Abstract: RFID technology can reduce lead-time and increase the retailer's service level. However, it can also affect the income of the supply chain, which makes it urgent to study the coordination of the supply chain members’ revenue. It is assumed that the unit cost of RFID tag is fixed and the effect of lead-time compression on profit of supply chain actors is studied in this paper. With the lead-time compression, retailer collects more and more information about products sales and demands so that the market demand forecast will be more and more accurate. Using a Newsvendor model, the profits of both centralized and decentralized cases with/without consideration of deploying RFID technology are studied and the effect of changing contract parameters on the coordination of supply chain is found. The results show that the revenue sharing contract can coordinate the supply chain with RFID technology and allow all members of the supply chain to achieve win-win. However, the interval of contract parameters will shrink, the retailer's optimal order quantity will reduce and the supplier's wholesale prices will rise after adoption of RFID technology. Moreover, the threshold of lead-time compression amount with RFID is obtained, and a numerical simulation analysis is given to illustrate the model. This study provides some management revelations for application of RFID technology.

Key words: two-stage supply chain, RFID technology, lead-time compression, revenue-sharing contract, coordination