agile inventory management

Agile inventory management incorporating wireless technology: Warehouse scenario and network topology

ELTRUN WORKING PAPER SERIES

WP 2002-003

Agile inventory management Incorporating wireless technology:

Warehouse scenario and network topology

V. ZEIMPEKIS & G. M. GIAGLIS

{vzeimp, giaglis}@aueb.gr

Athens University of Economics and Business Department of Management Science and Technology For more information please visit our site at: http:// www.eltrun.aueb.gr

THE eBUSINESS CENTER www.eltrun.aueb.gr


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Agile inventory management incorporating wireless technology:

Warehouse scenario and network topology

Vasileios Zeimpekis, George M. Giaglis

Department of Management Science and Technology Athens University of Economics and Business

47A Evelpidon & 33 Lefkados St., GR-11362, Athens, Greece

Abstract. The issue of buyer-seller relationships in supply chain management research is

becoming increasingly critical. Contemporary global markets, with their characteristics such as

smaller and variable productions, rapid market changes and shorter lead times, represent a

fundamental shift from a linear, sequential supply chain to an adaptive, agile supply chain

network. In this context, the improvement of inventory management in warehouses and

distribution centres appears to be a must, and wireless technology can be an effective solution to

enhance business operation. This paper aims to improve current warehouse management

practices by proposing an on-line, real-time hybrid wireless system that will facilitate the control

of inventory operations and will be able to fulfill domestic and international customers’ needs,

more effectively.

Keywords: Inventory systems, warehouse management, real-time data collection, wireless

technology

1 INTRODUCTION

Uneven demand, more frequent and shorter order-to-shipment times, and stricter

customer compliance requirements are the key parameters shaping twenty-first-century business

practices (Kalakota et al., 2001). As a result, companies are re-examining their business

processes from a business-to-business (B2B) commerce perspective in an effort to be more

effective and efficient. Such an evaluation has the potential to transform a company’s supply

chain practices from a group of unplanned and fragmented processes into an interconnected

system capable of delivering value to the customer.


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Traditionally, supply chains created value through efficiency and low price. Today,

however, supply chains have to create value through their flexibility. Their design must

accommodate a customer changing their mind after the order is placed so that the company

retains control of the manufacturing and fulfilment processes.

One of the most important trends that impacts supply chains is inventory management in

warehouses. Under today’s current practices, product information, storage and delivery are

handled in warehouses and distribution centres, by using paper-based techniques or in the best of

the cases wired hand-held scanners. However, the need for faster and more accurate fulfilment is

transforming rapidly supply chain coordination and the way inventory management is organized

in a warehouse facility. For that reason, new tools and a new type of inventory/warehouse

control is needed. Wireless technology can play a pivotal role in this emerging issue by enabling

real-time inventory management systems.

The basic aim of this paper is to investigate the impact of wireless technology in

inventory management. For that reason, the structure of the paper is organised as follows:

Section 2 introduces the current practices of inventory management and underlines the major

problems that a warehouse manager face. Section 3 focuses on the wireless systems which can

act as facilitators for wireless inventory management. A hybrid wireless system is proposed,

which incorporates two systems (W-LAN, Indoor GPS) for the core network of the warehouse

and two devices (RF-ID, PDT) which can be used as an access medium to the network. Section

4, presents a proposed warehouse scenario where the use of the previously analysed wireless

systems takes place. Finally, the paper ends with useful conclusions and suggestions for future

research.

2 CURRENT PRACTICES AND LIMITATIONS OF INVENTORY

MANAGEMENT IN WAREHOUSES

According to Yao et al (1999), a typical operation sequence that is followed in a

warehouse for processing day-to-day transactions is depicted in figure 1. More specifically, the

operation starts by the delivered goods (cases or cartons of merchandise), which are unloaded at

the receiving docks. Quantities are verified by the warehouse operators by using their bills of

landing or manifests (paper-based techniques). At the same time random quality checks are

performed on the delivered loads. Then, the loads are quickly calculated in order for the staff to

determine the number of pallets needed for transporting the goods to the storage area. Next the

goods are palletised, and a label is generated and attached to each load indicating its assigned


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location. If the storage modules (e.g., pallets, totes or cartons) for internal use differ from the

incoming storage modules, then the loads must be reassembled. After this, the loads are

transported to a location within the storage area. Some hours later, the operators will have

manually to key in the temporary holding location for the pallet data that was entered.

Figure 1: Warehouse activities

Subsequently, whenever a product is requested, the operator must access the central

warehouse database system, and check whether is available or not as well as its exact location.

This process is called order picking. An order lists the products and quantities requested by a

customer or by a production/assembly workstation, in the case of a distribution centre or a

production warehouse, respectively. When an order contains multiple stock keeping units

(SKUs), these must be accumulated and sorted before being transported to the shipping area or to

the production floor. Accumulation and sorting may either be performed during or after the

order-picking processes (Van de Berg, J.P et al., 1999).Finally, the products are retrieved from

the temporary storage racks and delivered for transport to the shipping area and are shipped.

Although the described process of the warehouse activities seems to be capable of

delivering value to the customer/enterprise, the reality is that that it faces many problems as it is

costly, inefficient and not effective at all. The basic reason for that is focused basically on the

fragmented inventory processes, which are characterised by many unnecessary handoffs or

additional process steps, resulting in inefficiency and increased cost. In essence, the problem is a

technology issue and in extend can also be an inter-enterprise process issue. The main problems

that are faced and which wireless systems could minimise by increasing at the same time

warehouse processes velocity (i.e. the fast and accurate collection and manipulation of

information) and maximising service levels are:


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! The lack of ability to verify (in real-time mode) the quantity of received goods.

! The need for label generation (every time a product arrives) which must be attached to

each load indicating its assigned location.

! The “blind” periods where the central database system does not know the actual available

locations for pallet assignment.

! The fear for lift drivers to mis-locate pallets due to the lack of real-time verification of

the item and its location.

! The “blind” periods, where information about product details/location are not keyed in

the system.

! The lack of real-time connectivity between the information system (IS) of the warehouse

and the IS of customer or vendor.

! The inability for the warehouse system to always monitor where each product is, inside

the warehouse (for the case where some of them must be reallocated in different places).

! The inability of the central warehouse system, to provide accurate, real-time information

to the operators about the processes that must be done (e.g. the generation of a put-away

list, indicating the warehouse storage location, which can be automatically transmitted it

to the appropriate forklift operator) when a product is ready for shipping.

Hence, we may subdivide the activities in a warehouse, where problems can occur, into

four categories: receiving, storage, order-picking and shipping. A study in the United Kingdom

(Drury, 1988) revealed that order-picking is the most costly among these activities (figure 2).

More than 60% of all operating costs in a typical warehouse can be attributed to order-picking.

Figure 2: Warehousing cost by activity


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3 WIRELESS SYSTEMS AS AN INVENTORY MANAGEMENT

FACILITATOR

Intelligent inventory management through wireless systems may result in a reduction of

the warehousing costs. For example, by applying real-time sophisticated production planning and

ordering policies the total inventory can be reduced, while guaranteeing a satisfactory service

level. The latter specifies the percentage of the orders to be supplied directly from stock.

Reduced inventory levels not only reduce inventory costs, but also improve the efficiency of the

order-picking operation within the warehouse (Van de Berg, J.P et al., 1999). Furthermore, an

effective wireless storage location policy may reduce the mean travel times for storage/retrieval

and order-picking. Also, by distributing wirelessly the activities evenly over the warehouse

subsystems, congestion may be reduced and activities may be balanced better among

subsystems, thus increasing the throughput capacity. Wireless systems can support all these

activities because they provide warehouse operators with:

! Easy and timely access to product information: Wireless systems can deliver product

information that not only reaches all the warehouse staff instantly, but is also available

real- time, wherever and whenever they want it.

! Ubiquity: Through wireless devices, warehouse staff is able to reach product information

anywhere, any time. On the other hand, inbound or outbound products can transmit

automatically their information, such as quantity, part & lot number, supplier wherever

they are in the warehouse.

! Flexibility: Because wireless devices are inherently portable, warehouse users may be

engaged in various activities such as product delivery, storage and so on.

! Location finding: By incorporation special RF devices, products can be easily tracked

inside a warehouse. This means that we can succeed in having an effective storage

location management as well as order picking and thus minimise the costs of distribution

centres/warehouses.

! Dissemination: Wireless infrastructures support simultaneous delivery of data to all

mobile users within a specific geographical region (warehouse). This functionality offers

efficient means to disseminate information to a large number of people.

The system that we propose for an agile inventory management in a warehouse consists

of a hybrid wireless network. The latter embraces two main parts: the core network and the

access medium.


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! The core network is responsible for the management of the transmitted/received

information. In our case it is formed by using two well-known systems: Wireless Local

Area Network (W-LAN) and Indoor Global Positioning System (GPS). The first will be

responsible for: a) the wireless reception of product information and b) the automatic

transmission of this information in the central warehouse database system as well as into

the wireless hand held devices. On the other hand, Indoor GPS will be used by the central

system for product location and tracking. More specifically, in a typical scenario, the

warehouse system will process the product data (received by the W-LAN) and will

generate a put-away list, indicating the warehouse storage location (received by the

Indoor GPS). This put-away task will be automatically transmitted to the appropriate

forklift operator, who will retrieve the pallet of product and will place it in the required

location.

! As far as the medium access is concerned, we propose two systems: a) RF identification

(RF-ID), which is placed in the pallets of the products and can transmit all the product

information to the central warehouse system through the wireless LAN. b) Portable data

terminals (with RF technology), which can be used when the received pallets of products

do not have an RF-ID. More specifically, the readers will be able to scan the bar code of

the products and transmit wirelessly all the information in the central database.

In the following section an in-depth analysis of the proposed hybrid system will take

place. The core network is analysed first and the medium access systems go after.

3.1 CORE NETWORK 3.1.1 Wireless Local Area Network (W-LAN)

W-LAN is a flexible data communications system implemented as an extension to or as

an alternative for cable-based Local Area Network (LAN). The W-LAN infrastructure is similar

to cellular systems where the terminal communicates with the base station over an air interface at

a certain frequency band (Giaglis et al., 2002). With W-LANs, users can access shared

information without looking for a place to plug-in, and network managers can set up or augment

networks without installing or moving wires. Wireless LANs offer the following productivity,

convenience and cost advantages over traditional wired networks (Proxim, 1998):

! Mobility: Wireless LAN systems can provide LAN users with access to real-time

information anywhere in their organization. This mobility supports productivity and

service opportunities not possible with wired networks.


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! Installation speed and Simplicity: Installing a wireless LAN system can be fast and easy

and can eliminate the need to pull cable through walls and ceilings.

! Reduced Cost-of-Ownership: While the initial investment required for wireless LAN

hardware can be higher than the cost of wired LAN hardware, overall installation

expenses and life-cycle costs can be significantly lower. Long-term cost benefits are

greatest in dynamic environments requiring frequent moves and changes.

! Scalability: Wireless LAN systems can be configured in a variety of topologies to meet

the needs of specific applications and installations. Configurations are easily changed and

range from peer-to-peer networks suitable for a small number of users to full

infrastructure networks (suitable for inventory management) that enable roaming over a

broad area.

Wireless LANs can be simple or complex. At its most basic, two PCs equipped with

wireless adapter cards can set up an independent network whenever they are within range of one

another. Installing an Access Point (AP) can extend the range of an ad hoc network and

effectively doubling the range at which the devices can communicate. In the wireless LAN

architecture which we propose for warehouse inventory management, it is necessary to install

more than one access points in order to succeed in having full coverage of the area. In addition,

the local network should be enforced by Extension Points (EP), whose main function is to extend

the range of network by relaying signals from a client to an AP or another EP.

3.1.2 Indoor Global Positioning System (GPS)

Instead of W-LAN, another system that can be proposed for the core network

infrastructure in order to facilitate wireless inventory management is the Indoor GPS. Indoor

GPS location identification system focuses on exploiting the advantages of GPS for developing a

location-sensing system for indoor environments. It should be noted that the main reason that the

well-known GPS system is not used in this case is that its signal does not typically work indoors

because of the inability of the signal strength to penetrate a building (Chen et al, 2000). It must

be mentioned that Indoor GPS takes into account the low power consumption and small size

requirements of wireless access devices. Its navigation signal is generated by a number of

pseudolites (pseudo-satellites). These are devices that generate a GPS-like navigation signal. The

latter is designed to be similar to the GPS signal in order to allow pseudolite-compatible

receivers to be built with minimal modifications to existing GPS receivers. As in the GPS

system, at least four pseudolites have to be visible for navigation, unless additional means, such


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as altitude aiding are used. The signal generated by the pseudolites is monitored by a number of

reference receivers (Pateli et al, 2002). The proposed Indoor GPS architecture that can be

suitable for wireless inventory management in a warehouse is illustrated in figure 2.

3.2 ACCESS MEDIUM

3.2.1 Radio Frequency Identification (RF-ID)

An RF-ID system integrates an antenna with electronic circuitry (a semiconductor device

which can be either active or passive) to form a transponder that, when polled by a remote

interrogator, will echo back a variety of information (Brewer et al., 1999). Active tags are larger,

more expensive and contain a battery to provide power to the semiconductor device. A common

example of an active RF-ID tag is the automated car toll system employed on many bridges or

toll roads Passive devices can be quite small, are usually under $1 in cost and do not contain a

battery. One of RF-ID’s most important attributes is that the tags do not require line of sight to

be read or close proximity to the reader. This means that readers can be located at the entrance to

a warehouse for example, automatically tracking goods in and out (figure 3). Furthermore,

without the need for human intervention, RF-ID tags are ideal for ‘clean environments’ such as

scientific or electronic production areas. RF-ID tags are programmable and can store a variety of

information including location, destination and product identification number. Additional

information such as size and weight can also be included where required. RFID tags are also not

susceptible to damage from dirt, grease, or being physically damaged.

The advantages of implementing RF-ID in wireless inventory management are the

following ones (Wolff, 2001):

! Maximising warehouse space: With the high costs associated with storage real estate, the

goal is to maximise warehouse space. This will improve utilisation without undermining

the ease with which goods can be moved in and out.

! Minimising goods shrinkage: Theft combined with imprecise inventory management can

create a significant shortfall in actual versus expected goods available. Within the retail

environment goods shrinkage is widely perceived to account for up to one per cent of

stock, representing a significant dent in profit margin.

! Minimising errors in delivery: The more tightly integrated the supply chain, the less

leeway there is for error. Misdirected deliveries or incorrect orders can immediately

result in on-shelf out-of-stock situations for a retailer leading both to reduced sales and

damaged customer relationships. Indeed, for organisations reliant on the delivery of


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specific components to fulfil their own order schedule, such errors can have a serious

impact on customer satisfaction.

! Minimising inventory: The widespread introduction of just-in-time retailing has enabled

retailers to reduce their stock levels but distribution companies now hold increased

quantities of just-in-case, or buffer stock, to ensure they can meet retail demands.

Improvements in supply chain visibility based on accurate, up-to-date information will

aid the reduction of these buffer stocks.

3.2.2 Portable data terminals (RF-enabled)

Portable data terminals (PDTs) with integrated hand held bar code readers or scanners

collect data and information in remote or off-site locations. PDTs are used when information at

various locations must be collected and it is either too costly, error prone, or difficult to perform

at or near a host computer. Some examples of tracking applications that require the use of PDT

data collection devices include warehousing and inventory, asset tracking, and field service.

PDT's can be custom configured and programmed for various applications but the most common

configuration is as follows: The main display menu will provide options to choose from. When a

selection is made usually the first prompt will be “user” (who is doing the scan), followed by

“location” (where is the scan occurring), and finally “item” (what item is being scanned). If it is

an inventory application the user is also prompted for “quantity” (how many items). The data can

be entered via the keypad or by scanning (reading) bar codes. As PDTs are RF-enabled, the

system is updated instantly in real-time. However, most applications work well with "batch" data

collection and "batch" PDT's: after all necessary data and information is collected and scanned,

the data is later uploaded into the host computer, which updates the tracking software. The

uploaded files can be transferred into an ASCII file, Excel spreadsheet, or directly into a tracking

software package.

Wireless inventory management can be implemented through PDTs because the latter

are:

! Convenient: There is now no need to run cables through walls, over ceilings and under

floors to connect computing or bar coding equipment. PDTs penetrate walls and floors

made with steel studs and reinforcement.

! Versatile: By using PDTs there is the ability of sharing data and transferring files in real-

time mode. PDTs can also be connected in multiple computers, to a printer or other

peripherals.


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! Flexible: PDTs provide a wireless point-to-point link for fast error free data transfer-even

if separated by walls and floors-at a speed of up to 38.4 KBits. The range is over 200 feet

inside an office or a warehouse and up to 1800 feet in open areas with no obstructions.

With 20 channel pairs, additional units can be used as transponders to further extend

range.

! User friendly: PDTs are easy to be used and can be connected to any device with a

standard RS-232 or keyboard port. No technical training is necessary beyond knowledge

of standard communications software for serial file transfers.

! Portable: PDTs have the ability to use rechargeable batteries which, can provide a lot of

hours of mobile access (during the scanning period) to the main database (i.e. ERP)

system.

4 PROPOSED WIRELESS INVENTORY SYSTEM IN WAREHOUSES

With the proposed wireless system(figure 3), which is an enhancement of a system

proposed by Yao et al., logistical information of the goods can be sent accurately and in real-

time mode to the central database from the moment the products arrive to the warehouse until the

time, which are ready for dispatch. More specifically this information can be provided, by the

coordination of the proposed wireless system with the AWCS (Automated Warehouse Control

System). The latter can update on-line and in real time mode the products’ information/location

by using the transmitted signals of the RF-IDs and PDTs. In order to operate effectively, the

access medium devices must be placed on pallets or cartoons (RF-IDs) and must be hand-held or

mounted on lift trucks (PDTs).

The transaction activities for a warehouse start when the purchasing department transmits

a detailed component description of varieties, specifications, time and quantities of items to be

acquired (Strehlo et al, 1996). When the order is ready for delivery, the vendor sends a

notification through EDI to the warehouse, detailing the order deliver information regarding the

transporter and planned arrival time (Yao et al., 1999). When the items arrive to the warehouse,

the receiving personnel retrieve the notification from their PDTs (the notification is sent

wirelessly from the AWCS) and route the truck to the pre-arranged receiving dock. By bar code

scanning (PDTs match in real-time mode all the product information stored in the central

database) or through RF-IDs, incoming items are identified and tracked. By transmitting all the

product information (through PDTs or RF-IDs), the data is also automatically available for

accounting, scheduling and inventory control.


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The bar-coded pallet label (can be also an RF-ID), in conjunction with the central

database records, contains all the data necessary to control the status and movement of the pallet

through the warehouse. The lift truck driver receives wirelessly put-away instructions about the

incoming pallet from the AWCS. These instructions direct the movement of the pallet to a

specific rack location. The driver uses a PDT to scan the label on the pallet and the label on the

rack and the AWCS verifies that the transaction is correct (this can be done also automatically if

the pallet has an RF-ID).

When retrieving the pallet for the picking operation, its number and location are given to

the driver via the PDT terminal. By scanning the bar code label on the pallet and the bar code on

the rack position, if the transaction is correct, a confirmation signal is given and the driver

delivers the pallet to the order filling area (this can be done also automatically if the pallet has an

RF-ID). On the shipping dock, the load identification bar code is scanned or transmitted

automatically if an RF-ID is used, which identifies and transmits the data about the contents of

the load into the customer order file in the AWCS. This information joins all related detail

transaction information to make the final dispatched notification to the customer.

Figure 3: Proposed topology for wireless inventory management in warehouses

The basic advantages that a warehouse can envisage by implementing the proposed

wireless system are:

! Real time notification of product information/location: The proposed wireless system can

provide very detailed, accurate and real-time logistical information about the product

information, quantity and location.


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! No need for paper-based techniques: By wirelessly transmitting all the information

needed for the arrived/despatched goods, their storage location as well as their product

details there is no need for printout reporting. Reports which are on-line and can be

accessed in real time mode are more appreciated by operating management people

instead of the old fashion paper-based techniques.

! Flexibility: RF-IDs and are very flexible as they can be placed on the products. PDTs are

also very portable as they can be hand-held or mounted on vehicle or equipment. They

are highly portable and can be used anywhere in the warehouse or factory and or carried

into cargo containers and other remote places.

! Wireless Information integration: Wireless technology can integrate various systems such

as ERP, EDI, and RF-ID for quality information service which could change the cost

structure, quality, delivery service and timely response thereby increasing profits and

customer satisfaction.

! Standardization of the procedure: Wireless systems can play a pivotal role in the way

most traditional processes such as receiving, racking, picking, docking, ordering, and

order-filling can take place. The standardisation of the warehouse management

procedures makes inventory operations easier to be managed, adjusted and upgraded and

at the same time there is avoidance of any type of errors or of unnecessary assumptions.

! Timeless access and response: By using real-time and accurate information from the

wireless network, inventory and warehouse management can be executed more

efficiently shortening in that way the communication with both suppliers and customers

(quick fulfillment of the suppliers, customer needs).

5 CONCLUSIONS

One of the basic business trends that are impacting contemporary supply chains is

inventory management in warehouses. Current warehouse inventory practices incorporate

fragmented processes, which lead in many unnecessary handoffs or additional process steps,

resulting in inefficiency and increased cost. The need for faster and more accurate order

fulfilment is thus transforming current inventory management coordination. In order to improve

this coordination, new tools and a new type of inventory management is needed.

This paper aimed to propose a hybrid wireless system, which enables the

transmission/reception of real-time data (i.e. product information/location) through a wireless

inventory management system. In order to achieve that, various wireless systems have been


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used. In first instance, W-LAN and Indoor GPS have been used as the core network, which is

responsible for the management of the information. The access mediums that were proposed

consisted of RF-IDs and RF-enabled PDTs.

By implementing a system like this, warehouses will be able not only reduce inventory

costs, but also improve the efficiency of the order-picking operation within the warehouse (Van

de Berg, J.P et al., 1999). Furthermore, an effective wireless storage location policy may reduce

the mean travel times for storage/retrieval and order-picking.

The need for wireless inventory management clearly indicates that a further research

which focuses on the mutual relations between warehousing and inventory management is

necessary. An in-depth investigation of the impact of new technologies in warehouse inventory

management can lead in numerous advantages which will affect not only the end customer but

the enterprise itself. Facing thus future markets trends, in particular the increased use of wireless

systems in supply chain management may raise some new research agendas in the area of

inventory and warehouse marketing.

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Strehlo, K., 1996, Data warehousing: Avoid planned obsolescence, Datamation, Jan. 5

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