerthan 119888dagger
119905 the income that the supplier or manufacturer obtains
by information technology is higher than the technologyinvestment so that they will all have enormous enthusiasmin investing it
According to the above propositions in the situationof 1198881015840119905gt 119888119905gt 119888dagger
119905 although the suppliersrsquo application of
information technology can increase the profit of the supplychain his profit will reduce Furthermore the upstream firmhas nomotivation to usemulti-agent andRFID system so thatthewhole supply chain cannot profit from the technology andthe maximum profit of the supply chain cannot be realizedThus it is necessary to study the supply chain coordinationin the situation of 1198881015840
119905lt 119888119905lt 119888dagger
119905to make the supplier
have enthusiasm to adopt this technology and reduce theinaccuracy of the supply chain inventory as well as increasethe performance of the supply chain and its members
7 Numerical Analysis
Finally a numerical example is taken to validate the ratio-nality and feasibility of the theoretics and method Whenthe customer demand follows uniform distribution pattern119909 sim 119880(0 200) we insert the following constant values intothe corresponding optimal expressions 119901
119908= 20 119888 = 12
119901119908= 20 119901
119898= 30 V = 8 and 119904
119898= 5 when 0 lt 119888
119905lt 78
the upstream ones are unwilling to use RFID andmulti-agenttechnology because the profit will be reduced after adoptingit
Furthermore according to Figure 7 we can find thatthe increased profit of the manufacturer and the retaileris a linear function about 120573 The increased profit of themanufacturer monotonously reduces as the shelf inventoryerror rate increases while the increased profit of the retailermonotonously increases as the coefficient 120573 increases Whenthe factor of the inventory error 0 lt 120573 lt 04 themanufacturerrsquos profit is beneficial from reasonable utilizationof information technology at this time the upstream firmis willing to make a investment If 120573 gt 02 the retailerrsquosprofit increases after he has deployed RFID and multi-agent technology Therefore choosing the factor of the shelfinventory error rate at the interval of 02 lt 120573 lt 04 can
10 Mathematical Problems in Engineering
0 50 100 150 2000
200
400
600
800
1000
1200
120583x
ΠDlowast
r1
ΠDlowast
r2
ΠDlowast
r
(a)
0 2 4 6 8 10minus250
minus200
minus150
minus100
minus50
0
50
100
ΔΠ
=Π
Dlowast
m2minusΠ
Dlowast
m1
ct
(b)
Figure 6 Variation of Π119863119903with 120583
119909and ΔΠ with 119888
119905
minus1000
minus500
0
500
1000
1500
2000
0 02 04 06 08 1120573
ΔΠ
120573 sim ΔΠr
120573 sim ΔΠm
120573 sim ΔΠr 25120573 sim ΔΠm 25
ct = 1 ct =
ct = ct =1
Figure 7 Variation of ΔΠ119903and ΔΠ
119898with 120573 for different values of
119888119905
ensure that the profit increases to make both the upstreamand downstream firm achieve a win-win situation
Moreover the suppliers aim at encouraging the retailer toorder more goods but the retailer directs at freely riding theinnovative technology from the upstream ones Thus theycan consider the coordination model based on the revenuesharing That is the suppliers and manufacturer undertakethe technology investment cost alone and give price subsidyto the retailer on the condition that the wholesale price isnot changed Or the retailer gives parts of sales revenue tothe upstream ones at the end of a sales season in order to
stimulate and encourage the suppliers to increase the RampDinvestment
Being restrained by personal reason the members of thesupply chain will first consider their own benefit and will takethe maximization of the benefit of the whole supply chaininto consideration on the premise that their own benefit issatisfied Thus to ensure that the members are willing toaccept the revenue sharing contract it is necessary to guaran-tee that the profit obtained by both parties under this contractwith the supply chain that has adopted this technology isnot less than the one that has been obtained in decentralizedscenario before the contract is made In other words it isworth considering to ensure that the members of the supplychain can achieve win-win situation with the restraint of thecontract In other words the coordination mechanism is toensure the following two inequalities tenable ΔΠ
119903gt 0 and
ΔΠ119898gt 0
8 Concluding Remarks
The information technology has been heralded as a majorbreakthrough to enhance the efficiency of assembly sup-ply chain This paper mainly aims to explore the impactof information technology on supply chain managementespecially the prospects of multi-agent and RFID invest-ment value Meanwhile the possibility and reliability of themodel are examined through the qualitative and quantitativeanalyse of the multi-agent and RFID system investmentAdditionally supply chain partnership is an important factorof performance in supply chain operations It is significantto strengthen the supply chain cooperation managementFinally this paper mainly aims at a perfectly competitivemarket and carries out the research in the situation that themarket demands are uniformly distributed Future researches
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
Submit your manuscripts athttpwwwhindawicom
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical Problems in Engineering
Hindawi Publishing Corporationhttpwwwhindawicom
Differential EquationsInternational Journal of
Volume 2014
Applied MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Probability and StatisticsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical PhysicsAdvances in
Complex AnalysisJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
OptimizationJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
CombinatoricsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Operations ResearchAdvances in
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Function Spaces
Abstract and Applied AnalysisHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of Mathematics and Mathematical Sciences
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
The Scientific World JournalHindawi Publishing Corporation httpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Algebra
Discrete Dynamics in Nature and Society
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Decision SciencesAdvances in
Discrete MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom
Volume 2014 Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Stochastic AnalysisInternational Journal of
10 Mathematical Problems in Engineering
0 50 100 150 2000
200
400
600
800
1000
1200
120583x
ΠDlowast
r1
ΠDlowast
r2
ΠDlowast
r
(a)
0 2 4 6 8 10minus250
minus200
minus150
minus100
minus50
0
50
100
ΔΠ
=Π
Dlowast
m2minusΠ
Dlowast
m1
ct
(b)
Figure 6 Variation of Π119863119903with 120583
119909and ΔΠ with 119888
119905
minus1000
minus500
0
500
1000
1500
2000
0 02 04 06 08 1120573
ΔΠ
120573 sim ΔΠr
120573 sim ΔΠm
120573 sim ΔΠr 25120573 sim ΔΠm 25
ct = 1 ct =
ct = ct =1
Figure 7 Variation of ΔΠ119903and ΔΠ
119898with 120573 for different values of
119888119905
ensure that the profit increases to make both the upstreamand downstream firm achieve a win-win situation
Moreover the suppliers aim at encouraging the retailer toorder more goods but the retailer directs at freely riding theinnovative technology from the upstream ones Thus theycan consider the coordination model based on the revenuesharing That is the suppliers and manufacturer undertakethe technology investment cost alone and give price subsidyto the retailer on the condition that the wholesale price isnot changed Or the retailer gives parts of sales revenue tothe upstream ones at the end of a sales season in order to
stimulate and encourage the suppliers to increase the RampDinvestment
Being restrained by personal reason the members of thesupply chain will first consider their own benefit and will takethe maximization of the benefit of the whole supply chaininto consideration on the premise that their own benefit issatisfied Thus to ensure that the members are willing toaccept the revenue sharing contract it is necessary to guaran-tee that the profit obtained by both parties under this contractwith the supply chain that has adopted this technology isnot less than the one that has been obtained in decentralizedscenario before the contract is made In other words it isworth considering to ensure that the members of the supplychain can achieve win-win situation with the restraint of thecontract In other words the coordination mechanism is toensure the following two inequalities tenable ΔΠ
119903gt 0 and
ΔΠ119898gt 0
8 Concluding Remarks
The information technology has been heralded as a majorbreakthrough to enhance the efficiency of assembly sup-ply chain This paper mainly aims to explore the impactof information technology on supply chain managementespecially the prospects of multi-agent and RFID invest-ment value Meanwhile the possibility and reliability of themodel are examined through the qualitative and quantitativeanalyse of the multi-agent and RFID system investmentAdditionally supply chain partnership is an important factorof performance in supply chain operations It is significantto strengthen the supply chain cooperation managementFinally this paper mainly aims at a perfectly competitivemarket and carries out the research in the situation that themarket demands are uniformly distributed Future researches
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
Submit your manuscripts athttpwwwhindawicom
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical Problems in Engineering
Hindawi Publishing Corporationhttpwwwhindawicom
Differential EquationsInternational Journal of
Volume 2014
Applied MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Probability and StatisticsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical PhysicsAdvances in
Complex AnalysisJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
OptimizationJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
CombinatoricsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Operations ResearchAdvances in
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Function Spaces
Abstract and Applied AnalysisHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of Mathematics and Mathematical Sciences
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
The Scientific World JournalHindawi Publishing Corporation httpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Algebra
Discrete Dynamics in Nature and Society
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Decision SciencesAdvances in
Discrete MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom
Volume 2014 Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Stochastic AnalysisInternational Journal of
Mathematical Problems in Engineering 11
should focus on whether the revenue sharing contract cancoordinate the supply chain when the market demands arenormal distribution As is apparent from the above descrip-tion the research of this paper has important theoreticalvalue and great practical significance
Notations
119909 The random variable representing thecustomerrsquos demand 119863
119901119898 The manufacturerrsquos selling price per item
119902119898 The ordering quantity of manufacturer
119904119898 The unit production shortage cost of
manufacturerV The salvage cost per item119876119894 The supplierrsquos production quantity 119894 = 1 2
119888 The unit production cost of supplier 119894119908119894 The wholesale price of supplier 119894
120572 The errors in assembly system (process)ℎ(119867) Pdf(cdf) characterizing 120572120573 The shelf inventory error rate (caused by
misplaced theft miscategory etc)119892(119866) Pdf(cdf) characterizing 120573119888119905 The technology investment cost (involving
multi-agent software and RFID tag cost)Π119888
sc The expected profit of whole supply chainin centralized scenario
Π119863
119904119898119903 The expected profit of suppliermanufacturer and retailer indecentralizedscenario
Acknowledgments
This research was supported in part by the National NaturalScience Foundation of China under Grant no 51175187 theNational High-Tech RampD Program of China under Grantno 2007AA04Z111 and the Grant of the University of MacauMYRG163 (Y1-L3) FBA11-LZT
References
[1] S Tzeng W Chen and F Pai ldquoEvaluating the business value ofRFID evidence from five case studiesrdquo International Journal ofProduction Economics vol 112 no 2 pp 601ndash613 2008
[2] A Ustundag and M Tanyas ldquoThe impacts of radio frequencyidentification (RFID) technology on supply chain costsrdquo Trans-portation Research E vol 45 no 1 pp 29ndash38 2009
[3] U Bagchi A Guiffrida L OrsquoNeill A Zeng and J Hayya ldquoTheeffect of RFIDon inventorymanagement and controlrdquo inTrendsin Supply Chain Design and Management pp 71ndash92 2007
[4] H Lee and O Ozer ldquoUnlocking the value of RFIDrdquo Productionand Operations Management vol 16 no 1 pp 40ndash64 2007
[5] A Atali H Lee and O Ozer ldquoIf the inventory managerknew value of visibility and RFID under imperfect inventoryinformationrdquo Social Science Research Network 2009
[6] M Tajima ldquoStrategic value of RFID in supply chain manage-mentrdquo Journal of Purchasing and Supply Management vol 13no 4 pp 261ndash273 2007
[7] E W T Ngai K K L Moon F J Riggins and C Y YildquoRFID research an academic literature review (1995ndash2005) andfuture research directionsrdquo International Journal of ProductionEconomics vol 112 no 2 pp 510ndash520 2008
[8] M M Hossain and V R Prybutok ldquoConsumer acceptance ofRFID technology an exploratory studyrdquo IEEE Transactions onEngineering Management vol 55 no 2 pp 316ndash328 2008
[9] E W T Ngai T C E Cheng S Au and K Lai ldquoMobilecommerce integrated with RFID technology in a containerdepotrdquo Decision Support Systems vol 43 no 1 pp 62ndash76 2007
[10] G M Gaukler R W Seifert and W H Hausman ldquoItem-levelRFID in the retail supply chainrdquo Production and OperationsManagement vol 16 no 1 pp 65ndash76 2007
[11] H S Heese ldquoInventory record inaccuracy double marginaliza-tion and RFID adoptionrdquo Production and Operations Manage-ment vol 16 no 5 pp 542ndash553 2007
[12] A Dutta H L Lee and S Whang ldquoRFID and operationsmanagement technology value and incentivesrdquo Productionand Operations Management vol 16 no 5 pp 646ndash655 2007
[13] Y Rekik E Sahin and Y Dallery ldquoAnalysis of the impact of theRFID technology on reducing product misplacement errors atretail storesrdquo International Journal of Production Economics vol112 no 1 pp 264ndash278 2008
[14] J G Szmerekovsky and J Zhang ldquoCoordination and adoptionof item-level RFID with vendor managed inventoryrdquo Interna-tional Journal of Production Economics vol 114 no 1 pp 388ndash398 2008
[15] E Bottani and A Rizzi ldquoEconomical assessment of the impactof RFID technology and EPC system on the fast-moving con-sumer goods supply chainrdquo International Journal of ProductionEconomics vol 112 no 2 pp 548ndash569 2008
[16] Y TuWZhou and S Piramuthu ldquoIdentifyingRFID-embeddedobjects in pervasive healthcare applicationsrdquo Decision SupportSystems vol 46 no 2 pp 586ndash593 2009
[17] S Wang S Liu andWWang ldquoThe simulated impact of RFID-enabled supply chain on pull-based inventory replenishmentin TFT-LCD industryrdquo International Journal of ProductionEconomics vol 112 no 2 pp 570ndash586 2008
[18] J Whitaker S Mithas and M S Krishnan ldquoA field study ofRFID deployment and return expectationsrdquo Production andOperations Management vol 16 no 5 pp 599ndash612 2007
Submit your manuscripts athttpwwwhindawicom
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical Problems in Engineering
Hindawi Publishing Corporationhttpwwwhindawicom
Differential EquationsInternational Journal of
Volume 2014
Applied MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Probability and StatisticsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical PhysicsAdvances in
Complex AnalysisJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
OptimizationJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
CombinatoricsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Operations ResearchAdvances in
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Function Spaces
Abstract and Applied AnalysisHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of Mathematics and Mathematical Sciences
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
The Scientific World JournalHindawi Publishing Corporation httpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Algebra
Discrete Dynamics in Nature and Society
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Decision SciencesAdvances in
Discrete MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom
Volume 2014 Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Stochastic AnalysisInternational Journal of
Submit your manuscripts athttpwwwhindawicom
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical Problems in Engineering
Hindawi Publishing Corporationhttpwwwhindawicom
Differential EquationsInternational Journal of
Volume 2014
Applied MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Probability and StatisticsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Mathematical PhysicsAdvances in
Complex AnalysisJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
OptimizationJournal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
CombinatoricsHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Operations ResearchAdvances in
Journal of
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Function Spaces
Abstract and Applied AnalysisHindawi Publishing Corporationhttpwwwhindawicom Volume 2014
International Journal of Mathematics and Mathematical Sciences
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
The Scientific World JournalHindawi Publishing Corporation httpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Algebra
Discrete Dynamics in Nature and Society
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Decision SciencesAdvances in
Discrete MathematicsJournal of
Hindawi Publishing Corporationhttpwwwhindawicom
Volume 2014 Hindawi Publishing Corporationhttpwwwhindawicom Volume 2014
Stochastic AnalysisInternational Journal of