Chapter 1 Introduction
Chapter 1 Introduction
0 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. Our motivation for this thesis was to find a way to being more efficient and effective in terms of taking inventory. We have introduced a system wherein the companys employees will be able to do their products inventory in a simple manner but still getting the result they need. In this chapter, we first provided an introduction of what inventory is and its importance in a business, followed by the different ways and approaches of conducting an inventory. In the next chapters, the method used for the study and how the data are collected and processed are discussed. Next are the chapters discussing the proposed system of the researchers, and how it was done.
Chapter 1 Introduction
Chapter 1 Introduction
Personal Collection Direct Selling Inc. Sucat, Paraaque branchs existing dataflow diagram is as seen below:
Personal Collection Direct Selling Inc. Sucat, Paraaque have worries about how they keep track of their stores inventory. Their main concern is about the confidentiality of the branchs inventory information. Since they use Microsoft Excel as their inventory system, anybody can access their files without so much of a hassle, since the computer they have in the store is usually left opened and unlocked, in order for the other personnel staffing the store to update the file once sales are made. Being that the case, an accidental deletion of data is not uncommon, nor is illegal copying of the branchs information. Incidents of accessing sheets that are not required for sales transaction by unauthorized staff and modifying information have been experienced as well. The files have also experienced several Macro Virus attacks that have caused inconvenience in their business.
Chapter 1 Introduction
inventory in a
Chapter 1 Introduction
Chapter 1 Introduction
Inventory Controller
Inventory controllers are professionals who specialize in the management of the various types of inventories that are maintained by companies as part of the standard process of conducting business. In general, the inventory controller is charged with the task of keeping the level of the inventory within perimeters that are considered high enough to allow the company to function at optimum efficiency, but low enough to create the least amount of tax liability for the corporation. Often a large corporation will employ more than one inventory controller, with each member of the inventory controller staff assigned the task of overseeing the functions of one or more inventory types within the business. Since any given company, especially a manufacturing corporation will maintain inventories that range from raw stock to manufacturing supplies to finished goods, the task of efficient inventory control is often easier with several controllers working to ensure that all types of inventory are managed properly. One inventory controller may have the responsibility of managing the supplies inventory, often by tracking the daily issues and usage of machine parts and other materials essential to the operation of the plants that produce goods offered by the company. Generally, an inventory controller that is focused on supplies or maintenance inventories will employ an ordering process that is based on average usage. Essentially, this means utilizing history about the past usage patterns of an item combined with the average amount of time it takes a vendor to deliver an order of the item once it is placed. This strategy allows the inventory controller to place orders so that the plant never runs out of necessary parts and resources, but helps to prevent large amounts of parts running up the net worth of the inventory. An inventory controller may also be charged with the responsibility of maintaining the finished goods inventory for a single plant or the entire company. This will involve keeping a constant track of daily production that is added to the current inventory of sellable goods, less the goods that are shipped to fulfil orders. Sales departments often interact regularly with a finished goods inventory controller to determine if there are products in stock that can be used to fulfil a customer request.
Uncertainty
Inventories are maintained as buffers to meet uncertainties in demand, supply, and movements of goods.
Economies of scale
Ideal condition of "one unit at a time at a place where user needs it, when he needs it" principle tends to incur many costs in terms of logistics. So bulk buying, movement and storing brings in economies of scale, thus inventory.
Components
Parts or subassemblies used in building the final product.
Work-In-Process (WIP)
Any item that is in some stage of completion in the manufacturing process.
Finished Goods
Completed products that will be delivered to customers.
Distribution Inventory
Finished goods and spare parts that are at various points in the distribution system.
Chapter 1 Introduction
FIFO (First In, First Out) and LIFO (Last In, First Out)
This type of inventory management relies on accurately recorded when items arrive, and when they are disbursed to a given department within the company. With this approach, the remaining units of a given item are physically checked after the days receipts and issues have been entered into the supply chain database. This process often allows small businesses that need to keep inventories to a minimum for tax purposes to always know exactly what they have on hand, and to take action if a significant amount of a given item cannot be accounted for.
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Thanks to the use of modern software, it is also possible to quickly take inventory of a selected group of items with great ease. For instance, generating a printout of the amount of office supplies that should be on hand is very simple. The printed report will reflect how much of each item should still be awaiting issue to a given department, as of the date the report is pulled. This approach does require that all receipts and issues be recorded in the database before the report is generated; otherwise, the count will be off. Inventory processes can be very elaborate or very simple, depending on the needs of the company. By choosing the right type of tracking system and software, and being diligent in physically counting units on a regular basis, it is possible to make sure that the materials records are kept accurate at all times. This makes valuing all types of inventories, ranging from raw materials to finished goods, much easier than it would be otherwise.
Physical inventory
Is a process where a business physically counts its entire inventory. A physical inventory may be mandated by financial accounting rules or the tax regulations to place an accurate value on the inventory, or the business may need to count inventory so component parts or raw materials can be restocked. Physical inventory stops operation at a facility and all items are counted, audited, and recounted at one time. Businesses may use several different tactics to minimize the disruption caused by physical inventory.
Min-Max System
This approach allows both the order size and the time between the placements of orders to vary. This method of monitoring inventory is sometimes referred to as an optional replenishment system. A hybrid system combines elements of both the continuous review system and the periodic review system. It is similar to the periodic review system in that it only checks inventory levels at fixed intervals of time, and it has a target inventory level. However, when one of those review periods arises the system does not automatically place an order. An order is only placed if the size of the order would be sufficient to warrant placing the order. This determination is made by incorporating the reorder point concept from the continuous review system. At the review period the inventory level on hand is compared to a reorder point for the item. If inventory has not fallen below the reorder point, no order is placed. However, if the inventory level has dropped below the reorder point, an order is placed. The size of the order is the difference between the inventory on hand and the target inventory level.
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Option o User - used by the administrator to add, edit or delete an account. This includes the username and password required for the user to log on and the users access rights. o All fields are required to be filled out. o Product Line shows the category of products the branch has.
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View
Help o
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1.4.2 Limitations
The system focuses primarily on the incoming products for retail that the branch receives and not on the inventory of the organization as a whole. It will cover products for retail and promotional offers. It will not involve equipments and other supplies maintained by the organization. The study will be done at Unit E-9 2nd Floor Evacom Plaza Building San Dionisio, Paraaque City during the academic year 2009 to 2010.
B. Product Line Numerical values are not accepted. C. Supplier Ordering is done manually. This sub-menu will serve as a reference as to who the supplier/s is/are and their contact numbers. The system wont automatically send orders for stocks in critical level to suppliers. D. Inventory When transactions made are deleted, the number of stocks left wont be automatically updated. Current total numbers of stocks are to be re-entered manually. E. Archive Cannot be printed. F. Audit Trails Only the time, date and the user is specified. Activities done are not stated. The time stamp will appear only when the user logs in and out of the system. If the user exits the system without logging out, time stamp wont appear on the log out field.
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Cost-flow assumption
and Is the beginning point used to determine the value of the ending inventory the cost assigned to the cost of goods sold (Eisen, 2007). It is the optimum amount of goods to be ordered each time the inventory drops at the pre-determined reorder point.
Internal control
It is a system of procedures and forms established in a business to safeguard its assets and help ensure the accuracy of the information provided by its accounting system.
Inventory
sale It is an asset acquired and maintained by an entity, which are held for or as supplies in the business operations.
Inventory turnover
Refers to the amount of times inventory is sold and replaced within a given period, such as a year. Low turnover rates can suggest that stores are acquiring a surplus of inventory, which can mean that they are experiencing problems, while a high turnover rate indicates that a store is doing brisk business. Inventory turnover is one of the many metrics used to gauge the financial health of companies large and small, and business owners may periodically assess their inventory turnover to see how they are doing.
Lead-time
the It is the period between placing an order and receiving delivery used in computation for economic order quantity (EOQ).
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Periodic system
It is an inventory tracking system that determines inventory levels only at fixed points in time through the use of physical inventory counts (Bragg, 2004).
Perpetual system
It is an inventory tracking system that determines inventory levels on an ongoing basis by making incremental adjustments to inventory records based on individual production transactions (Bragg, 2004).
Safety stock
outs It is the buffers or reserve stock kept on hand to protect against stock caused by delayed deliveries or increased demand.
Stock out
Means running out of the inventory of an SKU.
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