Cost-Benefit Model for Smart Items in the Supply ChainThis work presents a decision metric for the use of different kinds of Smart Items within the supply chain.The analysis is done from the viewpoints of the supplier, the shipper, and the customer.The spreadsheet computes the metric. For details please refer to the Paper:

Cost-Benefit Model for Smart Items in the Supply Chain

presented on IOT 2008, March 2008, Zurich, CHpublished by Springer LNCS 4952

Usage:

Define costs for simple Smart Items, e.g. barcode or RFIDDefine costs for advanced Smart Items, e.g. sensor networks.Check the Cost-Benefit Analysis sheet for the result.

General Parameters, Setup costsPrice charged for good 17.14Variable costs of production per good 5.27Amount of sold/distributed goods 400Cost of manual processing of returned goods (defective or perished) 2Fixed costsPenalty depending on cost of goods (shipper -> supplier) 20Price of shipping per good (to be paid by the customer) 4Variable transportation costs per good (for shipper) 2Costs of capacity loss for reshippingFleet size of shipper

The authors like to thank Emilian Peev for the conversion in excel.

Christian Decker (TecO, University of Karlsruhe, DE); Martin Berchtold (University of Karlsruhe, DE); Michael Beigl (TU Braunschweig, DE); Leonardo Weiss F. Chaves (SAP Research, DE); Daniel Roehr (TU Braunschweig, DE); Till Riedel (TecO, University of Karlsruhe, DE); Monty Beuster (TU Braunschweig, DE); Daniel Herzig (University of Karlsruhe, DE); Thomas Herzog (University of Karlsruhe, DE)

Define the general parameter of logistics process within this sheet. Example is depicted right.

This work presents a decision metric for the use of different kinds of Smart Items within the supply chain.

Example logistics process

Simple Smart Items: Barcode and RFIDAdditional fixed costs using Smart Items (infrastructure)

0.5Acquisition costs of Smart Item 50Additional shipping charge for usage of Smart Item per goodCosts of message sent over GSM to ERP-SystemFactor of density, ratio of Smart Item quantity to quantity of goods 0.25

Ratio of defective goods delivered to customer 0.2Ratio of triggered Smart Items, 0 ≤ φ ≤ ω ≤ 1Ratio of searched (potentially lost) goods during shippingRatio of recovered goods (previously lost)

Variable operational costs per Smart Item and shipment (e.g. recharge battery, programming)

Factor of maintenance: 0 all Smart Items get shipped back (reusable); 1 no Smart Item is returned

Non quantifiable advantage through usage of Smart Items (consumer satisfaction, etc.)

Profit function for Supplier

Supplier

Profit 3216.8

Profit function for Shipper

Shipper

Profit 800

Advanced Smart Items: Sensor NetworksAdditional fixed costs using Smart Items (infrastructure)

0.5Acquisition costs of Smart Item 50Additional shipping charge for usage of Smart Item per good 0.5Costs of message sent over GSM to ERP-SystemFactor of density, ratio of Smart Item quantity to quantity of goods 0.25

Ratio of defective goods delivered to customer 0.1Ratio of triggered Smart Items 0.01Ratio of searched (potentially lost) goods during shippingRatio of recovered goods (previously lost) 0.01

Variable operational costs per Smart Item and shipment (e.g. recharge battery, programming)

Factor of maintenance: 0 all Smart Items get shipped back (reusable); 1 no Smart Item is returned

Non quantifiable advantage through usage of Smart Items (consumer satisfaction, etc.)

Profit function for Supplier

Supplier

Profit 4020.4

Profit function for Shipper

Shipper

Profit 902

CustomerAdditional shipping charge for usage of Smart Item per good 0.5 from AdvSI sheetSlope of the value of the additional effort 0.0009 k for cust. utilityAmount of sold/distributed goods 400 from Par sheetSimple Smart Items: Barcode and RFIDRatio of searched (potentially lost) goods during shipping 0 from SimpleSI sheetRatio of defective goods delivered to customer 0.2 from SimpleSI sheetAdvanced Smart Items: Sensor Networks

Ratio of searched (potentially lost) goods during shipping 0 from AdvSI sheetRatio of defective goods delivered to customer 0.1 from AdvSI sheet

Utility Function(Cobb-Douglas Function)

Customer Utility Function

Customer utility0.16472979

Decision Metric

Customer utility Utility gain according to Cobb Douglas0.164729788588728 0.17

ResultProbably Beneficial