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CHAPTER 1

Introduction

Inventory to many small business owners is one of the more visible and

tangible aspects of doing business. Raw materials, goods in process and

finished goods all represent various forms of inventory. Each type represents

money tied up until the inventory leaves the company as purchased products.

Likewise, merchandise stocks in a retail store contribute to profits only

when their sale puts money into the cash register. In a literal sense, inventory

refers to stocks of anything necessary to do business. These stocks represent

a large portion of the business investment and must be well managed in order

to maximize profits. In fact, many small businesses cannot absorb the types of

losses arising from poor inventory management. Unless inventories are

controlled, they are unreliable, inefficient and costly.

Inventory management is primarily about specifying the size and

placement of stocked goods. Inventory management is required at different

locations within a facility or within multiple locations of a supply network to

protect the regular and planned course of production against the random

disturbance of running out of materials or goods. The scope of inventory

management also concerns the fine lines between replenishment lead time,

carrying costs of inventory, asset management, inventory forecasting,

inventory valuation, inventory visibility, future inventory price forecasting,

physical inventory, available physical space for inventory, quality


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management, replenishment, returns and defective goods and demand

forecasting.

To maintain an in-stock position of wanted items and to dispose of

unwanted items, it is necessary to establish adequate controls over inventory

on order and inventory in stock. There are several proven purposes that

computer/ technology could do:

• Enables the manager to examine the inventory visually to determine if

additional inventory is required. In very small businesses where this

method is used, records may not be needed at all or only for slow

moving or expensive items.

• Enables the manager to physically count a small portion of the

inventory each day so that each segment of the inventory is counted

every so many days on a regular basis.

• Enables the manager to record the item as it is used on a sheet of

paper. Such information is then used for reorder purposes.

• Enables the manager to retain a portion of the price ticket when the

item is sold. The manager can then use the stub to record the item that

was sold.

As a business grows, it may find a need for a more sophisticated and

technical form of inventory control. Today, the use of computer systems to

control inventory is far more feasible for small business than ever before, both

through the widespread existence of computer service organizations and the


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decreasing cost of small-sized computers. Often the justification for such a

computer-based system is enhanced by the fact that company accounting and

billing procedures can also be handled on the computer.

Point-of-sale terminals relay information on each item used or sold.

The manager receives information printouts at regular intervals for review and

action.

Off-line point-of-sale terminals relay information directly to the

supplier's computer who uses the information to ship additional items

automatically to the buyer/inventory manager.

The final method for inventory control is done by an outside agency. A

manufacturer's representative visits the large retailer on a scheduled basis,

takes the stock count and writes the reorder. Unwanted merchandise

is removed from stock and returned to the manufacturer through a

predetermined, authorized procedure.

A principal goal for many of the methods is to determine the minimum

possible annual cost of ordering and stocking each item.

Moreover, business world has become so dependent to computer

technology, for it barely contributes a lot in performing their tasks. On the

other hand, application systems have already made an evolutionary

development to further improve the ever-changing lifestyle and needs of the


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people. A part of these developments are the emergence of various

application systems designed to aid some human incapability like processing

timely information accurately. These computer technology advances are

mostly used by big companies, where instant but correct information is

necessity.

The key solution is the job scope of a distributor business specialist.

Every distributor is assigned to a particular place and has to deal with an own

system to keep track of the sales made. Mostly, a distributor would rely on a

manual system since it will require less maintenance time and less cost. But

since we are now in a fast pacing world, everything needs to be in great

speed but with efficiency. This is where the researchers’ “Personal Distributor

burns burry” comes handy.

Context of the Study

With the increasing innovation of technology worldwide and the

growing needs for business solutions, big or small companies are expanding

to incorporate computerization in their business strategies. For the needs of

the gradually changing market in terms of quantity, variety and complexity,

merchandising businesses tend to indulge in finding better ways of satisfying

their clients.

Headed and owned by Mr. Wee Liang Cheng, Pillars is a major

distributor of Barns burry Industry. Pte. Ltd. Singapore equipments, as in

Airman and Ingersoll-rand Diesel Portable Air Compressors, Electric Diesel


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Generator sets, Miller/Lincoln Diesel/ Rectifier Welders, Forklift Trucks, Aerial

Platforms, Air tools and others.

In 2001, Mr. Wee Liang Cheng, invested in the company and acquired

more than 90% of shares registering it under the Foreign Investments Act

1991. The company once focused on equipment to deliver to the other

country. Since the construction industry slowed down it continued to penetrate

other markets abandoned by its competitors.

Focused on PIEC products in the market, PIEC which stands for Pillars

Industrial Equipments Corporation owned by Mr Wee Liang Cheng, continued

to expand its Merchandise. The company started to supply few pillars

products on markets, which then grew and increased through the years. Now,

the company has about 30 regular equipment exclusively patronizing their

products, not to mention other walk-in clients. Also they currently have 84

employees, marketing and Distribution Pillars has its own marketing sales

force that calls and gets orders from its customers. Right now we have 7 sales

agents.

Assisted by Mr. Wee Liang Cheng, PIEC managed to rival with tight

competitors which led it to become a much experienced company.

The Pillars Industrial Equipment Corporation, which swore to fulfil the

everyday needs of the market for quality PIEC products, needs to monitor the

amount of inventory items lacking and present in their stockrooms.


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Due to the use of manual Sales and Inventory Procedures, the

company is experiencing restrains in growth and development. The company

is incapable of accurately knowing stocks which are currently available in their

warehouses and in timely manner it is because the sales clerk. Though given

a list of available products by a corresponding warehouse supervisor from

each stockroom, cannot have their list updated every time. It would require

every sales clerk to compare each of their records every time to determine all

of the purchased equipments. Aside from purchased equipments; they would

consult with each warehouse supervisor to determine other products taken

out of the stockrooms, due to defects or for the owners' personal usage. In

addition to that, they cannot tally accurately because of the presence of

human errors, which are evident on manual processing.

With those reasons, another problem arises. The company is

having difficulties in identifying products nearly or already depleted. Unless it

is manually checked, the company has no other means of knowing which

items are lacking. This leads to another problem; the company becomes

clueless of when and how many stocks to reorder from its supplies.

Reorder too early and/or too much products would cause the prices

to fluctuate, because the prices of the excess commodities will decrease. The

prices will decrease because the company needs to sell the excess products

fast before they stay in the stockroom longer than usual, adding more

expense and work in maintaining its quality and acceptability, or worst. The

Pillars Industrial Equipment Corporation would like to sell their equipments in


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good condition to its clients. By doing such, products can be free of defects

and accidental mishandlings from their employees. Lastly, the company is

struggling when multiple transactions, inflow and outflow, occurs

simultaneously. Especially in recording those transactions by two or more

employees, for entries are sometimes doubled or omitted from their records.

An employee may record a transaction that is already recorded by

the other employee; or an employee committing an entry, thinking that the

other employee has already recorded it. When it involves only one employee,

it makes the services slower for he/she cannot multitask.

What should happen to Pillars Industrial Equipment Corporation is to

have a centralized record of their products, where authorized users can

record transactions and view the status and quantity of the products in each

warehouse simultaneously. A centralized system that can be used to aid them

in monitoring products moved, flowing in and out of their premises. The

company should be able to handle multiple transactions and record them in a

centralized record in real time. Also they should also be capable of knowing

fast and accurately the availability of their products by having their lists

connected and updated in real time. In identifying the availability of

commodities, the company should also know the products nearly and already

depleted, for them to reorder with appropriate timing. Pillars Industrial

Equipment Corporation should monitor each of the equipments in the

warehouse.
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From the stated problems and needs of this company, the researchers

have decided to propose a business solution entitled "LAN–Based Sales and

Inventory System for Pillars Industrial Equipment Corporation ".

Objective of the Study

In this part the researchers indicate the study's main objective. It will

also present the specific and precise objectives the study has to accomplish in

order to provide a solution to the problems stated in the previous section.

General Objectives

The general objective of this study is to develop a LAN-Based Sales

and Inventory System for Pillars Industrial Equipment Corporation. A system

that would elevate their monitoring capabilities to guarantee more productivity

by bringing efficiency to both employees and customers of the company.

Specific Objectives

• To design a computerized system capable of generating sales

and inventory reports, as well as purchased returns and sales

return of the company daily, monthly and annually.

• To develop a system that will monitor the sales products new

added items, product availability add items easily sold and which

are not.

• To design a system able to remind the company of nearly or

already depleted commodities and critical levels.


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• To develop a system that will reduce manual processing done

by the employees in a lesser time.

• To test and evaluate the acceptability of the system by

gathering feedback from prospective users and technical experts.

Scope and Limitations of the Study

The Scope and Limitations enumerates the coverage’s and boundaries

of the study, “LAN-Based Sales and Inventory System for Pillars Industrial

Equipment Corporation".

Scope of Study

The study covers the monitoring of inventory items of the company.

The research will upgrade the inventory transactions of the company due to

the failing of the manual system. The study covers the generations of yearly,

monthly and daily reports on sales for the administration. The project includes

monitored access level for administrators, sales clerks and warehouse

attendance.

Limitations of Study

The system doesn’t cover others operations of the main office.

Equipment is the only product that is included in the system. Only the order

slip and reports are printed.


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Significance of the Study

To the Company

The value of this research is the business solution it would bestow

to the PIEC Merchandising. this study will trigger a technology growth to the

company and will uplift its level among modernized businesses. It would also

grant the company an understanding of what computers and Information

Technology Professionals can accomplish for them. The implementation of

this research will strengthen the relationship of the company and its

employees, for simplifying their work and entrusting them with a computerized

system as aid.

To the Employees

The benefit of this study to the employees of Pillars Industrial

Equipment would be the analysis of problems and needs they have with the

task assigned to them. With this analysis, the researchers can administer an

appropriate assistance to them. The study will provide the employees more

speed, functionality and ease by decreasing tedious work and errors. The

research would also grant the employees connectivity, bridging the gap

between them and their workstations. By bringing more confidence to their

work and eliminating unnecessary and redundant processes, the employees

will serve the company and its customers better.


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To the Clients

The customers of PIEC would receive more quality on products and

services with hospitality from the company's employees and from the

company as well. The research will provide the consumers improvements by

analyzing their dissatisfaction with regards to the company's commodities and

services. The clients will obtain faster, reliable and more accurate services,

along with high quality goods from the company. Therefore, the market will

gain a much competitive and satisfying provider of heavy equipments.

To the University

This research would profit the University of the East by promoting

its name as producers of intellectual students. The success of the project will

uplift the reputation and popularity of the university, reaching out to

companies, parents, and potential students. This study will present the

capabilities and knowledge of students on theoretical and hands-on training

on computer hardware and software applications to the Industry.

To the Students

The investigation will supply students a reference for their related

studies, providing an example and an aid for their educational inquiries. The

study would give an insight to students in lower years of what the College Of

Computers Studies and Systems (C.C.S.S) students are required to

accomplish before the graduate. This presents more value to C.C.S.S.

students, depicting their assets and capabilities. It would also add up to the

achievements of the students in this University, especially to the Information


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Technology (I.T.) Students.

To the Researchers

The study would bestow us researchers with more experience and

knowledge about the field we have taken and what opportunities await us. It

would give us a chance to display what we have learned and prove that we

deserve to be called I.T. Professionals. The study would prepare us to the

outside world as professionals and expose us to the world of businesses. The

accomplishment of this project will also give us a sense of completion, self

confidence and pride for our achievement. The study would also promote

teamwork, responsibility and sacrifice we would share and endure to fulfil this

requirement.
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Chapter II

REVIEW RELATED LITERATURE AND STUDIES

This chapter provides a pool of information related to the topic which

aids the researchers in developing the study. All gathered information from

books, periodicals, electronic sources, findings in theses and dissertations

serves as an input to the completion of the study. These unbiased and

relevant resources identify the essential knowledge, advantages,

disadvantages, and basic understanding of the study.

In this chapter, we will deal with the analysis and careful observations

about the existing system. This will be a great help for the researchers to

identify the strengths and weaknesses of this existing system. This will also

guide the decisions of the researchers on whether to continue working with

the proposed system.

Conceptual Literature

Inventory

An Inventory of is a stock or store the equipments. Firms typically stock

hundreds of items in inventory, ranging from small to things such as pencils,

paper clips, screws, nuts, and bolts to large items such machines, trucks,

construction equipment, and airplanes. Naturally, many of the items a firm

carries in inventory relate to the kind of business it engages in. Thus,

manufacturing firms carry supplies of raw materials, purchased parts, partially


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finished items, and finished goods, as well as spare parts for the machines,

tools, and other supplies. Department stores carry clothing, furniture,

carpeting, stationary, appliances, gifts, cards, and toys. Some also stock

sporting goods, paints, and tools. Hospital stock drugs, surgical supplies, life-

monitoring equipment, sheets, and pillow cases, and more. ‘Supermarkets

stock fresh and canned foods, packaged and frozen foods, household

supplies, magazines, and baked goods, dairy products, produce, and other

items. (Stevenson, 2004)

“Inventories are assets which are held for sale in the ordinary course of

business, in the process of production for such sale in the form of materials or

supplies to be consumed in the production process or in the rendering

services.”

Inventories encompass goods purchased by a retailer and held for

resale, or land and other property held for resale by a subdivision company

and real state developer. Inventories also encompass finished goods

produced, goods in process and materials and supplies awaiting use in the

production process. (Valix, 2006)

Merchandise inventory, inventory, or simply goods for sale, includes

the goods purchased for the principal purpose of reselling them in the ordinary

course of operations. The goods that comprise the merchandise inventory

depend on the nature of the business of the enterprise. For example, a

furniture store has beds, tables, chairs, and bookcases as its merchandise
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inventory. A vehicle dealer has cars, trucks and vans forming part of his

merchandise inventory. (Kimwell, 2005).

A traditional periodic inventory system operates as follows: when

goods for resale are purchased, merchandise purchases, are simply

purchases, is debited at the amount of the acquisition cost. Upon making a

sale, income is recognized by crediting merchandise sales, or simply sales,

based on the selling price of the goods. No separate entry is prepared to

record the decrees in the inventory balance as a result of the sale. There are

no inventory ledgers accounts that need to be updated as the buying and

selling transactions occur. (Kimwell, 2005)

All transactions affecting the inventory balance are recorded as they

occur. The perpetual inventory system acquired its name from the fact that the

inventory records are continuously updated. The acquisition cost, are simply

cost, of products purchased is recorded by debiting merchandise inventory or

inventory account. (Kimwell, 2005)

Inventories are critical assets in operating cycle of many organizations.

An inventory helps in the application of the matching principle. An inventory is

akin to storage tank that can release its content (the costs) when certain

triggering events take place. Even if, in a world of just in time, the role of

inventories is decreasing as management tool for adjusting the needs of cost

minimization and production smoothing to the randomness or seasonality of

demand, inventories still create significant issues in reporting to shareholders:


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(a) inventories are present in immobilization of funds (required to finance the

inventory) (b) the choice of how to attach costs to objects held in inventory

before their sale affects profit. It is therefore important to examine how

inventories are recorded and reported. (Stolowy & Lebas, 2002)

Types of Inventories

1. Cycle Inventory – the portion of total inventory that varies directly with

lot size.

2. Safe stock Inventory – protects against uncertainties in demand, a lead

time, and supply.

3. Anticipation Inventory – inventory used to absorb uneven rates of

demand or supply, which business often face.

4. Pipeline Inventory – inventory moving from point to point in the

materials flow system. (Krajewski & Ritzman, 2000)

Inventory Management

The inventory management system maintains information for multiple

warehouses. Among the many elements for each item at each warehouse, the

system calculates and stores usage rates, stocking level, and movement

classification. This information is easily retrieved allowing for flexible reporting

to management personnel. Usages rates help predict future sales from past

sales.

By establishing stocking levels, the system ensures the item will be

available when the customer requires it. This automation relieves


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management from the worry of running out of stock. Management personnel,

therefore, can concentrate their time in controlling products with high-dollar

movement. Each item is classified by its dollar moved through the warehouse

in a period of time. This classification enables management to identify where

to spend their time in controlling inventory. With all facets working in concert,

the inventory provides the best customer service with minimal labor.

(www.snowbd.com)

According to Jason Gluck man author of the article “Inventory

Management Software”, effective management of finished product inventory is

quite essential for running a business efficiently and profitably. Inventory

strategies and decisions become particularly important in business where

inventory costs form a sizeable part of total marketing costs.

Carrying inventories becomes inescapable in most businesses,

because the producing activities and consuming activities take place at

different times, in different locations and at different rates. Inventories are

made up of several elements: operational stocks kept for meeting the ready

demand at different consumption center. Some stock will be in transit at any

given point of time, while other stock will be in transit at any given point of

time, while other stock will be awaiting shipments. Finally, there are kept for

meeting emergencies. All these make up the total inventory.

While discussing inventory management software, it is important to

keep an eye on the elements of inventory costs. A variety of costs are


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incurred in carrying the inventories. They include interest on capital tied up in

the inventory, warehouse rent, staff salaries, insurance, rates and taxes,

stationery, postage and communication charges, administrative overheads,

costs of handling, unloading and stacking, loss due to damage and

deterioration while on storage and cost of order processing.

In businesses where the turnaround of inventories is rather slow,

interest on the capital tied up in the inventory becomes the most significant

element of the total inventory carrying cost. In fact, inventory cost causes the

most worry to manufacturers today. Increased competition has resulted in the

accumulation of stock in a number of industries. Inventory carrying costs are

on the increase of the products pushes up the inventory carrying costs as the

value of the locked up product goes up in the process. Similarly, every

increase in the interest rates also pushes up the inventory carrying costs.

(www.inventory-info.com)

According to Punongbayan and Araullo, authors of the magazine

“Accounting Alert”, here are the new significant Provisions and Changes in

Accounting

1. Inventories should be carried at the lower cost (i.e., those cost incurred

in the normal course of business in bringing the product of services to

its present location and condition) and net realizable value (i.e., the

estimated selling price in the ordinary course of business less the

estimated costs of completing the product and making the sale).


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2. The cost of inventories of a service provider includes labor and other

costs of personnel directly engaged in providing the service, including

supervisory personnel, and attributes overheads. Cost does not include

profit margins or non-attributable overheads.

3. Reversal of previous inventory write-down is required for subsequent

increase in value of inventories.

4. Compared with current requirements and practice, the new standard:

- Prohibits capitalization of exchange differences as part of

inventory costs.

- Prohibits LIFO inventory costing method.

- Provides circumstances that would trigger a reversal of a prior

period write-down of inventories which shall be recognized as a

- Reduction in the amount of inventories recognized as an

expenses. (Punongbayan & Araullo, 2005)

In telecommunications magazine Americas Issue “The Watchword Is

Automated Inventory Management Roundtable” written by Martin Creaner,

Inventory management systems long have been viewed as trouble spots,

especially for large incumbent operators with a lot of legacy equipment.

With the rollout of new and innovative services, which draw on complex

combinations of both network and service inventories, service providers are

heading into unsharpened waters. Now the watchword appears to be

automated inventory management to improve efficiency, flexibility and

consistency. Inventory management seems to be in a period of change, which

includes recent mergers and acquisitions among some of the top vendors, so
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it would be useful to chat with the leading and gauge their thoughts about this

ever changing market. (Creaner, 2006)

In the European Journal of Operational Research issue “Forecasting

daily supermarket sales using exponentially weighted quantise regression”

written by James Taylor, Inventory control systems typically require the

frequent updating of forecasts for many different products. In addition to point

predictions, interval forecasts for many different product. In addition to point

predictions, interval forecast for many different products. In addition to point

predictions, interval forecast are needed to set appropriate levels of safety

stock. The series considered in this paper are characterized by high volatility

and skewers, which are both time varying. These features motivate the

consideration of forecasting methods that are robust with regard to

distributional assumptions. The widespread use of exponential smoothing for

point forecasting in inventory control motivates the development of the

approach for interval forecasting. In this paper, we construct interval forecasts

from quantise predictions generated using exponentially weighted quantise

regression. The approach amounts to exponential smoothing of the

cumulative distributive function, and can be viewed as an extension of

generalized exponential smoothing to quantise forecasting. Empirical results

are encouraging, with improvements over traditional methods being

particularly apparent when the approach is used as the basis for robust point

forecasting. (Taylor, 2006)


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Merchandising

A merchandising business is an entity engaged in the activities of

buying and selling of products. The main difference merchandising and the

servicing business is the existing of physical products sold to the customers.

Merchandising sells products in order to generate revenue while servicing

renders service to generate revenue. Merchandising is also different from

manufacturing business because it does not produce its own product for sale.

It obtains products from a manufacturer or a supplier, either at the retail level

or the wholesale level. Other terms used to describe merchandising business

are “trading enterprise”, “trading firm” or buy and sell business. (Valencia,

2006)

Sales

Manually checking the stock of an item at the point-of-sale is time

consuming, if not annoying for the customer and employee. Providing an

item’s real-time quantity available for sale eliminates the need for manual

stock checking. Real time is accomplished by updating when the event

occurs. The quantity available for sale is calculated by subtracting quantity

reserved for sales orders from quantity on hand. The quantity available for

sale is maintained real-time every rime an invoice is printed. Knowing the

quantity available is important in reducing the labor involved in filling customer

orders, as well as in providing high customer service. Location information on

an item is also available to the salesman, through a comprehensive location

system. All of these features combine to help the salesman service the

customer in an informed and timely manner. (www.snowbd.com)


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Warehousing

Warehousing is the management of materials while they are in storage.

It includes storing, dispersing, ordering, and accounting for all materials and

finished goods from the beginning to end of the production process.

Warehousing facilities may range from small stockroom to large,

highly mechanized storage.

In Computers & Operations Research issue “Loss of customer goodwill

in the incapacitated single level lot-sizing problem” by Aksen, Deniz. Loss of

customer goodwill in incapacitated single level lot-sizing is studied with a

mixed integer programming model extending the well-known Wagner Whit in

(WW) model. The objective is to maximize profit from production and sales of

a single good over a finite planning horizon. Demand, costs, and prices vary

with time. Unsatisfied demand cannot be backordered. It leads to the

immediate loss of profit from sales. Previous models augment the total cost

objective by this lost profit. The difference of the proposed model is that

unsatisfied demand in a given period causes the demand in the next period to

shrink due to the loss of customer goodwill. A neighborhood search and

restoration heuristic is developed that tries to adjust optimal lot sizes of the

original no-goodwill-loss model to the situation with goodwill loss. Its

performance is compared with the WW solution, and with the commercial

solver CPLEX 8.1 on 360 test problems of various period lengths. (AKSEN,

2007)
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Networking

Because the world topology basically means shape, the term network

topology refers to the shape of a network – how all nodes (points) of a

network are wired together. There are several different topologies in which

networks are wired, and the choice of a topology is often your most important

choice when you plan a network. The different topologies have different costs

(oath install and maintain), different levels of performance, and different levels

of reliability. (Hall berg, 2003)

Networking is the practice of linking two or more computing devices

together for the purpose of sharing data. Networks are built with a mix of

computer hardware and computer software. (compnetworking.about.com)

“Networking is primarily about improving the flow of information

amongst group and people to gain greater access to mutual support, facilities

and resources. It means of empowerment, enabling people to gain greater

influence over the decision making that affects our lives”. (www.navca.org.uk)

A Local Area Network (LAN) is a group of computers and other devices

that are connected together by a common medium. LAN’s typically join

computers that are physically close together, such as in the same room or

building. Only a limited number of computers and other devices can be

connected on a single LAN. The limitations vary based upon the medium

connecting the computers and devices as well as upon the LAN software

being used. (McLead & Schell, 2002)


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Local Area Network, in computer science, is a collection of

interconnected computers that can share data, applications, and resources,

such as printers. Computers in a LAN are separated by distances of up to a

few kilometres and are typically used in offices or across university campuses.

A LAN enables the fast and effective transfer of information within a group of

users and reduces

Operational costs. (Encarta.msn.com)

A local area network (LAN) is a computer network covering a small

geographic area, like home, office, or group of buildings. Current LANs are

most likely to be based on switched IEEE 802.3 Ethernet technology, running

at 10, 100 of 1,000 Mbit/s, or on IEEE 802.11 Wi-Fi technology. Each node or

computer in the LAN has its own computing power but it can also access

other devices on the LAN subject to the permissions it has been allowed.

These could include data, processing power, and the ability to communicate

or chat with other users in the network. (www.wikipedia.com)

A local area network is a short-distance network used to link a group of

computers together within a building. 10BaseT Ethernet is the most commonly

used form of LAN. A piece of hardware called a hub serves as the common

wiring point, enabling data to be sent from one machine to another over the

network. LANs are typically limited to distances of less than 500 meters and

provide low-cost, high-bandwidth networking capabilities within a small

geographical area. (www.cnet.com)


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Local area network (LAN), a computer dedicated to sharing data

among several single-user workstations or personal computers, each of which

is called a node. A LAN can have from two to several hundred such nodes,

each separated by distances of several feet to as much as a mile, and should

be distinguished from connections among computers over public carriers,

such as telephone circuits, that are used for other purposes. Because of the

relatively small areas involved, the nodes in a LAN can be connected by

special high-data rate cables. A metropolitan area network (MAN) is defined

as being restricted to a larger area (maximum distances of 50-60 miles) than

a LAN but one still small enough so that dedicated links (such as microwave

links) can be used. (www.infoplease.com)

The advent of personal computers changed the type of information

sent over office computer networks. Terminal were no longer “dumb”, but

contained the power to perform their own instructions and maintain their own

memories. This took considerable pressure off mainframe devices, whose

energies could now be devoted to more complex tasks.

LANs allowed for the transmission of data between workers. In turn,

they enabled this shared data to be directed to a common printer, serving a

larger group of users. This eliminated the need for each worker to have a

printer and ensured that the one printer provided was not underutilized. In

addition, LANs allowed data to be called up directly on other workers

computer, providing immediate communication and eliminating the need for

paper. The most common application was in interoffice communications, or


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electronic mail (e-mail). Messages could be directed to one or several people

and copied to several more over the LAN. As a result, an e-mail system

became something of an official record of communications between workers.

Addresses became obligated to respond to e-mail messages in a timely

manner because their failure to answer could be easily documented for

supervisors.

Personal computers transformed LANs from mere shared processors

to fully integrated communication devices. With processing power distributed

among several computers, the mainframe’s main role was eclipsed and

complex processing, administrative functions, and data file storage became

the job of a new device, the file server. Today, there are many different types

of LANs. For example, many Macintosh computers use AppleTalk, while IBM

computers commonly use Ethernets. (www.answers.com)

Network Topology

A network topology refers to either the physical or logical layout of a

network installation.

• Physical Topology when in the context of networking refers to the

physical layout of the devices connected to the network, including the

location and cable installation.

• The Logical Topology refers to the way it actually operates (transfer

data) as opposed to its layout.


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There are four main network topologies (and mixtures of the four) in common

use today.

• Bus

• Mesh

• Ring

• Star

The Bus Topology

This type of network topology is generally used with Ethernet networks.

A Bus topology can be both Physical and Logical. The Bus topology is one of

the simplest of the four network topologies to use, in its most basic form it is

simply a case of running one cable (referred to as the backbone) from the first

device/PC in the network to the last device/PC, and then add any further

devices/PCs to the existing cable (backbone) between the first and last

machines.

This topology is probably the cheapest network type of all to initially

setup, as only one cable is used the installation is fairly simple and

economical. The problems can come when trying to add a device to an

existing Bus topology network. To add a device requires physically linking it to

the existing backbone which can turn out to be a major job.

Another consideration if using a bus topology for a network is fault

tolerance, or the lack of it, this type of network transfer data by passing
28

messages through the same cable, so a break in any part of the cable will

bring the whole network down. Each device will check to see if the message is

contents to its network card’s onboard RAM and process it accordingly.

(www.helpwithpcs.com)

The Mesh Topology

This type of network topology boasts the highest fault tolerance of all of

the network topologies; it is also usually the most expensive. In a mesh

topology each device/PC is connected to every other device/PC in the

network by its own cable, which means vast amounts of cables for any

sizeable network. The Mesh topology provides fault tolerance by having

separate cables for each connection, allowing any one cable to break without

interfering with the rest of the network. Unfortunately, because each

connection needs its own cable a Mesh topology can get very expensive.

Every time you add a client to a mesh network you have to run cables to each

of the other devices.

The amount of cables you will need for a mesh network can be

calculated by:

CN = (D*(D-1))/2

(where CN is Cables needed, and D is the amount of devices on the network)

When you need to add a single device to a Mesh network the job can

be very complex, for example if you had a network of 15 devices, to add one

device would mean adding 15 cables to the network. (www.helpwithpcs.com)


29

The Ring Topology

The physical ring topology is rarely used this days; a Ring topology

networks the devices by connecting each device to its two neighboring

devices. Data is passed one way from device to device, fault tolerance in a

physical ring topology is non existent, if one device/cable fails then the whole

network goes down. Adding a new device to an existing physical Ring network

can be complicated as any new device needs to go in between the existing

devices. (www.helpwithpcs.com)

The Star Topology

A physical Star topology connects the devices via a centralized unit

such as a Hub or a Switch. A Star topology gives great fault tolerance as any

device/cable failure will not affect the rest of the network (unless the

centralizing device or server (if vital) fails). Physically adding new devices to a

Star network is very simple compared to any of the other topologies; you

simply run a cable from the new device to the hub/switch.

Star topologies are very common, especially in Ethernet networks;

also, they are commonly mixed with one of the other topologies to create a

hybrid topology. (www.helpwithpcs.com)

Internet

An electronic network of computers that includes nearly every

university, government, and research facility in the world. Also included are
30

many commercial sites. It started with four interconnected computers in 1969

and was known as ARPA net. (www.orafaq.com)

Data Flow Diagram


Data flow diagram is a well known approach to visualize the data

processing in business analysis field. A data flow diagram is strong in

illustrating the relationship of processes, data stores and external entities in

business information system. (www.visual-paradigm.com)

Crossover cable
A type of networking cable that connects two computers or network

devices directly to one another. When purchasing this type of cable, the

packaging must indicate that it’s a crossover cable for the required network

interface: otherwise, it’s likely a typical straight through cable. Often,

crossover cables are used to connect two computers with network cards

together without using a network hub, network router, or network switch.

(www.computerhope.com)

Rollover cable
Type of network cable that connects a dumb terminal or computer to a

network switch or router console port. Often this type of cable is flat or yellow

to help prevent any type of confusion between other Cat5 network cables.

(www.computerhope.com)

STP cable
Short for Shielded Twisted-Pair cable, STP is a type of cable originally

developed by IBM for Token Ring that consists of two individual wires
31

wrapped in a foil shielding to help provide a more reliable data

communication. (www.computerhope.com)

Twisted-pair cable
A type of cable made by intertwining two separate insulated wires

together. There are two types of twisted pair: shielded and unshielded.

Shielded Twisted Pair (STP) has a fine wire mesh surrounding the wires to

protect the transmission; Unshielded Twisted Pair (UTP) does not. Shielded

cable is used in older telephone networks, network, and data communications

to reduce outside interference. (www.computerhope.com)

Coaxial cable

A cable that is used in video, communications and audio. This type of

cable has high bandwidths and greater transmission capacity.

(www.computerhope.com)

Review of Related Studies

Foreign Studies

In practice of inventory management customer-oriented service

measures play an important role. If inventory managers of stock points in a

supply chain promise specific times of delivery that cannot be met due to a

lack of stock, lead times at downstream stock points increase, causing

substantial adverse effects on customer satisfaction. Hence, it is of

considerable interest to understand the trade-off between safety stock and

customer waiting time. In this paper, we investigate this waiting time in an


32

inventory system under compound renewal demand. We provide an

approximation for the distribution function of the customer waiting time and we

determine the minimal reorder level subject to a maximum average waiting

time. In a numerical study we test the performance of our approximation.

Moreover, we investigate the effects of the performance of the waiting time in

case the underlying demand process is indeed a compound renewal, while a

discrete time model is used. (Kiesmuller, 2006)

Vendor-managed inventory (VMI) is a widely used co-operative inventory

policy in supply chains in which each enterprise has its autonomy in pricing. In

this paper, a leader “follower Stackable game in a VMI supply chain is

discussed where the manufacturer, as a leader, produces a single product

with a limited production capacity and delivers it at a wholesale price to

multiple different retailers, as the followers, who then sell the product in

dispersed and independent markets at retail prices. An algorithm is then

developed to determine the equilibrium of the Stackable game. Finally, a

numerical study is conducted to understand the influence of the Stackable

equilibrium and market-related parameters on the profits of the manufacturer

and its retailers. Through a numerical example, our research demonstrates

that: (a) the market-related parameters have significant influence on the

manufacturer’s and its retailer’s profits; (b) a retailer’s profit may not

necessarily be lowered when it is charged with a higher inventory cost by the

manufacturer; and (c) the equilibrium of the Stackable equilibrium benefits the

manufacturer. (Yu, 2006)


33

Among several approaches to derive the distribution of lead time

demand, this paper concerns with a compound distribution approach. The

mostly known analytic models using the compound distribution approach have

been done by non-recognition of the compound nature of some components

to reduce the analytic task. In order to provide some precautions to

researchers and practitioners, this paper conducts a theoretical examination

and clarifies the assumptions implicitly made by the analytic models. In

addition, comparison experiments under various situations are also

conducted. (Park, 2007)

This paper considers a single-echelon inventory system with a

warehouse facing compound Poisson customer demand. Normally the

warehouse replenishes from an outside supplier according to a continuous

review reorder point policy. However, it is also possible to use emergency

orders. Such orders incur additional costs but have a much shorter lead time.

We consider standard holding and backorder costs as well as ordering costs.

A heuristic decision rule for triggering emergency orders is suggested. The

decision rule minimizes the expected costs under the assumption that there is

only a single possibility for emergency replenishments, but the rule is used

repeatedly as a heuristic. Given a certain reorder point policy for normal

replenishments, our decision rule will always reduce the expected costs. A

simulation study illustrates that the suggested technique performs well under

different conditions. (Axsater, 2007)


34

We consider a two-echelon inventory system with a number of non-

identical, independent retailers at the lower echelon and a single supplier at

the upper echelon. Each retailer experiences Poisson demand and operates a

base stock policy with backorders. The supplier manufactures to order and

holds no stock. Orders are produced, in first-come first-served sequence, with

a fixed production time. The supplier therefore functions as an M/D/1 queue.

We are interested in the performance characteristics (average inventory,

average backorder level) at each retailer. By finding the distribution of order

lead time and hence the distribution of demand during order lead time, we find

the steady state inventory and backorder levels based on the assumption that

order lead times are independent of demand during order lead time at a

retailer. We also propose two alternative approximation procedures based on

assumed forms for the order lead time distribution. Finally we provide a

derivation of the steady state inventory and backorder levels which will be

exact as long as there is no transportation time on orders between the

supplier and retailers. A numerical comparison is made between the exact

and approximate measures. We conclude by recommending an approach

which is intuitive and computationally straightforward. (Olsson, 2007)

Local Studies

According to the Thesis about Sales and Inventory System Floor

Center Company) the objective of their study is to develop a direct connection

for point of sales and inventory system for the two branches of Floor Center,

which is beneficial to management’s decision-making, which also includes the

monitoring of the inventory levels to lessen and prevent out of stock situation
35

resulting to customer satisfaction and over stocking which satisfies the

business owner. (Molina, 2006)

PC City online sales monitoring and inventory system allows the

viewing of the sales and inventory of the 3 branches remotely on a daily basis.

Providing statistical analysis data of sales by year, month, and day being able

to determine the percentage of increase or decrease in the sales of

equipment and services. (Gonzales, 2006)

The objective of the study is to improve the company’s current system

by creating a LAN-based system that would integrate the company’s major

transaction sales and inventory monitoring system. Creating a more efficient

and easier way of data retrieval and a more convenient approach of data

encoding. (Bueno, 2006)

The objective of the study is to computerize a Sale and inventory

system to change the system, and realize the progress of the system by

developing a fast, accurate and efficient system inventor. (Madrona, 2006)

The study illustrates a greater convenience in the manual transaction

of the Inventory and Point of sales of the company Odyssey. Also reducing

the amount of clerical work involved in the monitoring operation as well as

providing album search of the store. (Camba, 2006)


36

Abstract

This paper studies a periodic-review pricing and inventory control

problem for a retailer, which faces stochastic price-sensitive demand, under

quite general modelling assumptions. Any unsatisfied demand is lost, and any

leftover inventory at the end of the finite selling horizon has a salvage value.

The cost component for the retailer includes holding, shortage, and both

variable and fixed ordering costs. The retailer's objective is to maximize its

discounted expected profit over the selling horizon by dynamically deciding on

the optimal pricing and replenishment policy for each period. We show that,

under a mild assumption on the additive demand function, at the beginning of

each period an (s,S) policy is optimal for replenishment, and the value of the

optimal price depends on the inventory level after the replenishment decision

has been done. Our numerical study also suggests that for a sufficiently long

selling horizon, the optimal policy is almost stationary. Furthermore, the fixed

ordering cost (K) plays a significant role in our modeling framework.

Specifically, any increase in K results in lower s and higher S. On the other

hand, the profit impact of dynamically changing the retail price, contrasted

with a single fixed price throughout the selling horizon, also increases with K.

We demonstrate that using the optimal policy values from a model with

backordering of unmet demands as approximations in our model might result

in significant profit penalty. (© 2005 Wiley Periodicals, Inc. Naval Research

Logistics, 2006

This paper shows that vendor-managed inventory is also used fine in

household electrical appliances sector. Taking Electrolux Italia as an example,


37

the implementation of this technique is presented and analysed, highlighting

the various processes involved (sales forecasting, capacity need forecasting,

master planning, replenishment need calculation, dispatch planning,

shipping), parameters (target stock, replenishment need, dispatch plan,

assigned stock, etc.) needed to regulate vendor managed inventory. The

paper points out the benefits obtained following the implementation of this

technique and presents based on the case the variables that define and

characterize the conditions under which it can be applied.

For the (S-1,S) lost sales inventory model with multiple demand

classes that have different lost sales penalty cost parameters, three accurate

and efficient heuristic algorithms are presented that, at a given base stock

level, aim to find optimal values for the critical levels, i.e., values that minimize

inventory holding and penalty cost.


38

Conceptual Framework

This section presents the several elements needed for the project

completion and identifies its relationship with each other through the Input-

Process-Output Model. The following figure displays the conceptual

framework of the study, depicting the various inputs essential to the study and

the procedures we need to accomplish to arrive with the proposed system.

Input PROCESS OUTPUT


• DESIGN A
The proponents must COMPUTERIZED
SYSTEM CAPABLE
also have a list in SQL OF GENERATING
database, Visual basic REPORTS.
programming to come up
with an effective and user- • DESIGN A SYSTEM
friendly system interface. ABLE TO REMIND
THE COMPANY Sales and Inventory
ABOUT ITS
• Schemes PRODUCTS.
System For
• Activity Pillars Industrial
• DEVELOP A Equipment Company
CENTRALIZED
SYSTEM CAPABLE
OF MONITORING
THE PRODUCTS OF
THE COMPANY
MORE EFFICIENT.

Figure 2 Conceptual Framework


39

Definition of Terms

This part contains the terminologies and definitions used in the study.

These definitions will assist the readers as it have had assisted the

researchers. It will enrich our understanding of the system, the business, and

our vocabulary as well.

Availability

Evaluation criterion: Availability is the completeness of the system with

regards to the objectives it should achieve. The performance of the system

measured according to the specifications and needs of the potential users.

A network topology in which nodes are connected to a single cable with

terminators at each end.

Business-to-business (B2B)

Business-to-business is the relationship between enterprises, contrary

to relations between enterprises and other groups (e.g consumers, public

administration).

Coaxial Cable

Coaxial cable is an electrical cable consisting of a round conducting

wire, surrounded by an insulating spacer, surrounded by a cylindrical

conducting sheath, and usually surrounded by a final insulating layer.


40

Commodities

Bulk goods such as grains, metals, livestock, oil, cotton, coffee, sugar

and cocoa. They can either be sold on the spot market for immediate delivery

or on the commodities exchanges for later delivery. Trade on commodities

exchanges is usually in the form of futures contracts.

Content

Evaluation criterion: Content refers to the overall appearance and

features of the system. The content must be updated and appropriates for its

purpose.

Crossover Cable

A twisted pair patch wired in such a way as to route the transmit

signals from one piece of equipment to the receive signals from one piece of

equipment to the receive signals of another piece of equipment, and vice

versa.

Customer

Customer is an individual with whom one must deal, one that buys

goods and service.

Data Flow Diagram

Data Flow Diagram is graphic representation of the “flow” of data

through business functions or processes. More generally, a data flow diagram

is used for the visualization of data processing. It illustrates the processes,


41

data stores, external entities, data flows in a business or other system and the

relationships between these things.

Database

Database is a collection of logically related data designed to meet the

information needs of one or more users. It is a collection of records stored in a

computer in a systematic way, so that a computer program can consult it to

answer questions.

Database Management System (DBMS)

Data Management System is a system or software designed to

manage a database, and run operations on the data requested by numerous

clients.

Database Model

Database Model is a theory or specification describing how a database

is structured and used.

Delivery Note

A document which specifies the quantity of equipments to be delivered.

Depleted

Something no longer sufficient: “supplies are low”, “our funds are

depleted”
42

Depicting

Represents by a picture, portray in words. To describe something.

Ecommerce

Ecommerce is one of the most important aspects of the Internet to

emerge or allows people to exchange goods/ services immediately. It consists

primarily of the distributing, buying, selling, marketing, and servicing of

products or services over electronic systems such as the Internet and other

computer networks.

Electronic Business, or “e-business”

May be defined broadly as any business process that relies on an

automated information system.

Enhancement

Enhancement refers to the development of the current existing system

to have a more accurate and useful system.

Fluctuate

Be unstable; “The stock market fluctuates”


43

Functionality

Evaluation criterion; Functionality or operability of the system based on

the specifications. The system’s ease, convenience and user friendliness are

also considered.

Inventory

Inventory consists of a list of equipments and materials held available

in stock.

Inventory Management

It enables an organization to meet or exceed customer’s expectations

of product availability while maximizing net profits or minimizing cost.

Inventory System

Refers to the software used to plan and track inventory balances and

activities.

Invoice

A written record of goods or services provided with the amount charged

for them, sent to a customer for payment.

Logical Topology

A network computing term used to describe the arrangement of

devices on a network and how they communicate with one another.


44

Maintainability

Evaluation criterion; Maintainability refers to the testability of the

system. It also measures the ease of maintenance, modifications and

upgrading of the system.

Merchandise

A product or anything that can be offered to a market that might satisfy

a want or need. However it is much more than just a physical object. It is the

complete bundle of benefits or satisfactions that buyers perceive they will

obtain if they purchase the product. It is the sum of all physical, psychological,

symbolic, and service attributes.

Merchandising

The management of stock in supermarkets and other non-specialist

sales outlets in order to ensure the display of the fastest selling titles.

Mesh Topology

The topology of a network whose components are all connected

directly to every other component.

Modem

A device that enables a computer to send and receive information over

a phone line.
45

Network

A communication system consisting of a group of broadcasting stations

that all transmit the same programs; “the networks complete to broadcast

important sports events. Network is a system of interconnected electronic

components or circuits.

Networking

The linking of a number of devices, such as computer, workstations,

printers, and AV gear into a network (system) fo the purpose of sharing

resources.

Network Topology

The physical or logical layout of the nodes in a network.

Official receipt

A document which acknowledge that a sum of money has been paid. It

can be used as legal proof of payment.

Payment

Agreed between two parties to pay for rendering service.

Physical Topology

Depicts the physical layout of the network.


46

Point of Sale (POS)

This can mean a retail shop, a checkout counter in a shop, or a

variable location where a transaction occurs.

Process

Manipulate data, which can be represented by data flow diagram,

object model with methods.

Redundancy

The repetition of an act needlessly, redundant refers to the quality or

state of being redundant, that is: exceeding what is necessary or normal; or

duplication. This can have a negative connotation, especially in rhetoric:

superfluous or repetitive; or a positive implication, especially in engineering:

serving as a duplicate for preventing failure of an entire system.

Reliability

Evaluation criterion: Reliability is the ability of the system to provide

desired results accurately, having performances free from failures. The

system must be able to recover itself, especially the information it holds, if

errors occur.

Retailer

A retailer sells goods or commodities directly to the consumers at a

retail price.
47

Retailing

All activities directly related to the sale of goods and services to the

ultimate consumer for personal, non-business use.

Reorder Point

For slow moving products and especially if the lead-time is short, you

may want to program in a minimum reorder point which is the equivalent of

one average sale.

RFID

Radio Frequency Identification refers to the technology that uses

devices attached to objects that transmit data to an RFID receiver.

Ring Topology

A network configuration in which nodes are attached to the main

communication line in a logical or physical ring shape connected with each

other

Rollover Cable

A type of network cable that connects a dumb terminal or computer to

a network switch or route console port.

Sales

Transaction that involves the transfer of services/products for money.


48

Server

A computer that provides services to other computers, or the software

that runs on it.

Shielded Twisted-Pair Cable

A type of cable originally developed by IBM for Token Ring that

consists of two individual wires wrapped in a foil shielding to help provide a

more reliable data communication.

Software

Written programs or procedures or rules and associated documentation

pertaining to the operation of a computer system and that are stored in read/

write memory.

Star Topology

A network configuration based on a central hub, from which nodes

radiate in a star-shaped pattern.

System

System is a collection of interrelated parts that comprises a single

function.

Tedious

Long-winded: using or containing too many words; “long-winded (or

windy) speakers”, “verbose and ineffective instructional methods”,


49

“newspapers of the day printed long wordy editorials”, proceedings were

delayed by wordy disputes”.

Theoretical

Sometimes used to describe a result that is predicted by theory but has

not yet been adequately tested by observation or experiment. It is not

uncommon for a theory to produce predictions that are later confirmed by

experiment.

Transaction

Transaction is a record of business conducted at a meeting

proceedings and events.

Twisted-Pair Cable

A type of cable made by intertwining two separate insulated wires

together.

Unshielded Twisted Pair Cable

A popular type of cable used in computer networking that consists of

two shielded wires twisted around each other.

Warehouse

Storage for goods and merchandise of an establishment or company.


50

Warehousing

Warehousing is the management of materials while they are in storage.

Workstations

A class of computers small enough in size and cost to be used by a

small group or an individual in their own work location yet powerful enough for

large-scale scientific and engineering applications. Typically with a Unix

operating system and good graphics.

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