Although inventory can be tracked more accurately in real time with RFID technology which results in reduced processing time and labor, one of the major barriers to adoption is the cost of RFID implementation. We use the newsvendor model to analyze a supply chain with one manufacturer and one retailer suffering from inventory inaccuracy.  We study the benefits of itemlevel RFID to both supply chain partners in centralized and dispersed  decision making conditions, and determine the cost thresholds at which RFID adoption becomes profitable. This can be used as quantitative and modeling basis by supply chain enterprises in making decision on RFID adoption.