Abstract
Inventory inaccuracy and demand distortion have become the two main issues in automated inventory decision processes for companies that have invested a substantial amount of resources in information systems. There is a strong interest in the research community in investigating the issues and proposing the use of radio frequency identification (RFID) technology in supply chains. However, most of the research uses a dichotomous approach and only deals with one of the two issues. This paper argues that both issues co-exist and interrelate in practice, proposing a joint model which accounts for both inaccuracies simultaneously. Our numerical results show that without using the joint model but instead aggregating the benefits of RFID implementation from separate models overestimates the value of RFID. In addition, we also found that the prevailing approach of rescaling demand to account for demand loss could underestimate the potential value of RFID.