Agile inventory management Incorporating wireless technology ...

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

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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 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.

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The need for label generation (every time a product arrives) which must be attached to each load indicating its assigned location.

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The “blind” periods where the central database system does not know the actual available locations for pallet assignment.

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The fear for lift drivers to mis-locate pallets due to the lack of real-time verification of the item and its location.

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

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The lack of real-time connectivity between the information system (IS) of the warehouse and the IS of customer or vendor.

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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).

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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.

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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.

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Flexibility: Because wireless devices are inherently portable, warehouse users may be engaged in various activities such as product delivery, storage and so on.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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Versatile: By using PDTs there is the ability of sharing data and transferring files in realtime 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.

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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.

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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 realtime 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.

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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.

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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.

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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.

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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.

REFERENCES Brewer, A., Sloan, N. and Landers, T.L. 1999, Intelligent Tracking in Manufacturing, Journal of Intelligent Manufacturing, 10, 3-4, pp. 245-250. Chen, G. and Kotz, D. 2000, A Survey of Context-Aware Mobile Computing Research, Dartmouth Computer Science Technical Report TR2000-381 Drury, J. 1988, Towards more efficient order picking, IMM Monograph No. 1, The Institute of Materials Management, Cranfield, U.K Giaglis G., Kourouthanasis P., Tsamakos A. 2002, Towards a classification network for mobile location services, In Mennecke, B.E. and Strader, T.J. (Eds.), Mobile Commerce: Technology, Theory, and Applications, Idea Group Publishing. Kalakota, R. And Robinson, M. 2001, M-Business: The Race to Mobility, McGraw-Hill, New York. Pateli, A., Giaglis, G.M, Fouskas, K., Kourouthanassis P. And Tsamakos A., 2002 On the Potential Use of Mobile Positioning Technologies in Indoor Environments , In the Proceedings of 15th Bled Electronic Commerce Conference -e-Reality: Constructing the e-Economy, Bled, Slovenia Proxim Inc, 1998, What is a Wireless LAN?, White paper, #7680 CI/SM (available online at www.proxim.com)

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Strehlo, K., 1996, Data warehousing: Avoid planned obsolescence, Datamation, Jan. 5 Van de Berg, J.P, Zijm W. H. M. 1999, Models for warehouse management: Classification and examples, International Journal of Production Economics, 59, pp. 519-528 Wolff, J. A, 2001, RFID tag-an intelligent bar code replacement, IBM Global services, (available online at www.ibm.com) Yao A.C., Garlson J. G., (1999), The impact of real-time data communication on inventory management, International Journal of Production Economics, 59, pp. 213-219

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