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UNIVERSITY OF CALOOCAN CITY

COLLEGE OF BUSINESS AND ACCOUNTANCY

INVENTORY MANAGEMENT PROCESS OF FELTA MULTI-MEDIA INC.

BASIS FOR IMPROVEMENT

A Thesis presentation
Presented to the Faculty of
College of Business and Accountancy
University of Caloocan City
Camarin Campus

Submitted by:
CONTRERAS, APRIL MAY E.
FALCOTELO, LAILANIE D.
GUIANALAN, EMA D.
JAVIER, CECILLE O.
LOZANO, DEZAVELLE A.

In Partial Fulfillment
Of the Requirements for the
Degree of Bachelor of Science
In Accounting Technology

Submitted to:
Dr. Zenith C. Camu, CPA
Thesis Adviser
UNIVERSITY OF CALOOCAN CITY
COLLEGE OF BUSINESS AND ACCOUNTANCY

CHAPTER I

THE PROBLEM AND ITS BACKGROUND

Introduction

Inventories are essential for keeping the production wheels moving, keep

the market going and the distribution system intact. They serve as lubrication and

spring for the production and distribution systems of organizations. Inventories

make possible the smooth and efficient operation of manufacturing organizations

by decoupling individual segments of the total operation. Purchased parts

inventory permits activities of the purchasing and supply department personnel to

be planned, controlled and concluded somewhat independently of shop-product

operations. These inventories allow additional flexibility for suppliers in planning,

producing and delivering an order for a given products part, loner gan (2013)

When it comes to inventory management, companies are starting to change

the way they fill their warehouses (www.supplychain247.com). The latest trend in

inventory management is always the use of data analytics. Digital technology helps

make the use of advanced analytics easier. A company will have access and

visibility into more useful data about the efficiency of inventory management.

These analytical insights can help automatically identify best practice


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improvements. It can also help predict what actions that a business needs to make.

(magentone.over-blog.com)

Another trend is the use of warehouse management system, retail

operations are improved by providing the ability to oversee inventory levels, trends,

locations, and more, supported by a user-friendly interface and efficient reporting

functions.

With a warehouse solution that allows you to run multiple facilities on the

same system, it’s easier to have complete visibility of your inventory and shift as

needed to enhance purchasing decisions. (www.supplychain247.com)

Nearly 81% of consumers experienced an “out-of-stock” situation in the past

12 months, resulting in lost sales for retailers and lots of disappointment for in-

store shoppers. Globally, retailers recorded losses of a whopping $1.75 trillion due

to mismanaged inventory. If you are still managing your inventory on a

spreadsheet or worse, not managing at all, then your business might be suffering

and it’s high time that you streamline your Inventory Management Processes.

With an effective warehouse management solution, inventory can be tracked to

provide significant process improvements and reduce turnaround times, ultimately

increasing profits. (www.supplychain247.com)

Managing inventory can be very challenging, and when you are a growing

business it can be really painful. If you are facing issues in tracking your inventory
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COLLEGE OF BUSINESS AND ACCOUNTANCY

and if it is getting difficult for you to optimize your warehouses and storage facilities

then you have come to the right place.

Background of the Study

With the ever surging demand in products and services across several

economic sectors, more and more management practices or techniques have

evolved to ease the process of effective and efficient service delivery to customers

and other organizational stakeholders. Inventory management is regarded as a

discipline charged with optimal use resources and for achieving overall operational

efficiency across industries (Akindipe, 2014)

“Inventory” is one of the more visible and tangible aspects of doing business

to many small business owners. Inventory is represented in various forms such as

raw materials, goods in process and finished goods. Shortage of inventory when

needed can be extremely detrimental and a large inventory carries a risk of

damage, theft, and spoilage. For these reasons, inventory management is

important for businesses. At the same time, it is important to thoroughly understand

the kind of inventory at hand, the challenges it brings.

According to Kotler (2012), inventory management refers to all the activities

involved in developing and managing the inventory levels of raw materials, semi-
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finished materials (work-in- progress) and finished goods so that adequate

supplies are available and the costs of over or under stocks are low.

In this study, the chosen company is FELTA Multi-media Inc. In 1966

Felicito and Teresita Abiva established First in Educational Learning Trends

Always (FELTA) with the aim of providing the academe with instructional materials

that answers the needs of the times.

For over four decades, FELTA has been assisting in upgrading the quality

of education in the country through its multi-educational line that serves the

educational requirements of both private and public schools.

In this effort to secure relevant and world-class educational materials,

FELTA has tied up with prestigious Multi-media publishers worldwide. The

publication of the Filipino Heritage — the first Philippine Encyclopedia; the

introduction of Audio Visuals like slides, filmstrip, overhead transparencies, charts,

skills boxes in all subject areas in all levels, for the past 15 years; the introduction

of Micro slides, a new teaching tool for science, biology, physics, chemistry, earth

science and astrology.

We choose FELTA Multi-media Inc. because they are the major educational

manufacturer and distributor with over almost 39 years of experience in the audio-

visual field. Media products enable our youth to construct, learn and grow in fruitful

and rewarding learning environments.


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FELTA Multi-media Inc. is the first to commercially produce Filipiniana

Video Programs, FELTA works in association with the Cultural Center of the

Philippines, Ayala Museum and the Philippine Information Agency to renew

awareness and interest in the latent Filipino culture. Felta’s video programs

includes: Encyclopedia Britannica, Library on Science and Technology, Math,

Computer Science, Engineering, Values Education Videos, among a host of

others. In its effort to secure relevant and world-class educational materials,

FELTA has tied up with prestigious publishers worldwide. On the other hand, Felta

Multi-media Inc. is facing problems in accordance with their inventory. Felta Multi-

media Inc. in terms of their records are having variation with the physical inventory

that results to shortage of inventory and have negative effects on a business.

Statement of the Problem

This study primarily aimed to evaluate the Inventory Management Process

of FELTA Multi-media Inc. as an essential tool to enhance inventory control.

Specifically, it seeks to find answers to the following questions:

1. What is the demographic profile of the respondents in terms of:

1.1 Age;

1.2 Gender;
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1.3 Civil Status;

1.4 Educational Attainment;

1.5 Position;

1.6 Length of Service

2. To what extent do the respondents assess the effectiveness of Inventory

Management process of FELTA Multi-media Inc, in terms of:

2.1 Demand Forecasting;

2.2 Lead Time Forecasting;

2.3 Warehouse Flow;

2.4 Stock Rotation;

3. Is there any significant difference on the assessment of the respondents on the

factors affecting the effectiveness of Inventory Management Process when

grouped according to their profile?

4. What are the problems encountered by the respondents of Felta Multi-media

Inc.?

5. Based on the above findings of the study, what Inventory Management Model

may be recommended for FELTA Multimedia Inc.?


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Hypothesis

Null Hypothesis. There is no significant difference on the assessment of

the respondents on the factors affecting the effectiveness of Inventory

Management Process when grouped according to their profile.

Alternative Hypothesis. There is significant difference on the assessment

of the respondents on the factors affecting the effectiveness of Inventory

Management Process when grouped according to their profile.

Scope and Delimitations

This study focuses on the inventory management practices of FELTA Multi-

media Inc. and to evaluate the current inventory practices of company.

30 out 36 employees of FELTA Multi-media Inc. are respondents for this

study. They are in the best position to furnish the researcher with the information

needed to answer the research question of this study.

This study will be conducted with limited amount of financial resources and

time framework.
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Significance of the Study

In general, the present study would benefit to the following institutions:

FELTA Multi-media Inc. The research will benefit the management and the

workers of FELTA Multi-media Inc. to know why there are challenges in their

inventory management system and what to do to improve inventory management

since the research was conducted among them.

Employees. This study gives the employees more knowledge about

inventory and to understand the importance of inventory. They are able to do their

tasks and they know the appropriate procedures and policies.

Researchers. The Researcher was able to understand in details the

inventory management practices and relate the findings to the real situation.

Future Researchers. The results of the study will be a great reference to

the future researchers. The study is going to add to the existing literature regarding

inventory management practices.


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CHAPTER II

REVIEW OF LITERATED LITERATURE

This chapter discuss the related and significant studies that have been

studied by previous researchers with the topic pertaining Inventory Management

Process.

Related Literature

Inventory Management is a crucial aspect of managing a company

successfully. Inventory is a vital part of current assets mainly in manufacturing

concerns. Huge funds are committed to inventories as to ensure smooth flow of

production to meet consumer demand. Maintaining Inventory also involves holding

or carrying costs along with opportunity cost. An efficient inventory management

ensures continuous production by maintaining inventory at a satisfactory level. It

also minimizes capital investment and cost of inventory by avoiding stock-pile of

product. Efficient and Effective Inventory Management goes a long way in

successful running and survival of business firm. (V. Vijaya Lakshmi and K.

Ranganath, 2016)
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The essence of inventory management is to augment business operations

so as to ensure effective flow of goods, products, and services (Chalotra, 2013).

In this context, ‘inventory’ is the aggregate list of items; a quantity of goods in stock

or stock of the product which an organization is producing for sale and the

components that make the sale. ‘Stock’ consists of a wide range of goods or

materials – stationery, office equipment, plant, machinery, consumables, etc.

available for use or sale. The element of ‘management’ or ‘control’ is thought to be

pivotal in this context because any ‘control’ is deemed a process by which events

are made to conform to a set plan. The term ‘control’ has familiar synonyms such

as management, overseeing, administering, conducting, planning, superintending,

guiding, organizing, supervising, regulating, supervising, all performed so as to

prevent “helplessness”, “neglect”, “weakness”, or “mismanagement” in the system.

Thus, inventory management is the supervision of supply, storage and accessibility

of items in order to ensure an adequate supply without excessive oversupply.

Stock Management is often associated with understanding the inventory mix of an

organisation and the different levels of demand on that inventory, depending on

diverse external and internal factors that can exert demand for materials in a given

period (Adebayo et al, 2012; Inventory, 2014; Oxford Advanced Learner’s

Dictionary, 2012).

According to (Ain Kiisler, 2014) Inventory management mean methods that

are used for organizing, holding and replenishment of stock. The main goal – keep
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the inventories on optimal level, without stockouts and excesses. For this, two

controversial but simultaneously mutually dependent tasks should be solved: [1]

To have enough inventories to fulfill orders of outer and inner clients in a manner

satisfying them. Or with other words – assure high level of customer service.

Usually this customer service level is measured as availability (fill rate). [2] To

minimize inventory carrying costs, first of all capital tied into inventories for

maximizing the company`s profitability. There are different types of inventory: [1]

Cycle stock – inventories for satisfying usual (predicted) demand between

replenishments (receiving new ordered quantities). [2] In-transit inventories/

pipeline stock – items that are en route from one location to another. They may be

considered part of cycle stock even they are not available for sale or shipment until

after they arrive at the destination. [3] Safety or buffer stock – held in excess of

cycle stock because of uncertainty in demand or lead time. Amount depends on

extent of demand fluctuation, replenishment lead time and planned availability

level for customers. Makes the majority of inventory in the typical logistic system.

[4] Speculative stock – held some reasons other than satisfying current demand

(getting quantity discounts, forecasted purchase price increase or materials

shortage, protecting against strikes/natural disasters etc. Production economies

may also lead to the manufacture of products at times other than when they are in

demand. [5] Seasonal stock – form of speculative stock that involves accumulation

of inventory before a seasonal period begins (or ends – in agriculture). [7] Dead
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stock - items for which no demand has been registered for some specified period

of time (obsolete products, demand season ended, etc).

Inventory management involves providing the required inventory levels that

will sustain the organization’s daily operations at minimum costs. This covers

issues like determining the level of stock to order, when to order, establishing

receipt and inspection procedures and providing proper storage facilities. Without

proper stock control procedures in place, firms are likely to face two undesirable

inventory levels. That is to say excessive/ high levels of inventory or inadequate/

low levels of inventory (Dickerson 2013).

The essence of inventory management is to augment business operations

so as to ensure effective flow of goods, products, and services (Chalotra, 2013).

In this context, ‘inventory’ is the aggregate list of items; a quantity of goods in stock

or stock of the product which an organization is producing for sale and the

components that make the sale. ‘Stock’ consists of a wide range of goods or

materials – stationery, office equipment, plant, machinery, consumables, etc.

available for use or sale. The element of ‘management’ or ‘control’ is thought to be

pivotal in this context because any ‘control’ is deemed a process by which events

are made to conform to a set plan. The term ‘control’ has familiar synonyms such

as management, overseeing, administering, conducting, planning, superintending,

guiding, organizing, supervising, regulating, supervising, all performed so as to

prevent “helplessness”, “neglect”, “weakness”, or “mismanagement” in the


UNIVERSITY OF CALOOCAN CITY
COLLEGE OF BUSINESS AND ACCOUNTANCY

system. Thus, inventory management is the supervision of supply, storage and

accessibility of items in order to ensure an adequate supply without excessive

oversupply. Stock Management is often associated with understanding the

inventory mix of an organization and the different levels of demand on that

inventory, depending on diverse external and internal factors that can exert

demand for materials in a given period (Adebayo et al, 2012; Enikanselu, 2008;

Yusuf, 2003; Inventory, 2014; Oxford Advanced Learner’s Dictionary, 2005).

As stated by (Jason Richelson, 2017) not having a system and process in

place to accurately receive inventory is one of the most common small business

inventory management mistakes, and the data backs that up. According to the

National Retail Federation, 28% of inventory shrink is attributed to supplier

mistakes that aren’t caught during the stock receiving process. A sound process

that includes checking all stock receipts against purchase orders minimizes these

losses.

There are three main systems that can increase the profitability of a

business when updating from manual checkout processes. The first is a Point of

Sale (POS) system, the second is an Inventory Management (IM) system, and the

third is a Customer Relationship Management (CRM) system. Updating POS and

IM systems are explored within the scope of this project. The initial POS system

includes the technology used to complete and record sales transactions on the

sales floor. Typically it involves barcoded items, scanning devices, a checkout


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interface or terminal, and additional features. This recorded information enters a

database which is either stored on a company server (normally bought as a

software package) or stored on a cloud-based server (Software as a Service

[SaaS]). A POS system is the foundation for the other two systems to function. 5

Inventory information collected by point of sale equipment is summarized into

useful data by the Inventory Management system. The Inventory Management

system tracks inventory levels for every item on the sales floor according to its

stock keeping unit. It is able to produce accurate and current inventory counts

based on sold and damaged items which is accessible from either a company

computer (software package) or through a POS terminal (Software as a Service).

An IM system is highly recommended because consistent item tracking helps

improve inventory decisions and reduce inventory costs. These two system work

well together: demand planning from the POS system can coincide with inventory

levels and ordering policies from the IM system to greatly reduce costs. The third

system is the Customer Relationship Management system. This system manages

interactions with current and future customers at both retail and wholesale levels

by creating individual customer accounts. Each account links customer information

with past purchases collected at the POS system. This information is accessible

at any time and is used for marketing campaigns, post-purchase email reminders,

newsletters, etc. The CRM system is meant to better serve customers, increase

customer willingness to pay, and retain customer loyalty. It helps to keep the
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customer satisfied after a purchase and provides detailed records of individual

customer histories. Automated email reminders can be sent to customers after a

purchase with specific care instructions and product recommendations tailored to

their purchase. However, this system does not affect the core operations of a

business, and should be viewed as an extra benefit as opposed to a fundamental

need.

When updating from manual processes, the first system necessary is the

POS system because it is the core for business analytics by providing

management with access to 6 comprehensive historic sales information. POS

software helps to identify “not only daily and weekly POS performance, but also

inventory levels by SKU and location, order status, in-stock percentage (in-stock

in a store as a percentage of shelf capacity), and warehouse and store out-

ofstocks” (Shapiro, 2012). Further research shows that a POS system streamlines

the process of entering inventory into a computer upon completion of sales,

thereby allowing for expedited inventory management for companies still doing this

counting manually (Casison, 2013). POS data can be used to create expected

sales forecasts based upon previous demand. This will impact purchase orders,

which “should be determined by how much end-users are likely to demand, so

POS data can be used to forecast what end-users will buy” (Simon, 2013).

Forecasts are a very useful tool when considering how to price items and when to

reorder additional units because they identify the frequency at which items are
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sold. The flexibility and automation that a new point of sale system provides over

manual processes is a key motivator for upgrading systems.

A POS system is a means to collect and aggregate sales data automatically,

which can then be used to produce a variety of sales reports including: daily reports

with historical data, six week history reports, top selling categories, top margin

categories, top margin customers, top margin items, customer rank by sales, top

selling items, and sales by time of day (Polanz, 2012). Specifically for the retail

agriculture industry, a good system can show a manager which plants are making

the most money, which ones are stagnant, and which ones maintain the highest

holding costs. This knowledge is crucial when dealing with perishable goods.

(Youngblood, 2013).

POS systems can also tackle issues relating to seasonality that all garden

centers must consider. It is difficult to sell particular plants, such as fall blooming

flowering shrubs, during the start of the season comparative to others, like annuals

for window boxes or flower pots, which 7 would sell quickly during that time.

Conversely, that same flowering shrub might outsell an annual greatly at the end

of the season because its value is not subject to seasonal obsolescence. Often

times, “many retailers do not (fully) consider seasonality in practice because of a

lack of technical capabilities” (Ehrenthal, Honhon, & Van Woensel, 2014).

However, “by accounting for nonstationary demand in inventory management,

retailers can reduce inventory holding, handling, and stock-out cost substantially”
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(Ehrenthal, Honhon, & Van Woensel, 2014). Without the proper technology, there

is a gap between a manager’s insight into trends and their actual patterns. A POS

system tracks the sale of individual categories of plants immediately when they

occur and manages every transaction completely. This provides management with

a greatly enhanced ability to plan orders, plant placements, and adjust strategies

for the seasonal nature of the industry (Lombardi, 2012). Wallitsch Garden center

(in [city, state] if available) implemented the CounterPoint pointof-sale system to

replace its manual system and as a result experienced much greater flexibility in

pricing. The company had access to new data which allowed them to “price

products individually based on margin, rather than grouping products into one price

point”. This is a crucial ability for retail agriculture businesses; oftentimes a

company purchase will include a group of different products offered at a

homogenized price. These products are then sold individually in the store with

varying degrees of demand. Individual pricing allows management to capitalize on

those demand trends. Wallitsch Garden center experienced further flexibility by

using POS data to compare the price points offered by various vendors, and in turn

was able to make smarter purchasing decisions for those products. Overall, the

updated system helped manage and control inventory and increased the profits of

the garden center by approximately 8 percent over the course of a season. 8

Coupling historical data trends with better buying helps to increase inventory

accuracy, reduce the need for end of year clearance sales, and ultimately reduce
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inventory obsolescence. Lakeview Nurseries in Massachusetts utilizes a just-in-

time buying policy as a result of having an electronic point of sale system, and

keeps a consistent flow of healthy products all deliverable within five days (Harvey,

2013). This system has also helped reduce end of year inventory significantly by

carefully managing inventory levels throughout the season. The just-in-time buying

system pushes those incremental costs back up the supply chain where, at the

manufacturer level, economies of scale reduce expenses. Research has proven

that switching from a manual system to a computerized inventory system improved

the efficiency of purchasing. Point of sale and inventory management gathers the

information pertinent to ordering, and “historical data enables you to more

accurately forecast seasonal sales and make better buying decisions for the

future”. Orders can be created more precisely and cost effectively. Garden centers

without forecast insight typically utilize push inventory systems, which requires

stocking large quantities of items and marketing them to sell as fast as possible.

As a result, inventory costs rise as research suggests that “every time an inventory

item has a birthday, it costs the retailer 30%” (Youngblood, 2013). This is explained

by the perishable nature of goods because incremental costs rise as inventory

levels do; plants need water, fertilizer, adequate light conditions, and proper care.

Carrying costs are naturally high in the industry, and inventory left over at the end

of each year damages retailers’ margins. Both employees and customers are

benefactors of implementation as manual processes typically requires heavy time


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inputs during checkouts and an electronic system expedites these transactions

(Girsch-Bock, 2013). Electronic point of sale systems create a major competitive 9

advantage for garden centers of any size. Customer inquiries can be handled

much more quickly because “sales staff can locate stock on hand at any store

location right from the POS terminal, and check the status of backorders, enabling

[employees] to efficiently fulfill customer needs and move them through checkout

quickly”. Without inventory counts provided by an electronic POS system,

employees cannot easily provide information to customers about product

availability. Physical inventory counting is expedited by using sales data to keep

track of current inventory levels; employees and managers no longer need to

spend the day wandering the sales floor counting every item (Sandstrum, 2014).

Information obtained from POS improves marketing by helping salespersons make

better judgments and ultimately practice smarter selling. Data reports highlight

specific needs and eliminate guessing and biases that employees develop

throughout the course of their work (Sandstrum, 2014). If need be, repositioning

strategies can be applied to every item within the POS database. In particular high

turnover items, like annuals, are very difficult to price individually because each

specific item is relatively similar.

However, there are clear trends in customer demand based upon color,

variety, and growth characteristics (upright, spreading, trailing, etc) which appear

in demand planning derived from POS data. A POS system with this ability will
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help able to track the sales data necessary to make better judgments on plant

placement so that management can choose high margin items to place along the

route to high turnover plants. There are challenges and capital investment a

garden center needs to recognize when implementing a POS system. While the

advantages of a new system include inventory control, speed at checkout, and

customer tracking, these systems can be complex and difficult to grasp if 10 an

employee is new to the system. In addition, while small systems can cost in the

range of $1,000 to $2,000, larger more complete systems can cost in excess of

$75,000. (Bame, 2012). Estimates suggest that if a garden center is making about

$500,000 in revenue per year, then it is most likely losing money without a POS

system. Once a business takes the appropriate steps to implement a system and

then begins forecasting, issues can arise with demand planning based upon actual

sales data. Specifically, “in the event of a stockout, a backorder is not allowed, so

all unfilled demand is lost… Real-world systems rarely include backordering at the

retail store level and cannot record demand during stockout. Therefore, historical

demand does not actually represent the amount of demand in the system, but just

the amount of demand filled. Most analytical models assume complete

backordering" (Nachtmann, Waller, & Rieske, 2014). It is important for a company

to reduce stockouts to avoid untrackable, unfilled demand. This relates back to

buying practices and smart ordering which helps to eliminate these issues.

Creating accurate sales forecasts and eliminating stockouts through better buying
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provide synergistic effects, which increase the value of both functions individually.

A forecast that best represents actual demand creates informed ordering, and

informed ordering reduces inventory stockouts, leading back to forecasts more

representative of actual demand.

Local Related Literature

Businesses all over the world, especially ones that are in the Philippines,

need inventory management in order to fulfill their business goals and objectives.

As a concept, inventory management is relatively easy to understand. You can

take it literally and say that it is managing inventory and you wouldn’t be wrong.

More precisely, it refers crucial aspects of management – the process of

overseeing, controlling, and handling the flow of inventory units that are used in

the production or distribution of goods. (Mendoza, 2018) The saying that time is

money is certainly the case for businesses. Delivering finished goods or receiving

raw materials or inventory is time sensitive. Delays affect production, delivery and

work schedules, take its toll on the bottom line of the company. (Chua, 2015)

It could also have an adverse impact on market demand, where alternative

suppliers from other countries are more readily able to provide products at more

reliable delivery schedules. Our traffic situation has enforced the implementation

of color-coding schemes, truck bans and even contributed to our ongoing port-
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congestion problem, all of which has an adverse financial impact on businesses.

Public transport, delivery trucks and shuttle services are also victim to the

perpetual traffic in Metro Manila. Instead of being able to do three or four round

trips, they are lucky to be able to do two, which translates to lost revenues and, in

many cases, a shift from profitable operations to a losing business. Public service

also suffers in that the available schedules become less frequent and the waiting

time becomes longer.

Inventory management is directly linked to operating management the goal

of which is to provide the best service to customer. When a customer calls for a

sales order, delivery must be done at the fastest possible time at the lowest

possible costs. Traditionally, companies maintain a large stock of inventories to

meet the challenge of serving customers on time. However, under the strategic

managerial framework, serving customers on time could be done by applying

technology and redesigning the processes of production. Inventory management

models change as the environment of business changes. But the core goal of

inventory management remains the same, that is, “make the customer happy” by

delivering accurate service on time. (Agamata, 2014)

Objective of inventory management. Inventory is the stockpile of the product

the firm is offering for sale and the components that make up the product. (Cabrera,

2015) It is the responsibility of the financial officer to maintain a sufficient amount

of inventory to ensure the smooth operation of the firm’s production and marketing
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functions and at the same time avoid tying up funds in excessive and slow-moving

inventory. Functions of Inventories, be they in the form of raw materials, be parts

and components, work in process, or finished goods may appropriately be

considered as the life-blood of the production distribution system. Within this

system of production and distribution.

IBM (October 2012) Innovations such as just-in-time manufacturing bar

codes and RFID tags have revolutionized supply chain management.

Unfortunately, these innovations have brought with it staggering amounts of data

to deal with. This white paper outlines some of the major factors affecting inventory

and supply chain management. Automation can practically affect all phases of

inventory management including counting and monitoring of inventory items; and

anticipating inventory needs, including inventory handling requirement. Effective

Inventory Analysis, Get Data Related to Effective Inventory Analysis. For many

distributors, inventory is the largest and perhaps the most important asset.

Inventory ties up more money than buildings or equipment, and is often less

“liquid.” It is crucial, then, that distributors develop and use a comprehensive set

of tools that allows close monitoring of the performance of inventory investments.


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Foreign Related Studies

Inventories are raw materials, work-in-process goods and completely

finished goods that are considered to be the portion of business’s assets that are

ready or will be ready for sale. Formulating a suitable inventory model is one of the

major concerns for an industry. The earliest scientific inventory management

researches date back to the second decade of the past century, but the interest in

this scientific area is still great. Again considering the reliability of any process is

an important feature in the research activities. Values of some factors are very

hard to define or almost unreal. In such cases, fuzzy models of inventory

management take an important place. This paper analyzes possible parameters

of existing models of inventory control. An attempt is made to provide an up-to-

date review of existing literature, concentrating on descriptions of the

characteristics and types of inventory control models that have been developed.

(Yurii Fedkovych Chernivtsi National University, 2015)

Inventory management is a challenging problem area in supply chain

management. Companies need to have inventories in warehouses in order to fulfil

customer demand, meanwhile these inventories have holding costs and this is

frozen fund that can be lost. Therefore, the task of inventory management is to find

the quantity of inventories that will fulfil the demand, avoiding overstocks. This

paper presents a case study for the assembling company on inventory

management. It is proposed to use inventory management in order to decrease


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stock levels and to apply an agent system for automation of inventory management

processes. (Darya Plinere and Arkady Borisov, 2015)

In the opinion of (Darya Plinere and Arkady Borisov, 2015) they mentions

several reasons why it is needed to have inventories: [1] To meet anticipated

demand; [2] To smooth production requirements; [3] To protect against stock-outs;

[4] To take advantage of order cycles; [5] To hedge against price increases or to

take advantage of quantity discounts; [6] To permit operations; [7] To decouple

components of the production-distribution system. Otherwise, it will lead to

production delays, shortages and/or dissatisfied customers. The paradox of

inventory management is that having inventory is needed, but it is not desirable to

have inventory due to inventory keeping costs. This situation makes inventory

management a challenging problem area in supply chain management.

Reducing inventory is considered one of the most important aspects of

inventory management. But in practice, low inventory level is not always a good

solution. Manufacturers need to maintain the right amount of inventory at the right

level. Therefore, although implementing advanced inventory management always

sounds good in theory, in practice, the balance of cost and benefit should be

considered.

According to (Jawaharlal Technological University, Hyderabad, 2010-2012)

Inventory management has to do with keeping accurate records of finished goods


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that are ready for shipment. This often means posting the production of newly

completed goods to the inventory totals as well as subtracting the most recent

shipments of finished goods to buyers. When the company has a return policy in

place, there is usually a sub-category contained in the finished goods inventory to

account for any returned goods that are reclassified or second grade quality.

Accurately maintaining figures on the finished goods inventory makes it

possible to quickly convey information to sales personnel as to what is available

and ready for shipment at any given time. Inventory management is important for

keeping costs down, while meeting regulation. Supply and demand is a delicate

balance, and inventory management hopes to ensure that the balance is

undisturbed. Highly trained Inventory management and high-quality software will

help make Inventory management a success. The ROI of Inventory management

will be seen in the forms of increased revenue and profits, positive employee

atmosphere, and on overall increase of customer satisfaction.

As stated by (Yurii Fedkovych Chernivtsi National University, 2015) Stocks

(reserves) are created to carry out the normal activities of the company. Proper

and timely determination of the optimal inventory control strategy allows freeing a

significant amount of assets, frozen in the form of stocks, which ultimately

increases the efficiency of resource use. Even though there are literally millions of

different types of products manufactured in our society, there are only two

fundamental decisions that one has to make when controlling inventory: [1] How
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large should an inventory replenishment order be? [2] When should an inventory

replenishment order be placed? The objectives of inventory management often

reduce the problem if it is more profitable to do quickly but more expensive or

slower but cheaper. Such a strategy will be optimal inventory control, which

minimizes the sum of milestones costs associated with the production, storage and

inventory shortage per unit of time or for a specific (including infinite) amount of

time. Management models differ in the nature of the available information on the

properties of the simulated system. When the value of the model parameters is

well-defined, nature of the corresponding mathematical model is deterministic. If

the parameters of the system are random values with a known probability,

distribution models are stochastic (probabilistic). If all of the model parameters do

not change over time, it is called static, otherwise – dynamic. Static models are

used when receiving a one-time decision about the level of reserves for a certain

period, and dynamic – in the case of sequential decision-making about stock levels

or to adjust earlier decisions, taking into account the changes taking place. When

static patterns of change in system parameters cannot be installed, it is necessary

to solve the problem of inventory management in the face of uncertainty. In models

of inventory management, the following characteristics are taken into account:

Single versus multiple items. This dimension considers whether a single item can

be used in isolation for calculations, or whether multiple interdependent products

should be taken into account, as a result of collective budget or space constraints,


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coordinated control or substitutability between items. Time duration. In some

inventory management situations, the selling season for products is short, and

excess stock at the end of the season cannot be used to satisfy the demand of the

next season. In such cases, a single period model is required. When multiple

periods need to be considered, a common approach is to use a rolling horizon

implementation approach. Here, decisions consider only a relatively small number

of future periods and are made at the start of each period. The decisions are then

implemented in the current period, and the problem resolved at the start of the

subsequent period. Number of stocking points. Sometimes, it is appropriate to treat

a single stocking point in isolation. In many real world cases, inventories of the

same item are kept at more than one location. In multi-echelon situations, the

orders generated by one location (e.g., a branch warehouse) become part or all of

the demand at another location (e.g., a central warehouse).

Silver (2012) identifies three possible forms of lead-time. The first form is

where the lead-time of each replenishment is known; the second is where

replenishments arrive after a random time; and the final form is where seasonal

factors may affect the time it takes for an order to be fulfilled. A supplier usually

has limited capacity; therefore, order size restrictions are taken into account in this

dissertation. In addition, lead-time is assumed to be a constant and known value.

Penalty and deficit. Any warehouse is established in order to prevent a shortage

of a certain type of products handled by the system. Lack of stock at the right time
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leads to losses associated with downtime, unevenness of production, etc. These

losses will be called a penalty for the deficit.

Almost all products have some type of peaks in their demand pattern,

whether it is small or large. So to determine if the peak is a peak or just a normal

variable demand is very important. A peak that not is representing the normal

demand pattern will give a too high value for the forecasting since the forecast is

based on historical data. In order to find those products, different peak values were

tried and then analyzed visually. Since the forecast is based on the last six months

so were the peaks. A peak was defined as a peak if there were one, two or three

values that were higher than a certain level above the average level and a

minimum average level. Different levels were tested and analyzed both by looking

at the peak products but also by looking at the other products to see that they did

not contain any products that should be allocated as peak products. (Daniel Arrelid

and Staffan Backman, 2012)

Powerful inventory management practice is crucial inside the operation of

any commercial enterprise. It is consequently very essential for the procurement

characteristic in a corporation to efficiently manipulate their inventory and use all

strategies that they see match for his or her sort of enterprise. Through doing this

they could decrease overhead fees and growth their purchaser pleasure by way of

having goods available when the consumer demands them hence enhancing the

organizational productiveness. bodily and Logical inventory wishes to be assessed


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and controlled in a manner wherein the records is real and correct so that there is

no overstocking and 5 minimal shortages are found out. Be aware that proper stock

management with the aid of the procurement characteristic also way having correct

forecasting and correctly timed replenishments. In most companies, inventories

constitute up to 50% of the full product fee, the money entrusted on stock, thereby

affecting the performance of the procurement characteristic and the overall

productiveness of the organization. (Bassin, 2014)

Local Related Studies

Inventory management is a prime task for an organization to achieve its

goals of maintaining appropriate level of inventory and minimizing waste. One way

of managing inventory is to have a web-based system in place that can instantly

track and update the information about the products, tools or equipment. One of

the main objectives of inventory management is to minimize the inventory carrying

cost. Therefore, it is very important to determine the optimal stock and optimal time

of replenishment of inventory to meet the future demand. In classical inventory

models the demand rate is assumed to be a constant. But demand for physical

goods may be time-dependent, price dependent and stock dependent.

(http://dspace.cas.upm.edu.ph)
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Thus, a common problem that arises in the management of an inventory is

demand uncertainty. It is difficult to predict the future demand of a new seasonal

product because of insufficient historical data. When it comes to inventory system,

we should only consider not only the system technical implementation itself but

also the business process which it is rooted. The biggest profit in the supply chain

of this process is to meet the customers demand quickly with the lowest cost.

Inevitably, by this way, it will have to accumulate a large number of stocks to

ensure that the final consumer can get the products which they want to buy.

However, this kind of management is also apt to accumulate too many stocks in

the points of sales which lead the entire supply chain expose to high risk, from the

rising of inventory costs to the dull sales or products sold at a loss. Therefore,

another method of inventory management is to prepare fewer stocks to avoid the

cost loss of inventory owing to market changes. But the reaction speed to demand

could be affected. In Musara Mazanai’s research, his paper presents the findings

of the study that was conducted to investigate the impact of application of Just-In-

Time (JIT) inventory management system in the manufacturing sector SMEs. The

study revealed that the majority of SMEs in the manufacturing sector were not

applying the JIT inventory management principles. Furthermore, statistically

significant positive correlations between the application of JIT inventory

management principles and cost efficiency, quality and flexibility were found. It is

therefore deduced that manufacturing sector SMEs can benefit significantly in


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terms of improved quality of products, increased operational cost cuts and

increased flexibility by applying the JIT inventory management principles. As an

illustration, Procter & Gamble drove out non value-adding supply chain costs to

save the company over $200 million by using an optimization model with an

interactive approach. One of the approaches which have long been proven

effective in the manufacturing sector in cutting costs, improving quality,

productivity, efficiency and decreasing waste is the just in time (JIT) management

approach. JIT is a management approach which originated in Japan in the 1950s.

(www.entrepreneur.com) When it comes to inventory, your business’s basic

stock should provide a reasonable assortment of products and should be big

enough to cover the normal sales demands of your business. Since you won’t have

actual sales and stocking figures from previous years to guide you during startup,

you must project your first year’s sales based on your business plan. When

calculating basic stock, you must also factor in lead time—the length of time

between reordering and receiving a product. For instance, if your lead time is four

weeks and a particular product line sells 10 units a week, you must reorder before

the basic inventory level falls below 40 units or you’ll have to wait for the product.

Insufficient inventory means lost sales and costly, time-consuming back orders.

Running out of raw materials or parts that are crucial to your production process

means increased operating costs, too. Your employees will be getting paid to sit
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around because there’s no work to do; when the inventory does come in, they’ll be

paid for working overtime to make up for lost production time.

One way to protect yourself from such shortfalls is by building a safety

margin into basic inventory figures. To figure out the right safety margin for your

business, try to think of all the outside factors that could contribute to delays, such

as suppliers who tend to be late or goods being shipped from overseas. Once

you've been in business a while, you’ll have a better feel for delivery times and will

find it fairly easy to calculate your safety margin.

Avoiding excess inventory is especially important for owners of companies

with seasonal product lines, such as clothing, home accessories, and holiday and

gift items. These products have a short “shelf life” and are hard to sell once they're

no longer in fashion. Entrepreneurs who sell more timeless products, such as

plumbing equipment, office supplies, or auto products, have more leeway because

it takes longer for these items to become obsolete. No matter what your business,

however, excess inventory should be avoided. It costs money in extra overhead,

debt service on loans to purchase the excess inventory, additional personal

property tax on unsold inventory, and increased insurance costs. Buying excess

inventory also reduces your liquidity—something to be avoided.

To control inventory effectively, prioritize your inventory needs. It might

seem at first glance that the most expensive items in your inventory should receive
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the most attention. But in reality, less expensive items with higher turnover ratios

have a greater effect on your business than more costly items. If you focus only on

the high-dollar-value items, you run the risk of running out of the lower-priced

products that contribute more to your bottom line. Divide materials into groups A,

B, and C, depending on the dollar impact they have on the company (not their

actual price). You can then stock more of the vital A items while keeping the B and

C items at more manageable levels. This is known as the "ABC" approach. Often,

as much as 80 percent of a company’s revenues come from only 20 percent of its

products. Companies that respect this “80-20 rule” concentrate their efforts on that

key 20 percent . Most experts agree it’s a mistake to manage all products in the

same manner. Once you understand which items are most important, you’ll be able

to balance needs with costs, carrying only as much as you need of a given item.

It’s also a good idea to lower your inventory holding levels, keeping smaller

quantities of an item in inventory for a short time rather than keeping large amounts

for a long time. Consider ordering fewer items but doing so more often.

A good inventory tracking system will tell you what merchandise is in stock,

what's on order, when it will arrive, and what you’ve sold. With such a system, you

can plan purchases intelligently and quickly recognize the fast-moving items you

need to reorder and the slow-moving items you should mark down or specially

promote.
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Theoretical Framework

Figure 1
Inventory Management Process
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The theoretical framework aims to clearly show the Inventory management

process of FELTA multi-media Inc. The Inventory Management integrates with

general accounting and other logistics systems. The Inventory Management stores

item information for the Sales Order. It also stores sales and purchasing costs and

quantities available by location and places holds on locations from which you do

not sell items. They update the general ledger inventory account balances with any

change in inventory valuation, count variances, or movement.

The General Accounting allows you to track inventory accounting. After they

receive and create vouchers for purchased goods, the Purchase Management

updates the general ledger and creates accounts payable entries for payment. The

Sales Order Management retrieves item prices and costs for sales orders from the

Inventory Management. The Sales Management updates the general ledger and

creates accounts receivable entries to record inventory, cost of goods sold,

revenue, and tax transactions for cash receipts processing.

The Warehouse Management integrates with the Inventory Management

to: [1] Use information from the Location Master, Item Master, Item Branch File,

Branch/Plant Constants, Item Location File, and Item Units of Measure Conversion

Factors tables [2] Suggest locations for Put away, Picking, and Replenishment

operations [3] Record warehouse transactions in the Item Ledger File table.
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Conceptual Framework

Inventory software programs now on the market let you track usage, monitor

changes in unit costs, calculate when you need to reorder, and analyze inventory

levels on an item-by-item basis. You can even control inventory right at the cash

register with point-of-sale (POS) software systems. POS software records each

sale when it happens, so your inventory records are always up-to-date. Better still,

you get much more information about the sale than you could gather with a manual

system. By running reports based on this information, you can make better

decisions about ordering and merchandising. With a POS system: [1] You can
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analyze sales data, figure out how well all the items on your shelves sell, and adjust

purchasing levels accordingly. [2] You can maintain a sales history to help adjust

your buying decisions for seasonal purchasing trends. [3] You can improve pricing

accuracy by integrating bar-code scanners and credit card authorization ability with

the POS system.

There are plenty of popular POS software systems that enable you to use

add-on devices at your checkout stations, including electronic cash drawers, bar-

code scanners, credit card readers, and receipt or invoice printers. POS packages

frequently come with integrated accounting modules, including general ledger,

accounts receivable, accounts payable, purchasing, and inventory control

systems. In essence, a POS system is an all-in-one way to keep track of your

business's cash flow. Features to consider in a POS system include the following:

[1] Ease of use. Look for software with a user-friendly graphical interface. [2] Entry

of sales information. Most systems allow you to enter inventory codes either

manually or automatically via a bar-code scanner. Once the inventory code is

entered, the systems call up the standard or sales price, compute the price at

multiple quantities and provide a running total. Many systems make it easy to enter

sales manually when needed by letting you search for inventory codes based on

a partial merchandise number, description, manufacturing code or vendor. [3]

Pricing. POS systems generally offer a variety of ways to keep track of pricing,

including add-on amounts, percentage of cost, margin percentage and custom


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formulas. For example, if you provide volume discounts, you can set up multiple

prices for each item. [4] Updating product information. Once a sale is entered,

these systems automatically update inventory and accounts receivable records.

[5] Sales tracking options. Different businesses get paid in different ways. For

example, repair or service shops often keep invoices open until the work is

completed, so they need a system that allows them to put sales on hold. If you sell

expensive goods and allow installment purchases, you might appreciate a loan

calculator that tabulates monthly payments. And if you offer rent-to-own items,

you'll want a system that can handle rentals as well as sales. [6] Security. In retail,

it's important to keep tight control over cash receipts to prevent theft. Most of these

systems provide audit trails so you can trace any problems. [7] Taxes. Many POS

systems can support numerous tax rates-useful if you run a mail order business

and need to deal with taxes for more than one state.

Perhaps the most valuable way POS systems help you gain better control

of your business is through their reporting features. You can slice and dice sales

data in a variety of ways to determine what products are selling best at what time,

and to figure out everything from the optimal ways to arrange shelves and displays

to what promotions are working best and when to change seasonal promotions.

Reporting capabilities available in POS programs include sales, costs, and profits

by individual inventory items, by salesperson, or by category for the day, month

and year to date. Special reports can include sales for each hour of the day for any
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time period. You can also create multiple formats for invoices, accounting

statements and price tags. Additional reports include day-end cash reconciliation

work sheets and inventory management.

Definition of Terms

Demand – is the quantity of a good that consumers are willing and able to

purchase at various prices during a given period of time (www.investopedia.com)

Forecasting – is a planning tool to develop assumptions or premises about

the future uncertainty based on analyzing the present and past data available

(whatis.ciowhitepapersreview.com)

Inventory – often called merchandise, refers to goods and materials that a

business holds for sale to customers in the near future

(www.myaccountingcourse.com)

Inventory Control – the process employed to maximize a company’s use

of inventory (www.accountingtools.com)

Inventory Management – the supervision of non-capitalized assets or

inventory and stock items (searcherp.techtarget.com)

Inventory Model – a mathematical model that helps business in

determining the optimum level of inventories that should be maintained in a


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production process, managing frequency of ordering, deciding on quantity of goods

or raw materials to be stored, tracking flow of supply of raw materials and goods

to provide uninterrupted service to customers without any delay in delivery

(www.whatissixsigma.net)

Lead time – is the total time required to manufacture an item, including

order preparation time, queue time, setup time, run time, move time, inspection

time, and put-away time. For make-to-order products, it is the time taken from

release of an order to production and shipment. For make-to-stock products, it is

the time taken from the release of an order to production and receipt into finished

goods inventory (www.businessdictionary.com)

Management – is a set of principles relating to the functions of planning,

organizing, directing and controlling, and the application of these principles in

harnessing physical, financial, human and informational resources efficiently and

effectively to achieve organizational goals. (www.managementstudyhq.com)

Process – A process is a series of actions which are carried out in order

to achieve a particular result. (www.collinsdictionary.com)

Stock Rotation – To rotate stock means to arrange the oldest units

in inventory so they are sold before the newer units (www.accountingcoach.com)

Warehouse – is a large building used for storing goods before they are

sold, sent to the shops, exported or imported, or used (marketbusinessnews.com)


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CHAPTER III

RESEARCH AND METHODOLOGY

This chapter presents the research method, respondents of the study,

techniques and instruments, data gathering procedures, and the statistical

treatment of data.

Research Design

The descriptive research method was utilized in the study. A questionnaire

was used to collect information from the respondents.

The study made use of the descriptive method of research. Descriptive

research design is a scientific method which involves observing and describing the

behavior of a subject without influencing it in any way. According to Manuel and

Medel, descriptive research describes what is. It involves the description,

recording, analysis and interpretation of the present nature, composition, or

processes of phenomena. The focus is on prevailing conditions, or how a person,

group, or thing behaves or functions in the present. It often involves some type of

comparison or contrast.
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Respondents of the Study

The data were collected from the employees of FELTA Multi-media Inc. The

list of the said employees is recorded for documentation. A total of thirty (30)

employees represents the whole one hundred (100) percent (100%) of the

respondents.

The respondents were oriented on the objective and expected outcome of

the interaction and the filling up of the questionnaires. Informal interview

techniques were used to ensure freewheeling interaction with the employees to

enable the researchers to gather more pertinent information. The questionnaires

were personally distributed to them with guide questions to ensure that all relevant

concerns were covered.

Table 1

Demographic of Respondents

Profile Frequency Percentage

Age

21 yrs. Old and below 0 0

22-25 yrs. Old 10 33%


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26-30 yrs. Old 6 20%

31-40 yrs. Old 5 17%

41-50 yrs. Old 6 20%

51 yrs. Old and above 3 10%

Total 30 100%

Gender

Male 13 43%

Female 17 57%

Total 30 100%

Civil Status

Single 7 23%

Married 23 77%

Separated 0 0%

Widow 0 0%

Total 30 100%

Educational Attainment
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High school graduate 3 10%

Vocational 0 0%

College level 3 10%

College graduate 24 80%

Post graduate 0 0%

Total 30 100%

Position

Rank & File 14 47%

Supervisor/Manager 16 53%

Total 30 100%

Length of service

1-6 months 2 7%

7-12 months 3 10%

1-2 years 4 13%

more than 3 years 21 70%

Total 30 100%
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Age. In terms of age, most of the respondents, 10 or 33%, are 22-25 years

old. This was followed by 6 or 20% respondents between 26-30 years old and 41-

50 years old.

Gender. With regard to gender, most of the respondents are female. The

female group was composed of 17 or 57% of the respondents and the remaining

13 0r 43% of the respondents are male.

Civil Status. The largest distribution of the respondents’ civil status, 23 or

77% were married. There were only 7 or 23% of the respondents who were single

at the time of the study

Educational Attainment. The highest educational attainment of most of

the respondent, 24 or 80% was college graduate. Both college graduate and high

school graduate were 3 or 10%.

Position. The largest distribution of the respondents’ position belongs to

Supervisor or manager which consists of 16 or 53%. The remaining 14 or 47%

respondents are rank and file.

Length of Service. The largest population of the respondents, 21 or 70%,

had been in service for more than 3 years. This was followed by 4 or 13%

respondents who had rendered 1-2 years of service. And 3 or 10% of the

respondents rendered 7-12 months working. The remaining 2 or 7% of the

respondents rendered 1-6 months.


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Sampling Technique

Simple Random Sampling was used in selecting the respondent to ensure

a fairly equal representation of the variable of the study.

Fraenkel, Wallen and Hyun (2012) state that in random sampling, “every

member of the population presumably had an equal chance of being selected”.

For the respondent of FELTA Multi-media Inc., 83% were selected from

100% employees, or a total of 30 respondents were requested to participate in this

study.

Research Instrument

The instruments used this study include the documentary analysis and

questionnaire, and interview.

The primary data-gathering tool was a questionnaire, which is composed of

four parts. The first part aims to gather the profile of the respondents in terms of

age, gender, civil status, educational attainment, position, and length of service.

The second part aims to assess the inventory management process of FELTA

Multi-media Inc. The third part is the challenges encountered by the company in

relation to their inventory. The part four aims to identify the program that maybe

proposed to improve the inventory management.


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Documentary Analysis coming from the secondary data throughout various

articles, books, corporate websites and studies pertaining to management

inventory process were analyzed in order to solidify the operations manual to be

proposed by the researcher.

University libraries, wherein recent researches whether published or

unpublished works were done on the same field of interest; and lastly, Websites

that contains news, articles, reports, and online publication that were related on

the field of study on the researcher.

Validation

The questionnaires formulated by the researchers were presented to the

adviser for comments and suggestions then presented to the HR manager for

validation.

Data Gathering Procedure

The researchers were given a topic by their research adviser, then a

statement of the problem was formulated. Moreover, then a guide questionnaire

was also formulated, and it was also use a guide all throughout the research using
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secondary data from various sources that has already done conducted various

authors of both published and unpublished works either theses or a dissertation.

Other sources of secondary data were the use of electronic pages.

After the secondary data were gathered, the researchers will analyze the

data by using documentary analysis and eventually answer the statement of the

problem thru the use of the guide questionnaire.

Statistical Treatment Data

The following statistical techniques were used to analyze the gathered data

from the questionnaires to answers the problem of the study.

Frequency distribution and percentage, and weighted mean to answer the

problem of the study.

Frequency Distribution and Percentage was used to describe the profile of

the respondents.

% = f/N x 100

Where: % = Percentage

f = Frequency

N = Number of respondents
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Weighted mean was computed to determine the average response of the

respondents on the various factors considered in the study.

Where: WN = Weighted mean

∑fx = Sum of the product of the frequency

N = Number of respondents

Likert Scale. Using a Likert Scale, each of the indicators will be assessed

and scored from 1, 2, 3 and 4 depending on the degree in which the respondents

are experiencing it. The score will be guided using the following:

SCALE WEIGHTED MEAN VERBAL INTERPRETATION

4 3.26-4.0 Very great extent

3 2.51-3.25 Great extent

2 1.76-2.50 Less extent

1 1.0-75 Not at all


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ANOVA. (Analysis of Variance) is a statistical technique that assesses

potential differences in a scale – level dependent variable by a nominal – level

variable having 2 or more categories.

The following scales were utilized to assess the assessment of the

respondents on the FELTA Multi-media Inc. in terms of demand forecasting; lead

time forecasting; warehouse flow; and stock rotation.

The first scale was used to illustrate the evaluation of FELTA Multi-media

Inc. in terms of demand forecasting; lead time forecasting; warehouse flow; and

stock rotation.

Likert Scale and Descriptive Rating

Numerical Ranking Scale Range Descriptive Rating

4 Very great extent

3 Great extent

2 Less extent

1 Not at all

The second scale below was used to present the frequency of the problems

encountered that causes delay in the construction project.


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Numerical Ranking Scale Range Descriptive Rating

4 3.26 - 4.00 Never Experienced

3 2.51 – 3.25 Quite Often

2 1.76 – 2.50 Often

1 1.00 – 1.75 Always


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Chapter 5

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

This chapter presents the summary of findings, conclusions and

recommendations in the Inventory Management Process of FELTA Multi-media

Inc.: Basis for Improvement

Summary of Findings

This is the summary of all the findings of the study conducted by the researchers

through the use of various research methodologies stated in chapter 3.

The following are the significant findings of the study:

1. Summary of the profile of the respondents which includes Age, Gender, Civil

Status, Educational Attainment, Position, and Length of Service.

Majority of the employees of Craftsmen Development and Construction

Corporation belonged to the age bracket of 21 – 25 years of age who got the

highest frequency of 10 with the percentage of 33%. Mostly, it composed of female

employees having a frequency of 17 with a percentage of 57% and predominantly,


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the civil status of the employees most are married respondents got the highest

frequency of 23 with the percentage of 77%. It may seem that the employees are

more committed for they have a family to serve.

Eighty percent (80%) of the employees are in their baccalaureate degree with a

frequency of 24. Most of the employees are on Managers/Supervisors having an

fifty-three percent (53%), as to the length of service the highest frequency is on the

employees who already work for more than three (3) years with 21 and percentage

of 30.

2. Assessment of the respondent of the effectiveness of Inventory Management

process of Felta Multi-Media Inc.

2.1 The result in the assessment in the Demand Forecasting of Inventory

Management Process of FELTA Multi-media Inc. indicates that their production

are planned and scheduled and the inputs are acquired accordingly for this got a

very great extent response from the respondents. Production planning and control,

through proper scheduling and expediting of work, helps in providing better

services to customers is terms of better quality of goods at reasonable prices as

per promised delivery dates. Getting a highest rate shows that FELTA Multi-media

Inc. make sure that the needs of the customer are being met and ensures
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materials, equipment and employees are all available to meet production goals for

a business.

Assessing also the Demand Forecasting of FELTA Multi-media Inc.

provides an insight to upcoming cash flow, so that they can more accurately budget

to pay supplier. How you pay your suppliers on time will impact your company’s

reputation, and may affect whether or not suppliers continue to work with you.

Understanding how much cash they will have to pay will show whether you can

afford to pay suppliers on time. FELTA Multi-media Inc. manage to keep the trust

of their supplier by paying them on time by determining forecasted demand.

FELTA Multi-media Inc. according to the respondents was also produced

products according to the forecasted demand and enable to reduce excess

inventory and avoid wastage. The more inventory you hold, the more building

space you need to hold it. FELTA Multi-media Inc. ensures that they order just the

needed quantity to fulfill customer demand without unnecessary excess quantity

and avoid costs associated with holding excess inventory in warehouse.

The result of assessment of forecasted demand shows that FELTA Multi-

media Inc. are able to minimize cost to gain maximum profit by having a rating of

great extent. If not all items sold, inventory manage will face the problem of selling

products with their expiry date coming closer and closer. This will cause direct and
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indirect costs, for ex. unnecessary storage cost and the possibility of selling with

lower price as the expiry date is about to come.

2.2 The result of the assessment of the respondents on the LEAD TIME

FORECASTING shows at great extent that the lead time used is efficient to control

the level of inventory. Stock-outs, as the name implies, occur when inventory, or

stock, to fulfill a customer's order is unavailable. As a result, stock-outs adversely

affect consumer demand and manufacturing schedules. Consider an example in

which an organization's management either underestimated the amount of stock

needed or failed to place a replenishment order. Because suppliers cannot

replenish materials immediately, production stops, which can be costly for the

company's bottom line. (www.investopedia.com) It clearly indicates that the lead

time used by FELTA Multi-media Inc. is competitive enough to control the level of

their inventory.

The assessment of lead time forecasting shows at great extent that using an

accurate estimate of the actual lead time rather than depending on the quoted lead

time improved the service level especially with irregular vendor. Assessing the

actual lead time of irregular vendors helps FELTA Multi-media Inc. to know the

time elapses from ordering of goods to delivery of goods just in case they

encountered problems with their main supplier.


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The result of the assessment shows at that FELTA Multi-media Inc. needs

to improve their lead time variation used to supplement their safety stock in

addition to the demand variance for the respondents rate it at less extent.

Lead Time is an important factor for customer satisfaction. Typically

customers want goods or service as fast as possible with minimal effort. According

to the assessment of the respondents of FELTA Multi-media Inc. Lead time can

affect at less extent the order timing as well as the quantity which you order. This

indicates that the delay in delivery doesn’t affect the order timing and quantity they

order for their lead time assumption remains constant despite of lead time

variation.

2.3 The result of the assessment of the respondents on the WAREHOUSE

FLOW shows at less extent in data associated with your shipping and receiving

operation are recorded regularly. It indicates that some data involving shipping and

receiving of inventory of FELTA Multi-media Inc. are not recorded regularly by the

employees. It is important to know who places the orders because there is often a

need to contact these people to follow up regarding a delivery. In receiving

operation, checking the packing slips and items for errors holds a large amount of

inventory problems for it is important to make sure what they’re shipping out

matches the orders placed because missing inventory can creep up on the next

time someone places an order.


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According to the respondents of FELTA Multi-Media Inc. delivery are

checked for accuracy and all orders are double-checked before they go out the

door to maintain a reliable standard for products. Respondents assessed it at great

extent. This shows that FELTA Multi-Media Inc. checks products as many times

as reasonable to ensure the delivery of products to the customers. If they can,

count before picking, and recount after.

FELTA Multi-Media Inc. respondents assessed at less extent the vehicles

going in and out of the loading dock are organized for receiving supplies from

vendors and shipping orders to customer. This can be happen because of the

unorganized listing of data. For example, the dispatcher has his lists of products

to be delivered with the courier. But in case of loss of products, the person who

should be accountable to this loss cannot be recognized because of unorganized

data.

. As stated in respondents of FELTA Multi-Media Inc. assessed at great

extent that supplies including deliveries from vendors, stocked inventory, or sold

products are labeled because the employees of FELTA Multi-Media Inc. make

signs and labels to direct their personnel through warehouse and find the inventory

fast and easy, and ideally without having bother the supervisors or other personnel

by asking for the product and directions they are needed to find.
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2.4 The result in the assessment of the respondents on the STOCK ROTATION

shows at great extent. The date of the products is checked when delivered, used

or put into display which FELTA Multi-Media Inc. ensures accuracy for the delivery

of the products. This also shows that the products of FELTA Multi-Media Inc. flow

smoothly as they make sure that their products are dated accordingly.

According to the respondents of Felta Multi-Media Inc. the assessed result

about the products with short life are stored or displayed at the front of the shelf is

at very great extent. This means that their inventories are organized neatly to the

room where it was delivered. This also explains that their inventories are easy to

find and easy to distinguish if it is ready to ship.

Products with short life are stored and displayed, so it was with the products

with longer life. As the result says, it is at very great extent. The products with

longer life are stored or displayed at the back of the shelf greatly. As the products

are organized according to their dates, that’s why the products that have the latest

date are stored at the back of the shelf. For their inventories are organized by first

in first out method.

Products are always put in the correct order is at great extent. The products

are organized correctly. And the first in first out method is implemented smoothly.

Just like the result in the two paragraphs above, the placing of the product is in

proper order. The latest date is at the back of the shelf while the older is at the
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front of the shelf so that they can easily determine the product that should be ship

first. One more thing is they can easily monitor the inventories delivered.

4. Problems encountered by Craftsmen Development and Construction

Corporation

The problems encountered by FELTA Multi-media Inc. and the following are

the result of the interviews using formulated guide questionnaire to draw the

challenges often faced by the company. The results are as follows: (1) The

company doesn’t forecast maximum lead time to anticipate safety stock in case of

delay in delivery. (2) Delay in delivery doesn’t affect the order timing and quantity

they order for their lead time assumption remains constant despite of lead time

variation. (3) Data associated with shipping and receiving operation are not

recorded regularly. (4) Vehicles going in and out of the loading dock are not

organized for receiving supplies from vendors and shipping orders to customer.

5. Recommendation

Based on the above-mentioned findings and conclusions, the researchers

recommend the following:


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1. The researchers recommend to forecast maximum lead time and to have

a safety stock so that if there’s a delay in delivery the production of FELTA Multi-

media Inc. will not stop.

2. Constant assumption of lead time affects the company in a negative way.

The order timing and quantity the company’s order will now have a big difference

when such delay in delivery happens. So the researcher suggest that FELTA Multi-

media Inc. should consider the time between the initiation and completion of a

product before ordering to avoid differences in order timing and the quantity of

product they will order.

3. The result of the assessment clearly shows that data associated with

shipping and receiving operation are not recorder regularly. So the researchers

propose an Inventory Management Process System which is the Point on Sale

(POS) System that will enable the company to quickly access supplier contact

information, payment terms etc. Receiving stock is another task made easier by

a POS. Unlike manual inventory management methods, when you receive the

purchase for a stock shipment in a POS, your inventory numbers are

automatically, and correctly, adjusted.

4.The results from the assessments clearly states that there is a need for

the improvement of the warehouse flow in their Inventory Management Process,

the researchers suggest that the vehicles going in and out of the loading dock
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should be organize and make sure that the schedule listed in the log book was

strictly being followed. In case the schedule wasn’t followed, the management

should monitor the vehicle being sent to receive supplies and ship orders to

customers so that in case of any fortuitous event the management knows who is

accountable by tracking the vehicle listed in the log book.

For FELTA Multi-media Inc.:

1. Invest in research that will improve Inventory Management Process

2. Should addressed the factors that would greatly affect the inventory

management process that came from the problems and challenges; and

3. Adopt and implement the inventory management process system as

proposed by the researchers.

For students:

1. Engage in the study of inventory process and inventory management;

2. Be more proactive in engaging future study regarding the inventory

management process.

For future Researcher:


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1. Conduct similar studies on developing and improving the inventory

management process;

2. Further study should be close to increase the statistical relevance of the

study or more reliable results.