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Agile inventory management incorporating wireless technology

:
Warehouse scenario and network topology

THE eBUSINESS CENTER
www.eltrun.aueb.gr

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

real-time hybrid wireless system that will facilitate the control of inventory operations and will be able to fulfill domestic and international customers’ needs. sequential supply chain to an adaptive. Athens. This paper aims to improve current warehouse management practices by proposing an on-line. more effectively. the improvement of inventory management in warehouses and distribution centres appears to be a must. 2001). Greece Abstract. 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. warehouse management. In this context.. real-time data collection. Contemporary global markets. The issue of buyer-seller relationships in supply chain management research is becoming increasingly critical. and stricter customer compliance requirements are the key parameters shaping twenty-first-century business practices (Kalakota et al. more frequent and shorter order-to-shipment times. 2 . As a result. Keywords: Inventory systems. George M. with their characteristics such as smaller and variable productions.. rapid market changes and shorter lead times. GR-11362. wireless technology 1 INTRODUCTION Uneven demand. represent a fundamental shift from a linear. and wireless technology can be an effective solution to enhance business operation. Giaglis Department of Management Science and Technology Athens University of Economics and Business 47A Evelpidon & 33 Lefkados St. Agile inventory management incorporating wireless technology: Warehouse scenario and network topology Agile inventory management incorporating wireless technology: Warehouse scenario and network topology Vasileios Zeimpekis. companies are re-examining their business processes from a business-to-business (B2B) commerce perspective in an effort to be more effective and efficient. agile supply chain network.

storage and delivery are handled in warehouses and distribution centres. a typical operation sequence that is followed in a warehouse for processing day-to-day transactions is depicted in figure 1. product information. supply chains created value through efficiency and low price. presents a proposed warehouse scenario where the use of the previously analysed wireless systems takes place. 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. PDT) which can be used as an access medium to the network. Next the goods are palletised. More specifically. 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. the operation starts by the delivered goods (cases or cartons of merchandise). the paper ends with useful conclusions and suggestions for future research. Finally. Agile inventory management incorporating wireless technology: Warehouse scenario and network topology Traditionally. Indoor GPS) for the core network of the warehouse and two devices (RF-ID. which incorporates two systems (W-LAN. and a label is generated and attached to each load indicating its assigned 3 . Wireless technology can play a pivotal role in this emerging issue by enabling real-time inventory management systems. 2 CURRENT PRACTICES AND LIMITATIONS OF INVENTORY MANAGEMENT IN WAREHOUSES According to Yao et al (1999). 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. However. which are unloaded at the receiving docks. The basic aim of this paper is to investigate the impact of wireless technology in inventory management. however. Today. A hybrid wireless system is proposed. new tools and a new type of inventory/warehouse control is needed. Then. Section 3 focuses on the wireless systems which can act as facilitators for wireless inventory management. Section 4. 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. Quantities are verified by the warehouse operators by using their bills of landing or manifests (paper-based techniques). Under today’s current practices. One of the most important trends that impacts supply chains is inventory management in warehouses. At the same time random quality checks are performed on the delivered loads. For that reason. by using paper-based techniques or in the best of the cases wired hand-held scanners. supply chains have to create value through their flexibility.

J. and check whether is available or not as well as its exact location.P et al. totes or cartons) for internal use differ from the incoming storage modules. these must be accumulated and sorted before being transported to the shipping area or to the production floor. pallets. whenever a product is requested. resulting in inefficiency and increased cost. the fast and accurate collection and manipulation of information) and maximising service levels are: 4 . Figure 1: Warehouse activities Subsequently. the reality is that that it faces many problems as it is costly. the operators will have manually to key in the temporary holding location for the pallet data that was entered. Accumulation and sorting may either be performed during or after the order-picking processes (Van de Berg.. In essence.e. in the case of a distribution centre or a production warehouse.Finally. After this. 1999). Agile inventory management incorporating wireless technology: Warehouse scenario and network topology location. This process is called order picking. which are characterised by many unnecessary handoffs or additional process steps. then the loads must be reassembled. If the storage modules (e. Some hours later.. the products are retrieved from the temporary storage racks and delivered for transport to the shipping area and are shipped. the problem is a technology issue and in extend can also be an inter-enterprise process issue. the operator must access the central warehouse database system. The main problems that are faced and which wireless systems could minimise by increasing at the same time warehouse processes velocity (i. respectively. An order lists the products and quantities requested by a customer or by a production/assembly workstation. inefficient and not effective at all. The basic reason for that is focused basically on the fragmented inventory processes.g. the loads are transported to a location within the storage area. Although the described process of the warehouse activities seems to be capable of delivering value to the customer/enterprise. When an order contains multiple stock keeping units (SKUs).

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. which can be automatically transmitted it to the appropriate forklift operator) when a product is ready for shipping. 1988) revealed that order-picking is the most costly among these activities (figure 2). Hence. order-picking and shipping. Figure 2: Warehousing cost by activity 5 . storage. ! The fear for lift drivers to mis-locate pallets due to the lack of real-time verification of the item and its location. ! 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. we may subdivide the activities in a warehouse. More than 60% of all operating costs in a typical warehouse can be attributed to order-picking. ! The lack of real-time connectivity between the information system (IS) of the warehouse and the IS of customer or vendor. A study in the United Kingdom (Drury. real-time information to the operators about the processes that must be done (e. into four categories: receiving. the generation of a put-away list. where information about product details/location are not keyed in the system. indicating the warehouse storage location. inside the warehouse (for the case where some of them must be reallocated in different places). to provide accurate. ! The inability for the warehouse system to always monitor where each product is. ! The inability of the central warehouse system. ! The “blind” periods. where problems can occur.g.

by distributing wirelessly the activities evenly over the warehouse subsystems. For example. 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. The system that we propose for an agile inventory management in a warehouse consists of a hybrid wireless network. inbound or outbound products can transmit automatically their information. while guaranteeing a satisfactory service level. J. This functionality offers efficient means to disseminate information to a large number of people. 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. On the other hand. but also improve the efficiency of the order-picking operation within the warehouse (Van de Berg. The latter specifies the percentage of the orders to be supplied directly from stock. any time. The latter embraces two main parts: the core network and the access medium. ! Dissemination: Wireless infrastructures support simultaneous delivery of data to all mobile users within a specific geographical region (warehouse). products can be easily tracked inside a warehouse.P et al. by applying real-time sophisticated production planning and ordering policies the total inventory can be reduced. ! Ubiquity: Through wireless devices. but is also available real. Also. 6 .. warehouse staff is able to reach product information anywhere. 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. such as quantity.time. congestion may be reduced and activities may be balanced better among subsystems. thus increasing the throughput capacity. an effective wireless storage location policy may reduce the mean travel times for storage/retrieval and order-picking. Furthermore. Reduced inventory levels not only reduce inventory costs. storage and so on. part & lot number. supplier wherever they are in the warehouse. ! Location finding: By incorporation special RF devices. 1999). ! Flexibility: Because wireless devices are inherently portable. warehouse users may be engaged in various activities such as product delivery. wherever and whenever they want it.

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. users can access shared information without looking for a place to plug-in.1. Indoor GPS will be used by the central system for product location and tracking. indicating the warehouse storage location (received by the Indoor GPS). With W-LANs. ! As far as the medium access is concerned. 2002).1 CORE NETWORK 3. Agile inventory management incorporating wireless technology: Warehouse scenario and network topology ! The core network is responsible for the management of the transmitted/received information. convenience and cost advantages over traditional wired networks (Proxim. More specifically. This mobility supports productivity and service opportunities not possible with wired networks. The core network is analysed first and the medium access systems go after.. in a typical scenario. 1998): ! Mobility: Wireless LAN systems can provide LAN users with access to real-time information anywhere in their organization. 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. In our case it is formed by using two well-known systems: Wireless Local Area Network (W-LAN) and Indoor Global Positioning System (GPS). 3. who will retrieve the pallet of product and will place it in the required location. which can be used when the received pallets of products do not have an RF-ID. On the other hand. 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. Wireless LANs offer the following productivity. This put-away task will be automatically transmitted to the appropriate forklift operator. In the following section an in-depth analysis of the proposed hybrid system will take place. the warehouse system will process the product data (received by the W-LAN) and will generate a put-away list. we propose two systems: a) RF identification (RF-ID). b) Portable data terminals (with RF technology). and network managers can set up or augment networks without installing or moving wires. 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. 7 .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).

As in the GPS system. These are devices that generate a GPS-like navigation signal. 3. whose main function is to extend the range of network by relaying signals from a client to an AP or another EP. unless additional means. At its most basic. Long-term cost benefits are greatest in dynamic environments requiring frequent moves and changes. In addition. overall installation expenses and life-cycle costs can be significantly lower. ! Reduced Cost-of-Ownership: While the initial investment required for wireless LAN hardware can be higher than the cost of wired LAN hardware. it is necessary to install more than one access points in order to succeed in having full coverage of the area.1. Its navigation signal is generated by a number of pseudolites (pseudo-satellites). two PCs equipped with wireless adapter cards can set up an independent network whenever they are within range of one another. Wireless LANs can be simple or complex. Indoor GPS location identification system focuses on exploiting the advantages of GPS for developing a location-sensing system for indoor environments. In the wireless LAN architecture which we propose for warehouse inventory management. such 8 . It must be mentioned that Indoor GPS takes into account the low power consumption and small size requirements of wireless access devices. the local network should be enforced by Extension Points (EP). another system that can be proposed for the core network infrastructure in order to facilitate wireless inventory management is the Indoor GPS. ! Scalability: Wireless LAN systems can be configured in a variety of topologies to meet the needs of specific applications and installations.2 Indoor Global Positioning System (GPS) Instead of W-LAN. 2000). 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. 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. at least four pseudolites have to be visible for navigation. 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. 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. 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.

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. destination and product identification number. This will improve utilisation without undermining the ease with which goods can be moved in and out. or being physically damaged. will echo back a variety of information (Brewer et al. more expensive and contain a battery to provide power to the semiconductor device. are usually under $1 in cost and do not contain a battery. 2001): ! Maximising warehouse space: With the high costs associated with storage real estate. 2002). 1999). RF-ID tags are programmable and can store a variety of information including location. Indeed. ! Minimising errors in delivery: The more tightly integrated the supply chain. automatically tracking goods in and out (figure 3). The advantages of implementing RF-ID in wireless inventory management are the following ones (Wolff. for organisations reliant on the delivery of 9 . Active tags are larger. This means that readers can be located at the entrance to a warehouse for example. The signal generated by the pseudolites is monitored by a number of reference receivers (Pateli et al. Within the retail environment goods shrinkage is widely perceived to account for up to one per cent of stock.2. grease. Additional information such as size and weight can also be included where required. RF-ID tags are ideal for ‘clean environments’ such as scientific or electronic production areas. without the need for human intervention. 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. Furthermore. the goal is to maximise warehouse space. Agile inventory management incorporating wireless technology: Warehouse scenario and network topology as altitude aiding are used.2 ACCESS MEDIUM 3. representing a significant dent in profit margin. ! Minimising goods shrinkage: Theft combined with imprecise inventory management can create a significant shortfall in actual versus expected goods available. RFID tags are also not susceptible to damage from dirt. 3. 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.. The proposed Indoor GPS architecture that can be suitable for wireless inventory management in a warehouse is illustrated in figure 2. when polled by a remote interrogator. the less leeway there is for error. 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.

Improvements in supply chain visibility based on accurate. and field service. over ceilings and under floors to connect computing or bar coding equipment. which updates the tracking software. most applications work well with "batch" data collection and "batch" PDT's: after all necessary data and information is collected and scanned. PDTs are used when information at various locations must be collected and it is either too costly. asset tracking. Some examples of tracking applications that require the use of PDT data collection devices include warehousing and inventory. ! Versatile: By using PDTs there is the ability of sharing data and transferring files in real- time mode. such errors can have a serious impact on customer satisfaction. error prone. up-to-date information will aid the reduction of these buffer stocks. to ensure they can meet retail demands.2. 10 . the system is updated instantly in real-time. or directly into a tracking software package. or difficult to perform at or near a host computer. ! 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. PDTs can also be connected in multiple computers. Agile inventory management incorporating wireless technology: Warehouse scenario and network topology specific components to fulfil their own order schedule. followed by “location” (where is the scan occurring). As PDTs are RF-enabled. 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. PDTs penetrate walls and floors made with steel studs and reinforcement. However. to a printer or other peripherals. The uploaded files can be transferred into an ASCII file. and finally “item” (what item is being scanned). 3. Wireless inventory management can be implemented through PDTs because the latter are: ! Convenient: There is now no need to run cables through walls. the data is later uploaded into the host computer. When a selection is made usually the first prompt will be “user” (who is doing the scan). Excel spreadsheet. or buffer stock. The data can be entered via the keypad or by scanning (reading) bar codes. If it is an inventory application the user is also prompted for “quantity” (how many items).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.

11 . by the coordination of the proposed wireless system with the AWCS (Automated Warehouse Control System). 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. ! User friendly: PDTs are easy to be used and can be connected to any device with a standard RS-232 or keyboard port. The transaction activities for a warehouse start when the purchasing department transmits a detailed component description of varieties. By bar code scanning (PDTs match in real-time mode all the product information stored in the central database) or through RF-IDs. 1999). No technical training is necessary beyond knowledge of standard communications software for serial file transfers. the access medium devices must be placed on pallets or cartoons (RF-IDs) and must be hand-held or mounted on lift trucks (PDTs). 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. 1996). ! Portable: PDTs have the ability to use rechargeable batteries which. 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.. 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. 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. With 20 channel pairs. When the items arrive to the warehouse. incoming items are identified and tracked.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. When the order is ready for delivery. scheduling and inventory control. the data is also automatically available for accounting. More specifically this information can be provided. 4 PROPOSED WIRELESS INVENTORY SYSTEM IN WAREHOUSES With the proposed wireless system(figure 3). can provide a lot of hours of mobile access (during the scanning period) to the main database (i.. specifications. In order to operate effectively. ERP) system.e. time and quantities of items to be acquired (Strehlo et al. additional units can be used as transponders to further extend range. By transmitting all the product information (through PDTs or RF-IDs).

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. the load identification bar code is scanned or transmitted automatically if an RF-ID is used. Agile inventory management incorporating wireless technology: Warehouse scenario and network topology The bar-coded pallet label (can be also an RF-ID). On the shipping dock. The lift truck driver receives wirelessly put-away instructions about the incoming pallet from the AWCS. 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). contains all the data necessary to control the status and movement of the pallet through the warehouse. 12 . its number and location are given to the driver via the PDT terminal. quantity and location. in conjunction with the central database records. These instructions direct the movement of the pallet to a specific rack location. if the transaction is correct. accurate and real-time logistical information about the product information. By scanning the bar code label on the pallet and the bar code on the rack position. 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). which identifies and transmits the data about the contents of the load into the customer order file in the AWCS. When retrieving the pallet for the picking operation.

The need for faster and more accurate order fulfilment is thus transforming current inventory management coordination. customer needs). ordering. EDI. racking. new tools and a new type of inventory management is needed. Current warehouse inventory practices incorporate fragmented processes. In order to improve this coordination. ! Timeless access and response: By using real-time and accurate information from the wireless network. which enables the transmission/reception of real-time data (i. In order to achieve that. product information/location) through a wireless inventory management system. 5 CONCLUSIONS One of the basic business trends that are impacting contemporary supply chains is inventory management in warehouses. resulting in inefficiency and increased cost. docking. PDTs are also very portable as they can be hand-held or mounted on vehicle or equipment. adjusted and upgraded and at the same time there is avoidance of any type of errors or of unnecessary assumptions. their storage location as well as their product details there is no need for printout reporting. and RF-ID for quality information service which could change the cost structure. various wireless systems have been 13 . quality. ! Standardization of the procedure: Wireless systems can play a pivotal role in the way most traditional processes such as receiving. 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. which lead in many unnecessary handoffs or additional process steps. 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. and order-filling can take place. 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. The standardisation of the warehouse management procedures makes inventory operations easier to be managed. They are highly portable and can be used anywhere in the warehouse or factory and or carried into cargo containers and other remote places. delivery service and timely response thereby increasing profits and customer satisfaction. This paper aimed to propose a hybrid wireless system. ! Flexibility: RF-IDs and are very flexible as they can be placed on the products. ! Wireless Information integration: Wireless technology can integrate various systems such as ERP.e. picking.

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