# Risk Analysis of a Two-Level Supply Chain Subject to Misplaced Inventory
## 2 Literature Review  
The inventory inaccuracy problem has received considerable attention in recent years. There are two main streams of literature dealing with the inventory inaccuracy problem. One stream has focused on optimal decision making when subject to inventory inaccuracy [1; 11; 12; 21]. Specifically, these studies have dealt with the inventory errors from different sources, such as temporary shrinkage [22; 23], transaction errors [24], and misplaced inventory [25; 26]. The other stream mainly investigates the effect of inventory inaccuracy on supply chain performance [27; 28; 29], among which several studies have analyzed the effect of inventory inaccuracy on collaborative Supply Chains [6; 30; 31]. This study belongs to the first stream of literature and focuses on the misplaced inventory problem. Some studies have quantified the retailer's benefits from RFID implementation in terms of reducing misplaced inventory. [PERSON] et al. [25] presented an analytical model of a single-period retailer subject to misplacement errors. They showed the impact of misplacement errors on ordering decisions and explored the benefits of implementing the RFID technology. The analytical expression of the RFID tag cost which makes its deployment cost effective was derived in their study. [PERSON] et al. [26] explored the impact of inventory inaccuracy on the retailer with inventory-dependent demand. They considered the impact of inventory inaccuracy on the retailer's profits under different demand sensitivity and demand uncertainty. The threshold RFID tag cost which makes the adoption of RFID profitable was also explored. However, the significant fixed cost of RFID implementation was not taken into account in the above studies, leading to an underestimation of the RFID critical tag price and overestimation of the benefits of RFID in reducing inventory inaccuracy. This study is closely related to the literature that analytically dealt with the inventory inaccuracy problem in a supply chain framework. [PERSON] and [PERSON] [32] studied both centralized and decentralized supply chains subject to misplacement errors. They showed that the incentives of the parties for investing in RFID are not perfectly aligned in the existence of the fixed cost of investment. [PERSON] [33] investigated the effect of inventory inaccuracy on supply chain performance and the impact of double marginalization on the parties' incentives for RFID adoption. They showed that RFID adoption improves supply chain coordination and a decentralized supply chain can benefit more from RFID technology. [PERSON] et al. [34] analyzed the impact of inventory inaccuracy on the performance of supply chains under a variety of operational factors such as the error magnitude, inventory audits frequency, and lead time variability. They found that the detrimental effects of inventory inaccuracy on supply chain performance are exacerbated by the supply chain structural complexity and lead time variability. In most of the existing literature, RFID is assumed to have a 100% ability in eliminating inventory errors. The relationship between different scales of RFID investment and its effectiveness in eliminating inventory inaccuracy was not considered. [PERSON] et al. [21] first considered that different types of RFID possess unequal technique features and analyzed the cost-effectiveness of different RFIDs for the optimal decisions of supply chain participants. They illustrated the relationships between the variable cost of RFID and its non-full ability to decrease the stochastic inventory errors. However, the fixed cost of RFID is not considered in their study. Risk analyses of the supply chain have been extensively studied in the literature. Many evaluation criteria (or analysis tools) have been introduced by previous studies, such as the mean-variance approach [35], value-at-risk (VaR) approach [36], and CVaR approach [37].