Using RFID for the management of pharmaceutical inventory — system optimization and shrinkage control

Motivated by a case study at a radiology practice, we analyze the incremental benefits of RFID technology over barcodes for managing pharmaceutical inventories. Unlike barcode technology, RFID enables accurate real-time visibility, which in turn enables several process improvements. We analyze the impact of automatic counting and discuss the system redesign critical to optimizing the inventory policy and eliminating shrinkage. We show that continuous review is superior to periodic review whenever accurate real-time information is available at no additional cost. We explain how RFID-enabled strategies vary with inventory parameters and provide a cost-benefit analysis for the implementation of RFID for the radiology practice.