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Improvement of warehouse operations through

implementation of mobile barcode systems
aimed at advancing sales process

Conference Paper July 2011

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 Improvement of Warehouse Operations through Implementation
of Mobile Barcode Systems Aimed at Advancing Sales Process

Igor Pihir1, Valentina Pihir2, Stjepan Vidai3

1
Faculty of Organization and Informatics, Pavlinska 2, 42000 Varadin, Croatia
2
Metal Industry Varadin, Gospodarska bb, 42000 Varadin, Croatia
3
Faculty of Organization and Informatics, Pavlinska 2, 42000 Varadin, Croatia
ipihir@foi.hr, valentina.pihir@miv.hr, svidacic@foi.hr

Abstract. This research paper deals with the
implementation of modern barcode systems
supported by mobile technology. As much as
barcoding, has grown to have many applications
in retail trade and stores selling consumer
goods, there is still space for improvement of
business processes in specific business systems.
If implemented in the large production systems
as a support to ERP systems, it can make a
difference in the business processes, especially in
terms of improving sales processes through
improvement of warehouse processes. Timely
and updated information on the current state of
stocks or shipping schedule are prerequisite to
competitiveness in the global trade. We
investigated the problems, solutions and benefits
of improvement of warehouse processes by
implementing mobile barcode systems in a
medium-sized wholesaler and a large enterprise
engaged in metal manufacturing industry with a
specific small-scale production.
Keywords. Process improvement, Warehouse
process optimization, Mobile barcode systems,
Warehouse IT implementation.
1. Introduction
This Sales process is a business function that
implies direct contacts with buyers. It is the most
exposed business process in every business
organisation. The processing of buyers'
inquiries/orders in a sales department is the basis
of every business cycle - from order to delivery,
while the processes of preparation of
documenttation, invoices and delivery are at the
end of each of these cycles. See Fig 1. The
results of these processes are the driving force of
business and they are the key to customers'
satisfaction, winning them over and maintaining
their loyalty in the times of crisis and slower
economic activities in general. To give a boost to
sales and increase the effectiveness of its
processes, it is necessary to continuously
optimize all supporting processes, the results of
which directly affect sales results. Most of
modern business systems utilize advanced
information systems to support their business
processes, especially as sources of timely and
updated information needed in decision-making.
Their implementation is a precondition for a
quick reaction and an immediate response to ever
more complex buyers requests.
Having analysed the cases of the large
enterprise in the metal manufacturing industry
and the medium wholesaler, we observed certain
trends in their business activities that are typical
of the majority of business operators. The actual
situation on the market is characterised by
reduced economic activity which has resulted in
the reduction of demand. Today buyers pay far
more attention to what the market has to offer.
This leads to a huge increase in the number of
inquiries, their complexity and specifications.
Consequently, the processing of inquiries and
receiving of orders have become more
demanding. With an aim to diminish the negative
effects of the market trends we have made an
attempt to address the tangible problem of how
to reduce costs and the duration of certain
processes by modelling business processes and
analysing the effects of implementation of IT
systems to support warehouse processes. The
proposed solutions are based on the
implementation of well accepted IT systems of
products barcoding (an identification system that
uses barcodes) as a fairly inexpensive and
reliable way of improving the warehouses
processes with the application of mobile
technology. So far, those systems have been
underexploited in wholesale systems and in
certain lines of production dealing with specific
types of products. Application of IT technologies
to the processes of warehouse operations and

433
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Proceedings of the ITI 2011 33 Int. Conf. on Information Technology Interfaces, June 27-30, 2011, Cavtat, Croatia
handling of final products is likely to improve
the effectiveness of the sales process and ensure
better preconditions for the realisation of sales in
the condition of reduced demand on the market
and increased scope of work relating to the
processing of orders and receiving new ones.
2. Technologies that improve warehouse
Processes
By warehouse processes we assume several
processes: receiving of goods into the warehouse
from the production unit or from the suppliers
logistics, storage process which includes
recording of incoming goods and their storing at
designated locations, retrieval of items from their
storage locations, preparation for shipment,
repackaging and shipping of goods [1].
Technologies that increase effectiveness of these
warehouse processes have considerably
contributed to the reduction of costs of
warehouse space, which directly contributes to
improvement of the sales process. One of the
most commonly used technologies of identifying
and monitoring products is the application of the
barcode and the Radio Frequency Identification
RFID. They are the most widely used in the retail
sales, food industry and the line of consumers
goods [2], [3]. Despite the fact that todays
trends have turned to new technologies, the
barcoding systems have remained in use for
more than 35 years, the reason being that new
mobile PDA devices with barcode scanners are
now being applied to the old technologies [4].
2.1. Mobile barcode system
Barcode was first used back in the late 1970s
and early 1980s. And yet, it is still today the
most widely used in designating and identifying
products throughout the world. The recent years
have seen a new trend of applying mobile readers
to these graphic designations (PDA). These
readers are connected to wireless networks via
standard information systems in support of
business operations. As an older and simpler
technology of designating products by means of
a linear code printed on a label or packaging, it
facilitates manipulation with a great number of
products and their packing. By means of a
mobile laser reader the linear code is converted
into a range of numbers that serve as a key to
interconnection with the database in the central
information system for management and
identification of products [5], [6], [7]. One of the
434
very noticeable trends that proves that this
technology has not yet become outdated can be
seen in the application of barcode as a feature of
mobile phones. Modern mobile phones can be
bought with software that scans the barcode from
the photographs made by their cameras. The use
of barcode in the mobile phone is estimated to
have grown by more than 700% in 2010. Most
often it is used in retail trade for marketing,
where products barcode is linked with additional
contents that can be found on the Internet via
mobile phone [8].
The common barcoding standards are: EAN-
8, EAN-13, UPC-12 and EAN/UCC-14, and
others. An overview of the types of barcodes
with the newly applied 2D can be found on
Wikipedia pages [9]. An EAN-13 barcode is a
13- digit (12 + check digit) barcoding standard
defined by the global standards organization. It is
unique for different types of products of one
company. It designates the origin of a product in
a hierarchical order: the state, the products
manufacturer, the product itself and the control
mark. The decimal number represented by
barcode is the so-called Global Trade Item
Number (GTIN) the number of the global trading
unit that is issued by the international EAN/UCC
organisation via the national organisations
networks. In Croatia it is GS1 Croatia [10], [11],
[12]. Bar code systems are essentially used for
two reasons: they are accurate and they are fast.
When tied into a computer system their use
allows for extreme accuracy in tracking
inventory and in production to establish its status
in real time [13].
2.2. RFID systems
RFID uses a small tag containing an
integrated circuit chip and an antenna, which has
the ability to respond to radio waves transmitted
from the RFID reader. It is able to send, process,
and store information [14]. In addition to bar
code technology, RFID is an identification tool
that does not need physical contact or particular
alignment with the reader. The reading phase is
very fast and fully automated [15]. Worldwide
investments in RFID technology amounted to
$363 million in 2004 and predictions for year
2010 were ~ $3000 billion. However, the
assessment of the impacts derived from these
investments remains a challenging and
controversial task [16]. Benefits include accuracy
of data, availability of timely data, improved
register check-out productivity, increased levels
of controls, customer service, reduced physical metal and liquids. be read (dirt,
inventory time, and increased system flexibility Special (more etc.)
expensive) working
[2]. However, real applications of RFID tags needed.
technologies are still limited because of various Most barcode
Most "fixed" readers
technical and economical obstacles. Metal and scanners require
do not require human
liquid environment can disturb reading Automation a human to
involvement to collect
performances of RFID technologies. Lack of operate (labour
data (automated)
intensive)
international standards is another disadvantage. Manual input of
For example, there are important differences In the event of Backup identification
numerical code
reader or tag needed, separate tag
between the UHF frequency in Europe and in the failure (barcode or other ID)
below the bar
USA. Furthermore, the costs of RFID are still code image
often much higher than the costs of current Forever,
Tag life time 3-10 years (depends on
identification technologies [17]. In industrial label quality)
environments, one must expect external Tag reusability Yes No
disturbance sources to interfere with the Cost to
High Low
transmission process (e.g., power inverters or implementation
commutator DC motors). If necessary, proper Price per tag 0,07 20 $ (USD) 0,05 $ (USD)
shielding can provide a protected environment
around the reader [18]. Malfunction of the reader It is up to each enterprise to determine the
or RFID chip or some other reason for rationale for application of the technology
unsuccessful reading may be a problem. Since described in Table 1 and the benefits and costs of
RFID does not carry any human readable its implementation. These technologies still have
identification, alternative means of entering the not found a wide use in industrial plants of
IDs must be provided as a backup [18]. manufacturing companies whose products have
not yet been generally standardized and are not
2.3. Advantages and flaws of RFID and produced on a large scale. It is important to point
out that this type of technology is still
barcode systems
considerably underused in many enterprises in
less developed countries and advantages of its
Based on the data collected from the
implementation have not been fully recognized
literature, Table 1 gives an overview of the most
yet. That is why our research is focused
important features of the barcode and RFID
primarily on analysing the importance and
systems of designation and identification of
benefits for a business system to invest in IT and
products.
in improvement of business processes with an
aim to clarify the benefits and advantages of
Table 1. RFID vs. barcode technology
[19], [9], [20], [21], [15], [22]. implementing the mobile barcoding systems to
ensure better management of stocks and as a
Feature RFID Barcode means of indirect improvement of the sales
Not required operations.
Line of Sight Required
(in most cases)
Passive UHF RFID: up 3. Methodology and research sample
to 12 m (fixed readers)
and up to 6 m Several cm up to
Read Range With an aim to look into the possibilities of
(handheld readers) ~1m
Active RFID: up to 30 improving business processes through
m or more application of mobile barcode systems to
10's, 100's or 1000's Only one at a warehouse operations of manufacturing
Read Rate
simultaneously time
1 per 10.000 1 per 3.000.000
companies and wholesale traders, a research was
Error Rate conducted of business processes and the level of
100.000 readings readings
Most barcodes their improvement before and after the
Capable of uniquely
Identification identifying each
only identify the introduction of mobile barcode systems in two
type of item but different cases. Case 1: production enterprise
item/asset tagged.
not uniquely.
Read/Write Read/Write Read only
engaged in metal manufacturing industry (a) and
Technology RF (Radio Frequency) Optical (Laser) Case 2: wholesale trading enterprise (b). To fully
Some RFID Smeared understand the process that is the subject of the
Interference
frequencies do not like barcodes cannot research, and to improve that process, the

435
processes in both enterprises were modelled at an
easy-to-consult level to that end the methodology
of business process modelling was applied.
Modelling processes and analyzing business
activities is prerequisite for improving business
processes through application of information
technologies aimed at improving work
effectiveness and ensure the functioning of the
overall business system. Processes modelled by
the globally adopted standard, BPMN (Business
Process Modelling Notation) [23], make it
possible for all participants in the procedure of
implementation of new system to understand the
process and to analyze improvements and their
impact on the enterprise.
4. Research and results
Based on the methodology of the process
modelling and on the analysis of the state of
processes before and after application of the
mobile barcode system, the research revealed
significant improvements. The processes and
impacts of implementation of the mobile barcode
technology were analyzed and explored through
extensive interviews with supervisors, workers
Figure 1. Description of the order-to-delivery process cycle
In both cases identified problem are similar
and they are marked in text case 1 (a), case 2 (b):
- The products stored in the warehouse are often
of visually similar or even identical shape. This
is likely to cause confusion and errors during
manipulation. Such products do not have
436
and the persons responsible for each business
process. Analyses were made in cooperation with
the employees who worked in the targeted
enterprises before and after the implementation
of the new technology, and also with the
representatives of the IT sector, whose solutions
had been applied to business processes in their
respective companies. The model of order-to-
delivery process cycle given in Fig 1 represents
an easy-to-consult process. Research was
conducted into the processes that are directly
affected by the functioning of sales and
warehouse departments. The models in Fig. 1
provide a sequence of processes in the
enterprises marked as Case 1 and Case 2:
1. Processing of inquiry, 2. Ordering (Buyer), 3.
Processing of order, 4. Planning of production, 5.
Ordering of materials/goods, 6. Delivery of
materials/goods delivery (Supplier), 7. Receipt of
materials/goods, 8. Production of semi-products,
9. Issue work order, 10. Deliver materials into
production, 11. Finalization and assembling, 12.
Storage of products, 13. Scheduling of delivery,
14. Preparation of products for delivery, 15.
Preparation of documentation, 16. Issue of
products.
additional packaging that would differentiate
them. (a)
- The problem lies in huge warehouse spaces that
comprise around 1,300 roofed aisles and 800
locations in the open-air warehouse at two
localities (a), and in over 10,000 locations in
eight warehouse halls at six localities (b).
- The products are handled manually by
warehouse workers or by means of forklifts. The
same product may be stored at several locations,
and locations are grouped. (a) (b).
- There are relatively many errors in the records
of products in terms of their location because
entries are made in log books and products are
frequently manipulated (a) (b).
- Preparation and tracking of goods by locations
are often time-consuming (a) (b).
- Errors in the records and slow updating of stock
in the information system often result in lack of
trust of the sales department in the system (a).
- Delays in the updating of stock in the
warehouse affects both the sale of the products
on stock and the delivery schedule (there is a
several-hour delay) (a).
- Installation of RFID chips on certain types of
products is inconvenient due to their specific
nature, for example, on metal products that are
usually handled by means of forklifts [14] (a) (b)
Implementation of the mobile barcode system
to the warehouse processes made it possible to
save time and reduce errors in the processes of
warehouse transactions, which directly
contributes to improvement of sales processes.
Another important process which has not been
modelled in detail, and yet it significantly
reduces the costs, is the warehouse inventory
taking (process X). It can very graphically reflect
the tangible savings achieved through
implementation of this technology. See Table 2.
Based on the research of these two business
cases, Table 2 shows the state of the process
before and after implementation of the mobile
barcode technology. In Table 2 the point of
improvement is indicated by the designation of
the process that corresponds with the number of
process given in Fig 1.

Table 2. Improvements in the processes after implementation of mobile barcode system

Process Description Case 1 - Manufacturing Co. Case 2 Wholesaler

Warehouse processes: Receiving goods, Storing goods, Picking
Before After Change Before After Change
goods, Preparing goods, Issuing goods from the warehouse
Number of delivery notes /worker per day [delivery note /
14,16 4 5 25% 30 35 17%
worker day]*
Number of workers that use mobile barcode system
12,14,16 0 5 100% 0 10 100%
[number of workers]
14 Time needed for preparation of goods for delivery [minutes] 120 96 -20% 12 10 -17%
14,16 Search for goods [estimation %] - - -70% - - 0%**
Errors in entries of goods, codes, quantities, locations,
12,14,16 - - -95% - - -40%
packing of wrong goods [estimation%]
16 Number of deliveries in the warehouse [in tonnes]* 20t 25t 25% 135 135 0%
Increase in the number of items and warehouse transactions
2, 11,12 - - 20% - - 0%
[increase in volume of work]
12,14,16 Warehouse working hours [number of shifts (hours)] 2 (16) 2 (16) 1 (8) 1 (8)
12,14,16 Number of warehouse employees [number of workers] 18 15 -17% 18 10 -44%
16 Average time of waiting for the carrier for shipping [hours] 2,5 0,5 -80% same same 0%
Warehouse processes: Inventory management Before After Change Before After Change
X Duration of inventory management [days] 2,5 1 -60% 4 2 -50%
X Reduction of errors in inventory management [estimation %] - - -99% - - -40%
Number of workers required to take inventory [number of
X 16 8 -50% 40 25 -38%
workers on the team]
Number of workers in the team that takes inventory
X 4 2 -50% 3 2 -33%
[number of workers on the team]
* in the manufacturing enterprise one shipping requires a team of workers and it involves tonnes of goods
** in the trading enterprise the tracking of items in the warehouse had been optimized even before the implementation of the
mobile barcode system, when the goods were sorted out by the method of the shortest way a travelling salesman..

5. Conclusion transparently the benefits of these technologies in

The results of the research conducted in two
enterprises prove that implementation of the
mobile barcode systems is justified, and that the
saving made by implementing that technology
has been considerable. A very significant an
immediately visible saving was achieved in the
process of inventory taking, which showed most
improving the process. The investments required
to introduce the described technologies largely
depend on the structure of the warehouse
systems, their size and number, and the type of
information system used. According to the data
collected in Case 2 the total investment of the
wholesaler into the implementation of this
technology amounted to ~HRK 350.000. In most

437
 part investment depends on the number of
mobile units (PDA devices), whose price on the
market ranges between HRK 8,000 and 13,000.
In Case 2 the wholesaler installed on eight
warehouse locations in six Croatian towns a total
of twelve mobile barcode devices and a wireless
network with the accompanying installations and
software, which were then linked with the central
information system. The reduction of the number
of workers alone is likely to pay off the
investment within a year. Implementation of IT
technologies in the identification and mani-
pulation of products is an important factor in
improving business operations and if followed by
an analysis of the process and achieved effects it
is more than justified.
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