Document Code: DCAVRKMI-F-URFR

MANUEL S. ENVERGA UNIVERSITY FOUNDATION

Lucena City Document Title: Undergraduate Research Final Report
An Autonomous University Page No.: Page 1 of 44
Revision No.: 0
DR. CESAR A. VILLARIBA RESEARCH AND Effectivity Date: August 2017
KNOWLEDGE MANAGEMENT INSTITUTE Prepared by: DCAVRKMI
Reviewed by: QMR
QUALITY FORM Approved by: President

Research Title: INVENTORY MANAGEMENT SYSTEM FOR JAPAN SURPLUS

RETAILER

Name of Researcher : Kathlene A. Jao

Paul John A. Arena
Kyle Rayner A. Lopez
Irish Anne V. Braga
Royce Daniel A. Anareta
Degree : Bachelor of Science in Business Administration
Specialization : Management Accounting
Name of Research Adviser : Carmen A. Aldovino

Abstract

In every retailing business an inventory management system is an essential tool for

determining inventory on hand and forecasting future sales. Having homogeneous inventory is

easier to maintain over heterogeneous ones. This entails the study, an Inventory Management

system that is fit for a heterogeneous inventory. This Japan surplus dealer, caught the researchers’

attention. The said business entity has a poor inventory management system. They cannot take

track of their remaining Inventory. The business is having their operations at Allarey St. Barangay

3, Lucena City. The business started its operations last October 2013, a sole proprietorship owned

by John Moreno. Ever since their establishment they have no Inventory management system but

earlier this year they implemented a manual inventory system. Previously, they cannot identify

their inventory through time and some items are left off. Thus, they often neglected the their newly

implemented system because of it is time consuming. The main objective of the study is to provide

King Louise Japan Surplus an inventory management system that is efficient and accurate for the
 Document Code: DCAVRKMI-F-URFR
MANUEL S. ENVERGA UNIVERSITY FOUNDATION
Lucena City Document Title: Undergraduate Research Final Report
An Autonomous University Page No.: Page 2 of 44
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DR. CESAR A. VILLARIBA RESEARCH AND Effectivity Date: August 2017
KNOWLEDGE MANAGEMENT INSTITUTE Prepared by: DCAVRKMI
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business. Through the use of the research methods such as series of interviews and observation;

the researchers evaluated their existing practices. The evaluation shows the lack of knowledge over

the inventory and its inefficiencies resulting into losses. Also, the researchers noticed the lack of

documentation form for the inventory. The data gathered paved way for the enhancement of the

current inventory management system

Keywords: Japan surplus, inventory management system, efficient, accurate,

homogeneous, heterogeneous

Background

“Japan surplus,” which first referred to used engines and car parts from, well, where else

but Japan. People still see the signs “Japan surplus” all over Banawe Street in Quezon City. But

in recent years, Japan surplus stores have mushroomed all over the country, now referring to a

very wide variety of goods, from personal effects to furniture to heavy equipment. In a Japan

surplus shop there are three kinds of people you’ll find looking around. There is the homeowner

who is on a hunt for a bargain. There is also the DIY diva looking for her next project. And then

there’s the third one—the most common of all—who is just curious about what other secondhand

pieces are out there.

To older generations of Filipinos, “surplus” was associated with American military

surplus pieces from the last World War. In the 1990s, there was a wave of discarded tech

products and secondhand furniture from Japan, thus, the birth of Japan Surplus shops. For this

generation, Japan Surplus are stores that have nice preloved items from Japan—and other First
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MANUEL S. ENVERGA UNIVERSITY FOUNDATION
Lucena City Document Title: Undergraduate Research Final Report
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World countries—that are reasonably priced and not as beat up as some of the pieces you’d find

in other secondhand stores. These shops are popular for the hundreds of secondhand Japanese

bicycles and cheap dinnerware, but there are other treasures to be found, like well-maintained

furniture and rare musical instruments. So head out to one now, keep an open mind, and reduce,

reuse, and recycle your way to a happy home.

Rationale of the research

The case details one of the few Japan surplus retailers in Lucena – a sole proprietorship

retailing business that are selling imported surplus products from Japan, Italy and Belgium. Mr

John A. Moreno founded the business way back October 2013 in Allarey st. Brgy 3 Lucena City.

The company currently has 2 employees which are responsible for maintaining the store.

Upon the study, the researchers had observed that the entity has an inefficient and

inaccurate inventory system. Delivered goods are mixed with the old ones and some sold

inventory are forgotten, resulting into scrap. Earlier this year, the business implemented a manual

inventory system in which is usually neglected due to the fact that it is time consuming. With

this the researchers came up with the idea of proposing an Inventory management system suited

for their inventory.

The study aims to provide an inventory management system that is highly suited for the

heterogeneous nature of the entity; a system that will comply with the current International

Financial Reporting Standards, International Accounting Standards and the Philippine

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Accounting Standards. The Researchers are optimistic that this study will be a useful tool not

only for the entity but as well as those who are in the surplus industry

Purpose of the Research

The main objective of the study is to:

3. To describe the business characteristic of the entity as to

[Link] of business

1.2. Length of business operation

[Link] class

[Link] and warehouse

4. To determine the current inventory procedure along with

2.1. Recording

2.2. Classification of inventory

2.3. Measurement of inventory

2.4. Dispatching

5. To identify the issues and challenges encountered by the business

3.1. Records
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3.2. Classification of inventory

3.3. Measurement of inventory

3.4. Dispatching

6. To prepare a recommendation report.

Theoretical Framework

Input Process Output

Business Interview Business Profile

related profile (Background of the
business)
Evaluation and
Japan Surplus Assessment Enhanced Manual
Inventory Inventory System
Practices

Figure1. The Theoretical Framework of the study.

In Figure 1, the conceptual framework of the proposed inventory system. In this

study, it aims for an enhanced inventory management system.

The researchers had to know the business related profile and the present inventory

practices used by the company. The researchers will interview the owner and employees

and observe the operations of the business. It will undergo the SWOT analysis (strength,

weakness, opportunities and threats) to be evaluated, assessed and will be tested. After
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MANUEL S. ENVERGA UNIVERSITY FOUNDATION
Lucena City Document Title: Undergraduate Research Final Report
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the process of which, the researchers know the profile of the business and its current

system to be able to come up with the new enhanced manual inventory system.

Literature Survey

Inventory, Banaag, F., Ducut, R. (2017) Inventory Management And Control.

They depended on the Generally Accepted Accounting Principles that expressed an

inventory be regarded as substantial individual property which is held available to be

purchased in the conventional course of business or things that are still at present work in

procedure. In this manner inventory comprises of raw materials, work in process, and

completed merchandise. The definition given by Banaag will serve as a way for the

familiarization of the management for what inventory stands for.

An inventory system gives the authoritative structure and the working strategies

for keeping up and controlling merchandise to be supplied. The system is in charge of

ordering and receiving the receipt of merchandise: timing the order placement and

monitoring what has been requested, how much, and from whom.

A typical arrangement of inventory exchanges includes getting items, moving them

to a quality review area, checking them, moving them over to main storage, picking them

for a request, gathering and bundling the request, and transporting it. In addition to the fact

that this process requires an expansive number of exchanges, any of which could be made

in blunder, however it additionally includes a considerable number "contacts" of the

inventory, expanding the chances of item harm. This discusses the typical arrangement of

inventory to the management for them to be aware of.

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There are additional variances sought after where in a supply of inventory on hand is

insured, you don't generally realize the amount you are probably going to require at

whichever schedule yet at the same time there is a need to fulfill client’s desires or

production on schedule. There is additionally a hidden instability of supply thus

inventory must shield you from untrustworthy providers when an item is difficult to find

or when it is rare. Untrustworthy providers ought to be restored through discussions or

they ought to be supplanted. To maintain a strategic distance from the effect of cost

inflation you should purchase amounts of inventory at proper occasions which is called

Price Protestation. In the event that you purchase a bigger amount of a thing less much of

the time the ordering costs are not as much as purchasing in smaller amounts again and

again accordingly bringing down ordering costs. This lets the management know the

purpose of inventory.

Inventory accuracy alludes to the inventory records and actual physical total for

the business to guarantee precision to compute the inventory regularly and coordinate it

against the records. Cycle tallying is a physical inventory taking method in which

inventory is computed as required rather than periodically.

Inventory costs has a big role in business which the management need to be

mindful of. Inventory incorporates costs like money and space to maintain or purchase an

inventory. Additionally, there are costs for labor to receive, check quality, put away,

retrieve, select, pack, ship and account for to keep inventory as sound as possible under

the circumstances. Furthermore, if merchandise deteriorate, get harmed or be rendered

obsolete, and stolen the business will be considered responsible.

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Inventory costs for the most part fall into ordering costs and holding costs.

Requesting, or procurement, costs come about paying little respect to the genuine

estimation of the merchandise. These costs incorporate the pay rates of those buying the

items, expenses of speeding up the inventory, and so forth.

In the most explicit issue, these costs ought to be taken in with thought and will

impact the inventory size. Holding costs incorporates the expenses for storerooms, taking

care of, protection, pilferage, breakage, out of date quality, depreciation, taxes, and the

opportunity cost of capital. Clearly, high holding costs will in general support low

inventory levels and regular replenishment. In setup or production change costs you make

every item extraordinary by acquiring the vital materials, organizing required papers,

properly charging time and materials, and moving out the past load of material. Ordering

costs allude to administrative and clerical expenses to set up the purchase or production

order. Ordering costs incorporates each and every bit of information, for example,

tallying things and computing request amounts. Shortage cost is a request for what thing

will be anticipated until it is renewed or dropped. At the point when the interest isn't met

and the request is dropped, this is alluded to as a stock out. A backorder is the point at

which the request is held and filled at a later date when the stock for the thing is

replenished.

Periodic and perpetual system are the two chief frameworks to decide stock

amounts close by. This definition will introduce two of the systems that the management

will encounter in businesses.

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To be able to distinguish periodic and perpetual system from each other. The

periodic system requires a physical check of products available toward the finish of every

period. A cost basis is later connected to determine an inventory value. It is ideally

utilized by organizations as it is straightforward and requires records and modifications

are generally toward the finish of the period despite the fact that it does not have planning

and control benefits of the perpetual system.

The perpetual system requires persistent chronicle of receipt and payment for

each thing of inventory. It is the most functional system for huge assembling and

merchandising companies to ensure sufficient supplies are close by for creation or deal,

and to limit dangers of machine shut-downs and client grievances. With this meaning, the

management will be familiar with the perpetual system and be able to distinguish

periodic from perpetual.

The management must be informed of the principle capacity of inventory

management which is to keep a meticulous record of each new or returned item as it

moves in or leaves a stockroom or purpose for sale. It monitors individual property of the

business.

Last-in, First-out (LIFO) – Inventory valuation presumes that the newest bought

merchandise are the first to be utilized or sold paying little heed to the real planning of

their utilization or sale.

Average Cost Method – Inventory valuation recognizes the estimation of

inventory and cost of merchandise sold by figuring an average unit cost for all products
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accessible for purchase throughout a given timeframe. This valuation strategy presumes

that ending inventory comprises of all products accessible for purchase.

Manual inventory systems are believed to be a method for the past as it is

refreshed, kept up and controlled without utilizing a technical system. The ordinary "bean

counting" performed by small businesses to monitor inventory has given way to the

automated world of bar codes and scanners. Indeed, even with this innovation, manual

inventory systems still hold key favorable circumstances over computer based partners.

Internal controls are the mechanisms, rules, and procedures actualized by a

company to guarantee the integrity of financial and accounting information, promote

accountability and avoid deceit. Other than following laws and guidelines, and keeping

workers from taking resources or submitting extortion, internal controls can help improve

operational proficiency by improving the precision and timeliness of financial reporting.

This in turn, presents the definition of internal controls for the management to know.

This section will briefly discuss the advantages of a manual inventory

management system. A manual inventory system permits business owners and employees

to physically check that inventory is accessible. This prevents the potential for data entry

errors, which can prompt frustrated customers. Manual check of inventory can likewise

permit representatives a chance to physically review the item and guarantee everything is

appropriately available for purchase. Thus makes eyesight sometimes better than

computerized. It is impenetrable to power failures that bring down computerized

inventory systems. A business owner can represent his inventory regardless of whether a

tree takes out a nearby transformer, cutting the power to the whole square. Manual
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inventory systems are additionally increasingly hard to mess with in light of the fact that

the products are physically tallied. A computerized system can be altered to misleadingly

lessen stock to empower burglary.

Without having a manual inventory management system, a business will be put at a

disadvantage with numerous dangers of expenses. A business will spend pointless

measures of cash on things that will be unnecessary. The management will be oblivious

how or where items move which may prompt burglary or obsolete inventory and it makes

tracking inventory complex. It will lack an inventory balance which can end in lost

profits and costs you can prevent. It will also reduce employee productivity as recording

can be done easily with a system. With this information, the management will be aware

of the disadvantages of not having a manual inventory system in retail stores.

Business documents are records that show the details connected to a company's

internal and external transactions. Business documents are essential to an company's

proficiency and efficiency. Without them, numerous businesses would find difficulties to

operate. For example, bookkeepers use business sales documents to decide whether a

company is working at a profit or loss.

A purchase order is a buyer-generated document that approves a purchase transaction.

At the point when it is acknowledged by the seller, it turns into a contract binding both of

the parties. It sets forth the descriptions, quantities, prices, discounts, payment terms, date

of performance or shipment, other associated terms and conditions, and identifies a specific

seller. This defines the purchase order which the management will frequently use.
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An inventory sheet enables your small business to monitor goods you use or sell. Each

sheet records a single item and monitors the amount of the item is coming into your

business and what amount is going out. This familiarizes the management with the

inventory sheet that they will always use in the business.

A Delivery Receipt is a document that is ordinarily signed by the receiver of a shipment

to show that they have gotten the product being sent and have claimed [Link] informs the

insurance company that the delivery was a success, and the customer now holds the actual

policy. The viable date of the approach, and whether inclusion has started may rely upon

the kind of receipt a protection policyholder is provided with. This shows the purpose of a

delivery receipt as they use it in the business.

Significance of the Research

1. Owner/Employees/Industry

a. It will help improve the present inventory management system of the business.

b. It will help the business to have an enhanced inventory management system.

c. It will help the employees to be more productive.

d. It will give the management a better control over its inventory.

2. Readers

a. It will serve as a reference for the readers, especially to those who will conduct the

same kind of study.

b. It will give the reader a better understanding about inventory management system of a

merchandising business.
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c. It will open the mind on the importance of the designed inventory management system

in the business.

3. Researchers

a. The study will help the researchers to have further knowledge about inventory

management system.

b. It will serve as a great experience and preparation to the researcher’s future career.

c. The researchers will fully visualize and know how inventory management system

works.

Statement of Desired Outcomes

The researchers want to propose an efficient and accurate inventory management

system for the company. This study can be a basis for a much more complex and

efficient inventory management system for the company. This study is important

because of the knowledge that this experience would impact on the researchers, also it

can be a basis for the future researchers for their study in this field.

Definition of Terms

Average Moving Method - Inventory costing method used under a perpetual inventory system

whereby, after each acquisition, average unit cost is recomputed by adding the cost of acquired

units to the cost of units in inventory and dividing by the new total number of units.

FIFO - Inventory valuation assumes that the first goods purchased are the first to be used or sold
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regardless of the actual timing of their use or sale. This method is most closely tied to actual

physical flow of goods in inventory.

Heterogeneous – Products with attributes that are significantly different from each other, makes

it difficult to substitute one product for another.

Homogeneous - Products that vie with each other in a market but which (from the consumer's

viewpoint) have little or no differentiation in terms of features, benefits, or quality and are,

therefore, forced to compete on price or availability.

Import - Good or service brought into one country from another. The word "import" is derived

from the word "port" since goods are often shipped via boat to foreign countries. Along with

exports, imports form the backbone of international trade. If the value of a country's imports

exceeds the value of its exports, the country has a negative balance of trade.

Inventory - Inventory is the term for the goods available for sale and raw materials used to

produce goods available for sale. Inventory represents one of the most important assets of a

business because the turnover of inventory represents one of the primary sources of revenue

generation and subsequent earnings for the company's shareholders.

Inventory Costs - Inventory cost includes the costs to order and hold inventory, as well as to

administer the related paperwork. This cost is examined by management as part of its

evaluation of how much inventory to keep on hand. This can result in changes in the order

fulfilment rate for customers, as well as variations in the production process flow. It can be

classified into three: Ordering costs, holding costs or Carrying costs, and Administrative

costs.
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Inventory Management System - An inventory management system is the combination of

technology (hardware and software) and processes and procedures that oversee the monitoring

and maintenance of stocked products, whether those products are company assets, raw materials

and supplies, or finished products ready to be sent to vendors or end consumers.

Periodic - Periodic inventory is a system of inventory in which updates are made on a periodic

basis. In a periodic inventory system, no effort is made to keep up-to-date records of either the

inventory or the cost of goods sold. Instead, these amounts are determined only periodically -

usually at the end of each year. This physical count determines the amount of inventory

appearing in the balance sheet. The cost of goods sold for the entire year then is determined by a

short computation.

Perpetual - Perpetual inventory is a method of accounting for inventory that records the sale or

purchase of inventory immediately through the use of computerized point-of-sale systems and

enterprise asset management software. Perpetual inventory provides a highly detailed view of

changes in inventory with immediate reporting of the amount of inventory in stock, and

accurately reflects the level of goods on hand.

Surplus Store - a shop that sells used items, or items previously purchased but unused, and no

longer needed. The items are often military, government or industrial excess.

Scope and Limitation of the Study

The study focuses on the Japan surplus retailer that is located at Allarey St. Barangay 3,

Lucena City. Where is in dire need of an enhanced and improved inventory management system

for the tracking and recording of the inventory. To address the primary emphasis of the study,
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which is the inventory management system for Japan Surplus, the researchers have chosen to

limit the scope of this study aspect. The researchers conclude that the scope of the proposed

inventory management system would be at the main store only and the warehouse is not included

in the study. The study focuses on the business only to provide an enhanced and improved

inventory management system.

Description of Method

For the objectives to come into existence of any research cannot be achieved

without the practices, steps and techniques that have to be employed. This study tries to

come up with an efficient and accurate inventory management system by the honing the

researchers’ available resources with the least probable cost. The researchers had come up

with the following methodologies to be used in the conduct of the research work.

Research Design

This study aims to assess the present inventory system Japan Surplus. The

researchers decided to use descriptive method as the research design for the researchers

to describe the business characteristics of Japan Surplus, to determine the current

inventory procedure, to identify issues and challenges encountered by the business and to

prepare a recommendation report of the inventory management system of the entity.

Descriptive method primarily focuses on describing the nature of a demographic

segment, without focusing on “why” a certain phenomenon occurs. It describes the

subject of the research for the purpose of enhancing the current manual inventory

management system of King Louise Japan Surplus.

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Research Instrument

The researchers used identification tools and techniques such as brainstorming,

interviewing, SWOT analysis and observation as data gathering instruments.

Brainstorming is a method used by the researchers to gather information about the

study on the existing operation and to find a conclusion/solution for the specific

problems. The researchers spontaneously gave ideas on how to enhance the inventory

management system.

Interview is used as a method for data gathering for its useful help to gather

information about the study on the existing operation. The researcher asked the owner to

take some information about their business followed by introducing the researchers and

asked some questions.

SWOT Analysis is used by the researchers as a method for understanding the

strengths and weaknesses of the entity, and for identifying both the opportunities and

threats in the marketplace or against a stated goal. The researchers conducted a SWOT

analysis to gain understanding of the entity.

Observation is the method used by the researchers the most, where they

considered the present system operation; however, the method gives incomplete data in

all aspects of operation.

Data Gathering Procedures

The researchers used/followed the COSO Model, which defines internal control

is/as designed to provide reasonable assurance in the effectiveness and efficiency of

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operations, reliability of financial reporting and compliance with applicable laws and

regulations. In an effective internal control system, the five components: control

environment, risk assessment, control activities, information and communication and

monitoring, work to support the achievement of an entity’s mission, strategies and related

business objectives.

The researchers followed the risk assessment procedure to obtain an

understanding of the entity and its environment including its internal control and to assess

the risks of material misstatements in the financial statements. Inquiries of management

and others within the entity, analytical procedures and observation and inspection.

Essential information for this research work was collected through primary and

secondary sources by interviewing with key personnel in the stores about purchasing and

inventory of the company. Observation of the production process was done to see the

flow of goods in the conversion process. Material handling and storage were also

observed and so was the patrol/inspection procedure. Record analysis of relevant data

was obtained from the company’s annual report and journals. Theoretical background

information was gathered through review of related literature on inventory management.

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Results and Discussion

Presentation, Analysis and Interpretation of Data

This presents the data gathered from the series of interviews, observation and visitation.

Thus, this illustrates the current inventory system by the management. In line with this, it

also illustrates the problems that the researchers encountered during the data gathering

process as well as the solutions that are developed by the researchers.

I. Business Characteristics

The business was founded by Mr. John A. Moreno on October 2013. It caters Japan

surplus retail products for the masses. For six years the business is open from 8:00 AM to

6:00 PM everyday except from holidays. They also offer their products through social media

platforms and have the customers pick up their item in the store. The owner categorizes the

inventory into Furniture (big and small), Kitchenware, and display items such as vases,

figurines, etc. Items from the main store are shipped from their warehouse to the store.

II. Current Exiting Inventory Practices

 Recording

When the researchers were conducting the study during the last quarter of

2018, there is no existing documentation of inventoriable products by the

management. Thus, they often rely on an estimation method to value their current

inventory. In the start of 2019. They implemented a manual inventory system in

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which the only forms they have is a delivery receipt from the warehouse and an

inventory sheet. The problem with this is employees often forget to record the

items. Thus, the recording of inventoriables are not as effective as the manager

says.

 Classification and Measurement of Inventory

The management classifies its inventoriables into classes, namely ABC.

Class A are the inventoriable items which are the most expensive throughout the

whole inventory which composed of designer kitchenware, furniture and

paintings. Class B are the inventoriables that holds a lesser value than class a in

which non-designer kitchen ware and display items. While class c are the items

are the generic type of items the cheapest amongst the inventory.

The management measures their inventory through an estimation

technique for they have no idea on how many their inventory is. The management

doesn’t exactly know how many peces of each item is delivered before. But

within implementing the manual inventory system, they are knowing their

inventory count in the store little by little.

 Receiving and Dispatching of Items

Receiving

After receiving the delivery receipt the staff matches the inventoriables

received to the receipt, the delivery receipt is accompanied with a readymade

inventory sheet. The staff also inspects the delivered inventoriables for
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defective items. For any defects found, the personnel will send the item back

to the warehouse. With the inspection done the staff will search for a

numerical code attached to the item to match up with the accompanying

inventory sheet. The inventory sheet dictates the prices as well as the quantity

of the delivered items for the delivery day. The items will now be displayed by

kind and by brand. The items are displayed inside or above the pieces of

furniture. The challenge of this process is that when the consumers flock in,

they often neglect the cross check of the delivery received to the items.

Dispatching

Retail

There are two types of retail transaction for the business and the

first one is the regular walk-in customer and the customer from the social

media platforms.

Walk-in transactions occur in the main store, the customers chose a

particular item they want to buy and inform the staff about it. The staff

will give the item its price. The displayed items are all out and as it. It just

means that if you buy it all there will be no other stock available. After the

sale the staff will record it as a deduction to the inventory sheet in which is

often neglected due to certain obstacles such as the flock of customers,

inquiries and when the personnel forget to record it.

Online transactions are done through social media, the

management posts a series of photos in which the interested could

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inquired and buy them. The items that were acquired online are also as is.

Thus, the items can be only picked up in the main store. The consumer can

only pay in the store. The challenge of this process is that the social media

platform is stormed by fraudulent buyers.

Wholesale transactions on the other hand is when the customer is

accustomed to buy bulk items for a cheaper price, the disadvantage of it is

that the items can be handpicked and is also prepared by the management.
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III. SWOT Analysis

Weakness
Poor Inventory Manual
Strengths
System
High Profit
Erroneous Recording
Social Media
Few Employees
platforms
Prone to theft
Affordable and Cheaper than
Current system is time
malls
consuming
Employee Productivity
Inefficiency during pick- up

Opportunities
Threats
Always in demand
Competition in the area
Being known for durability
Brokerage
Alternative to malls
Shipment Anomalities

The SWOT Analysis above shows that the business has its own strengths and

weakness that can be used for seizing every opportunity to thrive and eradicating the

threats. The SWOT analysis shows that the business has a poor inventory management

that can cause threats on the well-being of the business. For having a weak internal

control over inventoriables can cause the management to incur losses in which they can

get out of the competition in the japan surplus retailing scene.

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Conclusions

Based on the series of interviews, SWOT and observations. The researchers determined

this underlying problems in the current system,

1. Business Characteristics

a. Segregation of Duties of the employees.

b. Poor Internal Control over the inventory

c. Lacks business documents for inventory management

2. Current Inventory Practices

a. Erroneous recording

b. Prone to theft

c. Doesn’t have a physical count of the inventoriables

d. Problems for the dispatching of items

3. Current issues and challenges encountered by the business

a. The recording of the management is prone to human error.

b. The current system is time consuming.

c. The staff tend to forget to list down dispatched items.

d. The owner doesn’t track the inventory only estimates.

e. Neglect of the current manual inventory system.

4. To prepare a recommendation report

a. To enhance the current management status by improving the inventory

system
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Recommendations

Through the study and analysis of the problems encountered by the business. The

researchers recommend the implementation of an enhanced inventory management

system, in which the new system will be a tool for the business to flourish more.

Enhanced Manual Inventory

Management system

Recommendation Report

Output for the undergraduate thesis of

the following Researchers

Jao
Arena
Lopez
Braga
Anareta

A recommendation report is the product of the analysis of data gathered during the course of

interview to the management, in which it entails the solutions brainstormed by the researchers.
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The researchers devised this recommendation report to help the management enhance their

current inventory system. In such the researchers created new business inventory forms to ease

up the tedious job of managing a manual inventory system.

Old System Enhanced System

Old System Enhanced  Enhanced Business

 Prone to Human
System
Forms Issued
Error
alongside the receipt
 Usually Forgotten
 Updated Inventory
 Limited business
Sheet for Control
forms
 Tracking Techniques
 Prone to Theft
for Inventory

The recommendation report will start with a table containing the flaws of the old system

that the researchers observed during their visitation and as from the interviews the researchers

conducted. On the other hand, the other side contains the benefits of the newly recommended

system. The researchers shall explain to the management the flaws discovered during the

observation and the interviews.

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The recommendation report will also include a step by step procedure for the usage of the

new business forms for the enhancement of the inventory system. This will help the management

and also the researchers to extend the knowledge of the usage of the system to the staff, since

they are the primary user of this system.

Proposed Business Forms

Delivery Receipt

A delivery receipt is a document in which when a shipment of goods is being delivered it

is accompanied by this document in which it indicates the quantity of items, description of items

and price of the delivered inventoriables.

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In this, the delivery receipt will be used for the delivery of goods from the warehouse to the main

store

King Louis Japan Purchase

Surplus Order
Purchase Order Date
TO:
Goods Qua Unit Total
Details ntity Price

Subtotal
Sales Tax
Shipping & Handling
Total Due
Received by:

A purchase order is a document in which the management will send to their suppliers

prompting for an order of goods.

In this case, the purchase order will be used in ordering inventory from the warehouse.
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King Louis Japan

Surplus
Release form Date
To:
Goods Qua Unit Total
Details ntity Price
Release
Form

Subtotal
Sales Tax
Shipping & Handling
Total Due
Received by:

On the other hand, the release form is document in which after the transactions the

employee will issue this to be presented to the cashier.

In this case, this form will be used for the tracking of outgoing inventory instead of

listing if down through the inventory sheet. This form will be collected by the cashier. At the end

of the day, it will be tallied and inputted to the inventory sheet.

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King Louis Japan

Surplus
Return form Date

Goods Qua Unit Total

Return
Details ntity Price
Form

Subtotal
Sales Tax
Shipping & Handling
Total Due
Received by:

A return form serves as a document indicating a return of merchandise for detect from the

supplier.

In this, it will serve as the document for returning defective items found during the

inspection after delivery.

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Inventory Sheet

King Louis Japan Surplus

Inventory Sheet
For the Month of _________
Items Item Quantity SRP Returned Defective.
Code

King Louis Japan Surplus

Inventory Sheet
For the XX/XX/XX
Items Item Quantity SRP Returned Defective.
Code

Inventory Sheet is a document used to track down the levels of inventory. In this, we offered two

types of inventory sheet one for daily use and the other one for monthly use. The purpose of the

inventory sheet is to track down the current inventory levels on a daily basis and as well as the

monthly basis.
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References

Banaag, F. & Ducut, R. (2017).Inventory Management; Overview and Introduction Part

[Link] Management And Control, 24-35

Banaag, F. & Ducut, R. (2017).Reasons Inventory Systems Failure and Recommended Solutions.
Inventory Management And Control, 153-154

Bragg, S. (2011). Inventory Storage. Inventory Best Practices Second Edition, 67-83

Chapin, N. (2003). Encyclopedia of Computer Science 4th. Retrieved from

[Link]

Delivery Receipt. (n.d.). Retrieved from

[Link]

Jane, M. (2017). Difficulties in Using a Manual Inventory System. Retrieved from

[Link]

Joseph, C. (2008). Advantages & Disadvantages to a Manual Inventory Control System.

Retrieved from [Link]
[Link]

Kenton, W. (2019). Internal Controls. Retrieved from

[Link]

Lister, J. (2017). The Advantages of Manual Inventory Systems. Retrieved from

[Link]

Tejada, C. (2007). 5 Budget Japan Surplus Shops in Your Neighborhood. Retrieved from
[Link]
in-your-neighborhood-a40-20170913

Top 10 Consequences of Not Having Inventory Management. (n.d.). Retrieved from

[Link]

Weller, E. (2010). How to do a Product Inventory Sheet. Retrieved from

[Link]

What are Business Documents?. (n.d.). Retrieved from [Link]

finance/business-documents-88ae4aa945821fdb
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Appendices

Research Instruments

Guide Questions

Business Characteristics

What is the nature of your business and has it changed over the years?

What are the strengths and weaknesses of your main store?

How long have you been operating?

How many employees you have in the store?

Who is in charge of recording, receiving, handling the transactions and dispatching?

Do you have a warehouse?

Current Recording practices and challenges

What is the frequency of recording your inventory?

What is the forms you use to record inventory?

How do you classify your inventory?

How do inventory items are picked after sales order?

What are the common problems that the business has encountered?

How do you record your inventory? (Daily/weekly/monthly/quarterly) And what methods do

you use?

How do you make sure your record is accurate?

Classification and Measurement of Inventory Practices and Challenges

How do you classify and measure your inventory?

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What are the challenges that you have encountered regarding inventory control or tracking of

inventory?

How do you keep track of your inventory?

How do you make sure your record is accurate?

Dispatching of Inventory

How do you receive your items every time there is delivery?

How do you cater you customers for dispatching?

How do you cater the customers you’ve mentioned?

Thoughts about the Enhancement of the Inventory System

What would you implement in the improved manual inventory system?

Using the improved system would you recommend it to others?

Do you find it helpful to use a manual system even though it didn’t work at the time you tried

it?

Will you give the time to properly introduce the system to your staffs?
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Series of Interviews

Business Characteristics

What is the nature of your business and has it changed over the years?

Answer: Surplus store, we do not sell general merchandise. No.

What are the strengths and weaknesses of your main store?

Answer: The strength of the surplus store is having a high profit and its weakness is the

poor inventory management system.

How long have you been operating?

Answer: Almost 6 years. It is started on October 2013.

How many employees you have in the store?

Answer: Only 2 employees

Who is in charge of recording, receiving, handling the transactions and dispatching?

Answer: Both of my employees

Do you have a warehouse?

Answer: Yes, we do.

Current Recording practices and challenges

What is the frequency of recording your inventory?

Answer: Daily

What is the forms you use to record inventory?

Answer: it includes delivery receipt and inventory sheet

How do you classify your inventory?

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Answer: Display items, glass wares, decors, cabinets and beds.

How do inventory items are picked after sales order?

Answer: By using LIFO method (Last in first out)

What are the common problems that the business has encountered?

Answer: I record manually so I cannot travel because I could lose items, even if there

is a CCTV since we do not have an inventory record, we don’t know what are the

items that came in and we do not have control on the items once they are out.

Sometimes we also forget to list down some things, for example we paid the

electricity bill or the water bill, so we start to panic because we forget those things but

we remember that we already paid after.

How do you record your inventory? (Daily/weekly/monthly/quarterly) And what methods do

you use?

Answer: Daily. Through Inventory Sheets

How do you make sure your record is accurate?

Answer: By checking everything daily, but since it is time consuming we do it

monthly

Classification and Measurement of Inventory Practices and Challenges

How do you classify and measure your inventory?

Answer: We classify our inventory into 3 classes: Class A are the expensive ones,

Class B are the ones who holds lesser value than class a like non branded kitchen

wares or used. Class C are the generic ones. We measure our inventory through

estimation before but now through inventory sheets

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What are the challenges that you have encountered regarding inventory control or tracking of

inventory?

Answer: Actually before 2019, we do not have an inventory management system.

Problem regarding inventory we do not know what are the unsold items, I don’t know

how much is my asset, I don’t know the exact amount just an estimate.

How do you keep track of your inventory?

Answer: Before 2019 were just estimating the inventory but now we already have an

inventory management system. But the problem is sometimes we forget to record our

sales and inventory.

How do you make sure your record is accurate?

Answer: By checking everything daily, but since it is time consuming we do it

monthly

Dispatching of Inventory

How do you receive your items every time there is an delivery?

Answer: We receive the delivery receipt first, and match the items according to the

list. If there is a defective one it is immediately returned to the warehouse. The

delivery receipt is accompanied with a readymade inventory sheet. After matching

everything up we display the items in the store by kind and brand as you can see.

How do you cater you customers for dispatching?

Answer: Since we have 3 transactions walk-in, retail and wholesale it varies.

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How do you cater the customers you’ve mentioned?

Answer: for walk-in, they will have to choose their item, then come to me for the

pricing, after the sale transaction we should record it. But when the flock of

customers or inquiries come in, we cannot record it all at once so at the end of the

day we always have extra sales we don’t remember came from. For online it is

easier, when they comment mine we know right away who buys the product. In

that they will just pick it up in the store and pay it in the store it is already record.

The challenge of this is the bogus buyers, the one who says they will but it but no.

For wholesales on the other hand, they buy in bulk and in huge volumes. The

challenge of this when we are assisting them and there are walk-ins we cannot

record in the same time; we tend to forgot.

Thoughts about the Enhancement of the Inventory System

What would you implement in the improved manual inventory system?

Answer: I would like for the system to be up to date, the records are accurate and

efficient for our business.

Using the improved system would you recommend it to others?

Answer: Yes, small businesses like our store should have an accurate an efficient

manual inventory system so that they know what are the sold or unsold items, if the

business is still profiting and such.

Do you find it helpful to use a manual system even though it didn’t work at the time you tried

it?
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Answer: Yes, since it is easier not so depended to technology. Older people like our

staff have a harder time to understand digital systems

Will you give the time to properly introduce the system to your staffs?

Answer: Yes, since the system will benefit us in making decisions

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Business Forms

King Louis Japan Surplus King Louis Japan Surplus

Delivery Receipt Date Purchase Order Date
TO: TO:
Goods Quantity Unit Total Goods Details Quantity Unit Total
Details Price Price

Subtotal
Subtotal Sales Tax
Sales Tax Shipping & Handling
Shipping & Handling Total Due
Total Due
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King Louis Japan Surplus King Louis Japan Surplus

Return Form Date
Release Form Date
TO: Goods Quantity Unit Total
Goods Details Quantity Unit Total Details Price
Price

Subtotal
Sales Tax
Shipping & Handling
Subtotal Total Due
Sales Tax
Shipping & Handling
Total Due

King Louis Japan Surplus

Inventory Sheet
For the Month of _________
Items Item Quantity SRP Returned Defective.
Code
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King Louis Japan Surplus

Inventory Sheet
For the XX/XX/XX
Items Item Quantity SRP Returned Defective.
Code
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Observation performed during the study

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