Agile inventory management incorporating wireless technology:

Warehouse scenario and network topology

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

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

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

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

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

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

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

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

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

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

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

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

! 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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Warehouse scenario and network topology

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