An Analysis of the challenges of implementing an inventory management

information system: A case study of Bovichic Restaurant

A Project Proposal submitted

By

Umer Ameen Khan (33276)

To

Department of Business Administration

In partial fulfilment of

The requirement for the

Degree of

MASTER OF BUSINESS ADMINISTRATION

In

Supply Chain Management

This Project has been

Accepted by the faculty

FACULTY OF BUSINESS ADMINISTRATION

______________________________________________________

Dr. Sheheryar Malik (Advisor)

 An Analysis of the challenges of implementing an inventory management information
system

Table of Contents Page

1. Introduction ………………………………………………………….………………. 03

1.1. Background

1.2. Project research problem

1.3. Purpose of the research

1.4. Research questions

1.5. Significance of the project

2. Project related literature summary …………………………….…………………….06

3. Planned research methodology …….…………………….…………….…………….12

3.1 Method

3.2 Approach

3.3 Data Collection

3.4 Ethical considerations

3.5 Schedule for completion

References ……………………….………………………………..…………………….17

Appendix A –Survey Questions ……….……...………………………………………..19

Appendix B –Organizational Research consent form ……….……...........................…. 20

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 An Analysis of the challenges of implementing an inventory management information
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1 - Introduction

1.1 Background

The inception of BoviChic, primarily a fast food entity, dates back to September 1999

when it was launched on a cart at Sarena Mobile Market then Sarena Towers & Shopping

Mall located in North Nazimabad Karachi. The name is the outcome of fusion of initial

four alphabets of words “Bovine” and “Chicken” and has got no literal meanings. In the

beginning, BoviChic had been selling only fried chicken products. Now the menu entails

variety of chicken, beef, fish and vegetable products at five branches. The company’s

warehouse is situated at North Nazimabad Block “J” from where central purchasing of all

the articles/inventory takes place and then transfer to all the branches when necessary.

The Team BoviChic looks forward to close deals on prospective franchised outlets in

some prime business locations/centers in Karachi which are likely to become operational

by last quarter of current year. As a substantial number of inquiries from other major

cities have been made by interested parties, the management at present is also exploring

business potentials in that regard as well.(Malik, 2015)

1.2 Project Research Problem

As business grows different problems arises which require different solutions that needs

to be resolved at time for stability of the company and for future growth as well.Since

theBovichic is strengthening their roots in the restaurant industryand having multiple

branches around the city, the inventory begins to become too much of a handful.The

Bovichic is facing uncertainty in respect of deficit and surplus of finished good

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 An Analysis of the challenges of implementing an inventory management information
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productsinventory because manual ordering of inventory from branch-end and no proper

artificial intelligence system has been integrated so far that results in shortages at branch

level and even at back-end level. Obviously there is not only a one-way transfer of

inventory from the back-end but there happens internal transfer between the branches that

makes the process way too complex without any automated system. Inventory

management is an eminent part of any business entity because Ineffective inventory

system leads to customer loss and decrease in sales. The more an inventory management

is effective the more sales it will generate and also the performance of the company

boosts up. So there must be a systematic or automated inventory management system

managed by company’s personnel who have relevant knowledge in this regard.

(Mohamad et al, 2016)

1.3 Purpose of Research Project

The research purpose is toinvestigate the challenges of implementing an inventory in

Bovichic Restaurant and to analyze the issues with respect to managing the inventory

appropriately that will reduce uncertainty at back-end level and branch level and make

recommendations for Bovichic restaurant that the management must bring about change

in lights of this researchin order to improve their inventory management.

1.4 Research Questions

The below mentioned questions are needed to be addressed in this area of research that

has its own significance

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 An Analysis of the challenges of implementing an inventory management information
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1. What is the perception of employeesin respect of strengths and weaknesses of the

current inventory management at Bovichic Restaurant?

2. Doesthe management of Bovichic Restaurant feel that inventory managementis

relevant to them?

3. Why should Bovichic Restaurant adopt a strategy that focuses on inventory

management information system?

4. How can the Bovichic Restaurant benefit from implementing inventory

management information system?

1.5 Significance of the Study

Study comprises of different aspects of inventory management system which controls

inflow and out flow of inventory in order to reduce ambiguity.The systemwill help us in

making decisions in respect of tracking inventory levels, instructions, sales and deliveries

to the individual branch-ends. This study will give a comprehensive information of all the

elements that is necessary to increase the efficiency of the company so that all the

branches may procure necessary inventory of products and make it easier for the people

involve in transfer-in or transfer-out of the inventory.Capital invested in inventory

should be at optimum level it should neither excessive nor insufficient. The objective

of Inventory management is maintaining the inventory at optimum level. If company

invests more in inventory that results in increase in cost of funds and in this way, it

shrinks the profitability of the company. Inventories may be use in improper manner,

theft and increases the cost in terms of investment in inventory and increase in the

warehousing cost. In contrast, inadequate investment in inventory creates stock-out

problem that reduces sales and ultimately leads the company to customer loss. The

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 An Analysis of the challenges of implementing an inventory management information
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proper management of the inventory will exclude the stock-out problem that a company

otherwise would experience in improper inventory management.

2 - Project Related Literature Summary

Utilization and optimization of the company’s internal resources are concerned with the

traditional concept of supply chain management. Now the more importantly is to finding

out the relation between trading partners of the company. In Contrast, at this point in

time, supply chain is referred to as controlling, managing and improving the inflow

and/or outflowof information and materials used directly or indirectly in the process from

the point of origin to the point of consumption with the help of working together as

interconnected and interdependent companies (Monczka et al., 2015).

As supply chain management develops during the last couple of years, several methods

and approaches have been come into existence in this last decade. The approaches that

are used frequently includes material requirement planning (MRP), Just in time (JIT),

Total quality management and flexible manufacturing system (FMS) (Christopher, 2016).

A Fundamental factor of supply chain management is inventory management. It creates a

proper balance between availability of product, customer services and the inventory cost

(Ballou, 1998). The companies are very much careful about the efficient use of inventory

and that has been accepted massively that higher inventories result in wastage.

(Christopher, 2016)

2.1 Inventory

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 An Analysis of the challenges of implementing an inventory management information
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Inventory is considered as an asset part of a company’s balance sheet that brings

revenues. It is the most eminent asset of any business the inventory turnover is the

subsequent earnings for shareholders of the company and the primary source of

generating revenues. Work-in-progress, finished goods and raw materials are three

components of an inventory. Raw materials are the materials required to manufacture any

particular product that is available through company’s supplier. Work-in-progress

involves goods that are in the process of transformation during manufacturing of any

product that is being converted into final product whereas finished goods inventory is the

final product that has gone through all the processes of manufacturing and ready to sale.

There are three predetermined methods in order to valuing any type of inventory. The

first and most common method of inventory valuation is first-in-first-out (FIFO) states

that cost of goods that are sold depends on the material that is purchased earliest while

the inventory in-hand depends the material cost purchased the newest. The second

method of valuing inventory Is last-in-first-out (LIFO) that is absolutely opposite of FIFO

method and the third method of valuing inventory is weighted average approach that

depends on the average cost of materials purchased throughout the particular period

2.2 Inventory Management

Every company lists its own inventory and with the help of different ways, the company

manages its inventory but one thing that is common in every company that is the purpose

always remains same, that the inventory should be ready to use and it should be available

at minimum cost. The term inventory management refers to all the stages, which are

necessary for managing and developing the inventory levels starting from raw material

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 An Analysis of the challenges of implementing an inventory management information
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inventory to the finished good inventory, in that case sufficient inventory must always be

there and should be available at minimum cost that means the optimum quantity of stock

must be available. The objective of managing the inventory is to sustain and preserve

stock level of each product as per requirement of the company. On the other hand, the

significance of proper managing the inventory is that it is on the balance sheet of the

company in assets portion where it has increased importantly because many companies

have their own strategies by reducing their capital in fixed assets, warehouses, buildings,

equipment and machinery used directly or indirectly in business. (Mohamad et al, 2016)

Michael C. Bergerac, the former CEO of Revlon, Inc., noted that mistakes of

management mistake will end up in managing the inventory. Generally accepted

phenomenon is that the higher inventories are wasteful (Tayur et al., 2012).Reducing

excess inventory is a solution of many management problems and needs a close

surveillance upon it because it is very much associated to customer services. Companies

that sell or manufacture goods requires substantial investment in inventories. The most

prevalent controllable asset of a firms is inventory in manufacturing, retailing,

wholesaling, importing exporting industries. The two eminent purpose of inventory is it

acts in the production system as buffer zones, and probably can be seen as speculated

investment(Shen et al, 2016)

it is not rational for any business entity to possess a larger amount of inventory for a very

long time because it increases warehousing cost, spoiling of material and pilferage costs.

In contrast little inventory is also disastrous for businesses as well, since the inventory

should be managed properly with the management projections and proper strategies must

be made and followed accordingly.

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 An Analysis of the challenges of implementing an inventory management information
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Traditionally components that holds in work-in-process, finished goods and raw material

inventories were meant to be as a cushion to reduce the stock-out problem of items

needed. However, massive cushion in inventories lead to loss of valuable resources and

the hidden cost behind it generates. In order to get rid of this hidden cost, organizations

are moving towards inventory management. Inventory reduction with the help of

inventory management has been become crucial since 1980s. In that case just-in-time

(JIT) systems were introduced that states the material or parts should be purchased or

manufactured on just-in-time bases. The just-in-time approach stood against the hidden

cost of inventories and reduced substantial cost by reducing inventories and many

companies start implementing just-in-time approaches that results in reducing excess

inventories.(Chen et al., 2005)

Chen et al. (2005) noted that among American companies, there is huge emphasis on

inventories and the law was imposed that there will be punishment for those who did not

cut of their inventories so far. That is just because of substantial market share increasing

of Japanese companies in multiple industries including automobile industry during 1970s.

Nevertheless, managing of raw material properly is eminent for construction companies

that reduces cost and timeof project.On the basis of historical data, it indicates that

account for materials 49% to 60% of cost of the projectand 80% controlling schedule is

present (Ibn-Homaid, 2002). It is further observed that most of the projects delay just

because of single frequent cause that is non-availability of required item in a particular

firm (Ghalayini et al., 1997) and the project halt that results in waste of time and increase

in labor cost or other hidden cost related to that particular industry. To conclude, there

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 An Analysis of the challenges of implementing an inventory management information
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must be minimal inventory possible for production side but that should not become the

reason for non-availability of that particular material.

2.3 Inventory Management and Performance

As described before, reduction in inventory is the part of inventory management, in case

of JIT, specially where materials are produced or purchased to be used at each stage of

manufacturing. Many studies promote JIT and concluded that a very positive relationship

between just-in-time (JIT) inventory management system and the company’s

performance. Fullerton et al. (2003) noted that implementation of more advanced JIT

inventory management system has an edge over competitors who don’t have such system

in terms of cost savings and also found that there is a direct relationship between

company’s profitability and how much company reduces its production techniques. The

findings of such authors depict that implementing of JIT techniques would be more

profitable for the company

In addition to that there found another study that is consistent with that and Eroglu and

Hofer (2011) concludedthere exist a direct relation between inventory management and

company’s performance.An Empirical Leanness indicator (ELI) was used in order to

measure an inventory management. The study revealed that the leanness of inventory is

the optimal tool for inventory management. Inventory that results in surplusthat needs to

be minimized and it became other name for best inventory management. The study in the

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manufacturing companies of US revealed that leanness directly associated with profit

margins. As per Eroglu and Hofer (2011), companies which are leaner that the average of

industry usually experience higher returns.

2.4 Automation in Inventory Management

Inventory management is the crucial part of any business and as business maximizes that

part needs to be automated in order to reduce the ambiguity and uncertainty of any

business. Consistence with that statement, Awaya et al(2005) noted that inventory of

materials or finished goods products must be maintained and controlled properly with the

appropriate tools that is far away without having comprehensive inventory management

system that aid in reducing stock-out problems and also minimizes the inventory levels

that is beneficial for the company’s performance and gives higher return without any

wastage, pilferage and theft of any type of inventory. Artima, an inventory introduced in

late 2000s that is desktop based application associated with the order-entry-system. Some

of the inventory management software includes Quick Books, Dear Inventory, SIMMs,

TRXio, etc.

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 An Analysis of the challenges of implementing an inventory management information
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3. Planned Research Methodology

3.1 Methodology

3.1.1 Single case study

The comprises of single case study as methodology and it focuses on implementing of

inventory management information system in Bovichic Restaurant.Barzelay (1993) stated

that the single case-study is an important method of research in respect of social sciences

for analyzing and solving different problems.Examination of critical concerns at Bovichic

Restaurant depict it as single case study – that what can we improve in managing

inventory. Inventory management strategies is the primary focus, and analyzing the

current system of controlling, reducing inventory cost, and their application across the

organization. The work experience at Bovichic Restaurant and review of literature will be

used eminently to analyze different problems and themes and formation of qualitative

research. The primary and secondary data will be collected to answer the research

questions qualitatively.Primary data is the data used for current research at hand and new

data contributes to the existing store of knowledge whereas secondary data is the data

which has already been collected for maybe different purpose that becomes valuable in

our research (Hox&Boeije, 2005)

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 An Analysis of the challenges of implementing an inventory management information
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3.2 Approach

Research project consist of inductive approach where the implementation of inventory

management information system strategy of Bovichic Restaurant will be critically

analyzed and compared with the literature.

3.3 Data collection

As discussed that the research is exploratory in naturethat ofimplementation of inventory

management information system, Qualitative data will be gathered. Secondary data will

be utilized too in order to compare practices from literature. Secondary data decreases

cost, burden over student and a very valuable method of research for students. (Szabo

&Strang, 1997)

3.3.1 Primary Data Collection Method

A survey questionnaire with existing employeesof Bovichic Restaurant will be the

fundamental method of collecting data. For this data collection up to 20 employees of

Bovichic restaurant are selected. These employees will play a vital role in case study by

answering the questions that will be going to ask them through research instrument and

therefore the data will only be collected to those employees that are currently working

with Bovichicrestaurant and affected by the same as well.

These survey questionnaires are the very important part of the research, and to make the

conceptual framework, the qualitative data will be used. The questionnaire will be

properly filled by the respondent of Bovichic restaurant that will help us analyzing the

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issues in the organization in respect of inventory management system. Lastly, Microsoft

excel and thematic analysis for qualitative data will be conducted throughout this

research.

3.3.1.1 NonRandom sample

Survey questions will give you an idea of current inventory management information

system. The non-random sampling approach will be conducted in order to select the

respondent, and will be asking them to fill out the questionnaire. Respondentsshall be

chosen on non-random bases.Non-Random Sample technique is used when there is

biasness between the samples and the sample are taken as a subset of total population

with any conditions(Goodman & Blum, 1996)

3.3.2 Analysis

SWOT analysis and Benchmarking will be analyzed through survey questions

3.3.2.1 SWOT Analysis

SWOT analysis was primarily used and developed its framework at the institute named

Standard Research Institute by Albert Humphrey in the 1960s and 1970s. Stakeholders of

the research get pertinent recommendation with the help of SWOT analysis. It is the very

basic and simple technique of evaluating upcoming opportunities and threats through

strengths and weaknesses (Singh, 2010)

3.3.2.2 Benchmarking

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 An Analysis of the challenges of implementing an inventory management information
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Benchmarking is a method of purifying performance by familiarizing, classifying and

understanding the practice internally or externally in an organization. To find out the gaps

between inventory management and what is the benchmark for maintaining the inventory

management information system (Cooper and Kleinschmidt, 1995)

Appendix <A>depicts the document of proposed questions.

3.4 Ethical considerations

As per subject learning material, the project is fulfilling all the ethical values and there

will be no violation of ethical beliefs. Respondents will be ethically treated and potential

discomfort will be eliminated. Consent of providing information will be demanded

primarily from the respondent using individual consent form of Iqra University, they

have fully authority and to withdraw from being a respondent and/or answering any of

the question and then those respondents will not be the part of this research. Any of the

data collected from the respondent will be remain highly confidential and will not be

disclosed to anyone at any cost or at any circumstances other than using in this research

project.

Appendix <B> shows the consent form of organization that Bovichic Restaurant are fully

agreed and willing to conduct this research and the management of restaurant is agreed to

participate in completion of this research.

3.5 Completion Schedule

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The research project will be expectedly completed within three months right after

approval of the research proposal. Following are some important milestones that needs to

be exposed

Project proposal Approval will be received by 1st October 2017

Commencement of Literature review will be from2ndOctober 2017

Commencement of Data collection will be from 7th October 2017

Concludes data collection by 17th October 2017

Concludes Literature Review by20th October 2017

Commencement of First Draft will be from 1stNovember 2017

Draft Project Report submissionbefore 13th November-17

Project report (Final) submission before 15th Dec 2017

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References

Awaya, T., OHTAKI, K. I., YAMADA, T., YAMAMOTO, K., MIYOSHI, T.,

ITAGAKI, Y. I., ... & MATSUBARA, K. (2005). Automation in drug inventory

management saves personnel time and budget. Yakugakuzasshi, 125(5), 427-432.

Ballou, R. H. (1998). Business logistics management (4th ed.). London: Prentice-Hall.

Barzelay, M. (1993). The single case study as intellectually ambitious inquiry. Journal of public

administration research and theory, 3(3), 305-318.

bin Syed, S. J. A. N., Mohamad, N. N. S., Rahman, N. A. A., &Suhaimi, R. D. S. R.

(2016). A Study on Relationship between Inventory Management and Company

Performance: A Case Study of Textile Chain Store. Journal of Advanced Management

Science Vol, 4(4).

Chen, H., Frank, M. Z., & Wu, O. Q. (2005). What actually happened to the inventories

of American companies between 1981 and 2000?. Management science, 51(7), 1015-

1031.

Christopher, M. (2016). Logistics & supply chain management. Pearson UK.

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 An Analysis of the challenges of implementing an inventory management information
system

Cooper, R. G., & Kleinschmidt, E. J. (1995). Benchmarking the firm's critical success factors in

new product development. Journal of product innovation management, 12(5), 374-391.

Eroglu, C., & Hofer, C. (2011). Lean, leaner, too lean? The inventory-performance link

revisited. Journal of Operations Management, 29(4), 356-369.

Fullerton, R. R., McWatters, C. S., &Fawson, C. (2003). An examination of the

relationships between JIT and financial performance. Journal of Operations

Management, 21(4), 383-404.

Ghalayini, A. M., Noble, J. S., & Crowe, T. J. (1997). An integrated dynamic

performance measurement system for improving manufacturing

competitiveness. International Journal of production economics, 48(3), 207-225.

Goodman, J. S., & Blum, T. C. (1996). Assessing the non-random sampling effects of subject

attrition in longitudinal research. Journal of Management, 22(4), 627-652.

Hox, J. J., &Boeije, H. R. (2005). Data collection, primary versus secondary.

Ibn-Homaid, N. T. (2002). A comparative evaluation of construction and manufacturing

materials management. International Journal of Project Management, 20(4), 263-270.

Malik, W., (2015) Company History.

McIntyre, G. A. (1952). A method for unbiased selective sampling, using ranked sets. Australian

Journal of Agricultural Research, 3(4), 385-390.

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L.

(2015). Purchasing and supply chain management. Cengage Learning.

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 An Analysis of the challenges of implementing an inventory management information
system

Shen, H., Deng, Q., Lao, R., & Wu, S. (2016). A Case Study of Inventory Management in

a Manufacturing Company in China. Nang Yan Business Journal, 5(1), 20-40.

Szabo, V., &Strang, V. R. (1997). Secondary analysis of qualitative data. Advances in nursing

science, 20(2), 66-74.

Tayur, S., Ganeshan, R., & Magazine, M. (Eds.). (2012). Quantitative models for supply

chain management (17). Springer Science and Business Media.

Appendix <A>

Name: ____________________________________ Gender: Male Female

Age: 18-25 26-35 36-45 Above 46

Work Experience
0-3 4-8 9-15 Above 15
(in years)

1 = Strongly Disagree,
2=Disagree,
Strongly Disagree – Strongly Agree (Five point Likert-
3 = Uncertain, 4
Scale)
= Agree, 5 = Strongly
Agree
The current inventory management system helps in extensive
1 2 3 4 5
decision making

I do not face problems while managing inventories 1 2 3 4 5

The current inventory management system is user friendly 1 2 3 4 5

I am satisfied with current inventory management system 1 2 3 4 5

Inventory management information system is important to me 1 2 3 4 5

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 An Analysis of the challenges of implementing an inventory management information
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Inventory management information system is valuable to me 1 2 3 4 5

Inventory control and theft control will be reduced by
implementing extensive inventory management information 1 2 3 4 5
system

Current inventory management system is time consuming 1 2 3 4 5

Current inventory management system is less efficient 1 2 3 4 5

Theft and other wastages incur due to improper management

1 2 3 4 5
of inventory
New Inventory management information system will increase
1 2 3 4 5
efficiency
New inventory management information system will improve
1 2 3 4 5
certainty

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Appendix <B>

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