# Risk Analysis of a Two-Level Supply Chain Subject to Misplaced Inventory
## 7 Managerial Insights for Decision Makers  
Inventory inaccuracy is prevalent in various industries all around the world. In this section, we provide managerial insights for the managers to deal with the inventory inaccuracy problem based on the theoretical results and the numerical results.  
It is well known that the supplier can benefit from additional information provided by the retailer, such as inventory information and demand information. However, such a benefit needs to be justified by comparing it with the costs of investing in the information systems and processes. When the inventory errors occur, it is vital for the supplier to decide whether or not to ask the risk-averse retailer to share the inventory information, so as to reduce the negative effect of inventory inaccuracy Our study finds that the supplier's benefit from information sharing is affected by the magnitude of inventory errors, as well as the retailer's degree of risk aversion. On one hand, the supplier can benefit more from information sharing when she selects less risk-averse retailers. On the other hand, the supplier should not induce the retailer to share information when there are few inventory errors. Moreover, when the retailer is subject to serious inventory errors, RFID implementation is preferred to information sharing. This is because information sharing only ensures that both parties make decisions by taking inventory errors into consideration; whereas RFID enables information integration and reduces inventory errors, thus generating more profits.  
How the costs and benefits are distributed among supply chain participants has been a hot issue in RFID application in the supply chain. Our results show that the retailer benefits more from RFID compared with the supplier when dealing with the inventory inaccuracy problem. The reason for this is that, once RFID tags are attached to the products by the upstream supplier, the supplier can benefit from the information integration enabled by RFID; meanwhile, the downstream retailer can benefit from the reduction of inventory errors without any variable cost. This could cause a one-sided free-rider problem in the absence of any cost sharing scheme. Hence, from the supplier's perspective, she may have no incentive to adopt RFID due to its high costs. In this situation, it is necessary for the retailer to bear a portion of the RFID costs in order to enable the implementation of RFID along the supply chain. On the other hand, the supplier is encouraged to extend the RFID efforts into other parts of her business, i.e., add values on RFID implementation. For example, a traceability system can be implemented in the perishable food supply chain to track food 'from farm to fork', and thereby improve food safety. Furthermore, the supplier can integrate the traceability system with the production process and the quality management process to improve the manufacturing efficiency.  
It is also crucial for the managers to take into consideration the fact that RFID implementations are not static over time. Both technology improvements and cost savings are expected to increase the benefits of RFID implementation for supply chain applications. Moreover, our study shows that the maximum benefits from RFID application can be achieved through supply chain coordination.