CHAPTER I

INTRODUCTION

Background of the Study

Around the world, people go about doing the same things in very different ways.

Although the behaviours of races and cultures are different, it is irrefutable that human

being shares and satisfies the same fundamental needs for survival. Food as one of the

basic necessity for living can be realized through agriculture. Agriculture plays a crucial

role in the economy of developing countries, and provides the main source of food,

income and employment to their rural populations.

Agriculture plays a crucial role in the life of an economy. It is the backbone of the

economic system. It supplies essential raw materials and products for the

manufacturing sector and agro-related industries. It is a major link in the input and

output value chain, and supplies surplus labour to the industry and service sectors.

The Philippines is an agricultural country with a land area of 30 million hectares,

124,400 square kilometres or 47.72% of which is agricultural land. Agricultural land area

of Philippines increased from 83,050 sq. km in 1967 to 124,400 sq. km in 2016 growing

at an average annual rate of 0.84 %. (World Data Atlas). In the recently released data of

Philippine Statistics Authority (PSA), for the first quarter of 2019, agriculture grew

by 0.67 percent. Production increases were noted for livestock, poultry and fisheries

during the period. On the other hand, crops recorded a decrease in output. At current

prices, the gross value of agricultural production amounted to Php 429.7

billion. Philippine agriculture is characterized by a mixture of small, medium and large

farms. Majority of the farms in the country are all small farms averaging about 2

hectares. These are simple farms which are owned and managed by single families

ranging from subsistence to commercial production.

Mindanao as the second largest island in the Philippines, it represents about a

quarter of the country’s total population. One third (1/3) of Mindanao’s land area is

devoted to agriculture. The region supplies over forty (40) percent of the country’s food

requirements and contributes more than thirty (30) percent to national food trade.

SOCCSKSARGEN or Region 12 employs about eight hundred ten thousand (810,000)

individual in agriculture, which marks as second in the Mindanao engaged in agriculture

for year 2015. (Philippine Statistics Authority)

President Elect Rodrigo Roa Duterte acknowledges the role of agriculture in the

Phillipine economy, and considers this sector as one of the top concerns of his

administration. Proof of the government’s commitment to grant land to landless farmers

was the distribution of Certificate of Land Ownership Award (CLOA) to one thousand six

hundred eighty (1,680) farmers of Barangay Laguilayan, Isulan, Sultan Kudarat.

(Philippine Information Agency) In 2014, the Philippine government and the World Bank

signed loan-and-grant agreement to expedite the Philippine Rural Development Project

(PRDP). This program would cover two thousand (2,000) farm hectares that create

better access to markets. (Business World)

With the abundant agricultural industry of Mindanao, specifically in the area of

Isulan, Sultan Kudarat, it opened for other business opportunities like agricultural supply

store. An agricultural supply store or agro centre is an agriculturally-oriented shop

where one sells agricultural supplies -- inputs required for agricultural production such

as pesticides, feed and fertilizers .Sometimes these stores are organized

as cooperatives, where store customers aggregate their resources to purchase

agricultural inputs. Agricultural supply and the stores that provide it are part of the

larger Agribusiness industry.

Farm supply retailing and wholesaling requires having a good grasp of how

agriculture works as a business. There are no formal education requirements for

entering the retail or wholesale fields of farm supply; however, workers in these fields

should have a certain degree of knowledge about the products being sold. Therefore,

joining these fields may require some experience working on a farm, using many of the

products that are being sold. Wholesalers will need to be effective communicators in

order to demonstrate how new farming innovations will be useful to their customers.

For the best career prospects, those interested in the retail and wholesale of farm

supplies may pursue at least a bachelor's degree in agricultural business. These

undergraduate degree programs will include courses in accounting, selling and sales

management, crop production, economics, marketing of agriculture products and farm

management. Graduates are prepared for careers in farm management and farm supply

sales.

Ideally farm supply stores should be located near the edge of a large city or in a

rural area, as these provide farmers with easy access to the store. Owners can choose

to lease or purchase a facility to house the store although it needs to contain adequate

room to house the many products and farm supplies they provide including large bags
of grain, feed, seed and fertilizer. All products don’t have to be housed on shelves for

customers to see and pick up. Instead, they can place orders at the counter for large

items, and a person can bring the items over from a warehouse or storage facility on the

property.

Wil Agri Supply owned by Mr. Willy Lamasan Agaha is the subject of this

research. It is established on September 9, 2011 and currently with three (3) stores

located in Isulan, Surallah and City of Koronadal. Wil Agri Supply offers farming

fertilizers, farming chemicals, agriculture supply and hardware. The proponent of this

study preferred Wil Agri Supply as subject-matter of this paper because the researcher

foresees probable growth. The researcher will formulate contemporary approach in

inventory control and accounts management to help the enterprise manage its day to

day operations.

Rationale of the Study

This study seeks to understand the crop cycle of agriculture in the area of Isulan,

Sultan Kudarat which is the primary market of Wil Agri Supply. To analyse the

behaviour of the supply and demand of this type of business taking in to account it

seasonality and how it will affect both the inventory, accounts receivable and accounts

payable of Wil Agri Supply. This research will design a strategy that would revamp the

existing inventory control system and accounts management of Wil Agri Supply to jive

with the cyclical trend of the agriculture industry. The strategies formulated would help

Wil Agri Supply manage its inventory by eliminating a percentage of expired products,

idle inventories and identify the ideal Economic Order Quantity (EOQ) and Safety
Stocks. Interrelated to inventory are the accounts receivable and accounts payable

accounts, where the proponent of this study wants to evaluate the strictness or liberality

of its collection to its customers and the terms provided by its supplier to Wil Agri

Supply.

Statement of the Problem

This study aims to examine and evaluate the implemented inventory control

system and receivable and payable management of Wil Agri Supply. Specifically, it aims

to:

1. Describe and understand the agriculture industry, in terms of supply and

demand for agricultural products in the area of Isulan, Sultan Kudarat;

2. Assess and evaluate the existing inventory control system of Wil Agri Supply

and its versatility with the seasonal demand in the locality.

3. Determine the implemented accounts receivable and accounts payable

management in matched with the trade cycle of the industry.

Scope and Limitations

The scope of this study focuses on the formulation of the suitable inventory

control system and accounts management of Wil Agri Supply located in Isulan, Sultan

Kudarat.

` Survey questionnaires and interview guide were used by the researcher as data

gathering tools. This would assist the researcher to perceive the procurement procedure

of Wil Agri Supply and how it is coherent to the needs of its market. The concentration
of this research is only to the extent of its inventory management that would also create

an effect on the receivable and payable accounts.

Research Methodology

Respondents

The respondents of this study were the Wil Agri Supply owner, employees,

customers and suppliers. The data gathering was done through set of survey

questionnaires, interview guides and review of current and historical data.

Locale of the Study

The study was conducted in the locality of Isulan, Sultan Kudarat. Isulan is

a landlocked municipality in the coastal province of Sultan Kudarat. It serves as the

provincial capital. The municipality has a land area of 541.25 square kilometers or

208.98 square miles which constitutes 10.22% of Sultan Kudarat's total area. Its

population as determined by the 2015 Census was 90,682. This represented 11.17% of

the total population of Sultan Kudarat province, or 2.00% of the overall population of

the SOCCSKSARGEN region.

Research Instrument

To permit the data gathering of the study, the researcher prepared two (2)

sets odf survey questionnaires

Data Gathering Procedure

Data Analysis

Review of Related Literature