Quality Form: Dr. Cesar A. Villariba Research and Knowledge Management Institute

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MANUEL S. ENVERGA UNIVERSITY FOUNDATION

Lucena City Document Title: Undergraduate Research Final Report
An Autonomous University Page No.: Page 1 of 79
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DR. CESAR A. VILLARIBA RESEARCH AND Effectivity Date: August 2017
KNOWLEDGE MANAGEMENT INSTITUTE Prepared by: DCAVRKMI
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QUALITY FORM Approved by: President
Inventory Management System for a Japan Surplus Retailer
An Undergraduate Thesis
Presented to the Faculty of the College of Business and Accountancy
Manuel S. Enverga University Foundation
Lucena City
In Partial Fulfillment of the Requirements
for the Degree Bachelor of Science in Business Administration major in Management
Accounting
by
Kathlene A. Jao
Irish Anne V. Braga
Kyle Rayner A. Lopez
Paul John A. Arena
Royce Daniel A. Anareta

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April 26, 2019
Approval Sheet
This thesis paper hereto entitled:
INVENTORY MANAGEMENT SYSTEM FOR JAPAN SURPLUS RETAILER

Prepared and submitted by KATHLENE A. JAO, PAUL JOHN A. ARENA, KYLE RAYNER A.
LOPEZ, ROYCE DANIEL A. ANARETA and IRISH ANNE V. BRAGA in partial fulfillment of the
requirements for the degree of Bachelor of Science in Business Administration major in
MANAGEMENT ACCOUNTING has been examined and recommended for acceptance and
approval for Oral Examination.
CARMEN A. ALDOVINO
Adviser
Approved by the Committee on Oral Examination with grade of _________, April 26, 2019
CARLOS JAYRON A. REMIENDO

Chairperson
RALYN E. BERMUDEZ ASHLEY D. PANGILIGAN

Member Member
Accepted in partial fulfillment of the requirement for the degree Bachelor of Science in Business
Administration major in MANAGEMENT ACCOUNTING.
CATHERINE D. LIMJUCO, MBA, CPA

Acting Dean, College of Business and Accountancy
Acknowledgement
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This research would not be possible without the effort, enthusiasm, and perseverance of
its members. Thus, this accomplishment would not be possible if the researchers was not granted
of their desired support. The researchers would like to express their sincerest gratitude to the
persons behind them through the course of this research.
To Catherine D. Limjuco CPA, MBA., College Dean, thank you for all the
encouragement, insightful clarifications and loving support.
To Carmen A. Aldovino, the research adviser, for guiding us and sharing with us your
expertise concerning our research.
To Jim Acuzar, Ralyn Bermudez, Love Guerra, Maria Lucille Pedegloria, Ashley
Pangiligan, Carlos Jayron Remiendo and Grace Meg Anne Villaluz, our professors and
consultants, for answering our questions and giving suggestions to finish this study.
To Audrey Abulencia. Our dear friend who helped us with revising the study.
To Mr. John A. Moreno, Owner of King Louis Japan Surplus, for warmly accommodating
us and guiding us about the nature of the business.
To the faculty of Business and Accountancy for giving us free time to finish our study.
To the researcher’s parents and siblings, for their constant financial and moral support
given.
To friends particularly our classmates, thank you for the never-ending motivation in
defying all odds and problems encountered through this study.

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To all the concerned persons, who inspired the researchers in achieving this research study, thank
you for trusting us.
To our Almighty God for guiding us throughout this whole research. His guidance helped
us in all the time of our research and writing of this manuscript.
THE RESEARCHERS
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Dedication
To Our Almighty God.
To my family,
To the people I love and care for,
To the 32’s, team cw, seekaynum and mudslap,
To my DotA 2, CSGO, RAN GS, The forest family.
To my dogs who made me happy.
To my groupmates,
To my wuffenloaf...
-Kath
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Dedication
I dedicate this to my Parents and relatives who love and endlessly supporting me. Papa and
Mama thank you for supporting and giving me the strength that I need to face the daily trials in
life for me to do better while I’m reaching my dream.
To my thesis mates, Rd, Kyle, Kath and Irish, thank you for such an unforgettable time of our
college days. For all the fun and desperate times of my life that makes me realize the important
of true friends.
I also want to thank all the professor who taught me everything they know for me to be ready in
the real world after graduation and for guiding me to be in the right path of life.
And last but not the least, to the God Almighty, thank you for giving me such a wonderful
parents, for giving me strength in everything I do and guiding me always.
-PAUL JOHN A. ARENA

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Dedication
To my all-knowing, all-powerful, and all-loving God,
I couldn’t have done this research work without Your aid and guidance.
I thank and glorify You, oh Heavenly Father, that you have always been there for me, to help
and give me peace and comfort during my research work.
To my Mom and Dad,
Who sends their utmost support and love to finish my study I dedicate this thesis to you.
To my fellow friends,
May you find your worth not on the things that this world can offer
But may you find and seek that genuine kind of happiness that could only be found in
the hands of our Creator.
Lopez, K., 2019

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Dedication
I dedicate this study to my family, especially to my mother who never gave up on me and
supported me all throughout.
To my sisters of KAPPA DELTA OMEGA Sorority, thank you encouraging and trusting me.
To my friends, UNDB, my MCC Family and to my special someone thank you for supporting me
always.
And to my research buddies: Kath, Pj, Kyle and Rd, thank you. Kaya natin to.
-Ayish
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Table of Contents
Page No.
Title Page 1
Approval Sheet 2
Acknowledgement 3
Dedication 5
Table of Contents 9
Abstract 11
Background 12
Purpose of the Research 14
Theoretical Framework 15
Literature Survey 17
Significance of the Study 29
Statement of Desired Outcomes 30
Major Final Output 30
Target Beneficiaries 31
Definition of terms 31
Scope and Limitation of the Study 33
Description Method 34
Research Design 34
Research Instrument 35
Data Gathering Procedure 35

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Results and Discussions 39
Data Matrix 39
Business Characteristics 40
Current Existing Inventory Practices 42
Current Issues and Challenges encountered 43
Enhanced Inventory Management System 46
Conclusions 61
Recommendations 63
Appendices 65
Guide Questions 65
Series of Interview 66
Location of Business 71
Business Forms 72
Photo Exhibit 74
References 76
Curriculum Vitae 78
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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
This study aims to assess the current inventory management system of a Japan Surplus retailer in
Lucena City. Specifically, the researcher’s main focus of study is to evaluate the company’s
inventory management system by identifying the current practices and as well as the current
issues and challenges brought up by the nature of the business. The researchers will gather
information by using these four parameters namely by the: recording, classifying, measuring and
dispatching of the inventory. The researchers used these data gathering techniques such as
observation, series of interview and visitation for the collection of data. The respondents are
composed of the two employees and the owner. The researchers used a validated questionnaire fit
for the collection of data in accordance with the objectives of this study. A SWOT analysis is
performed for the determination of some of the issues and challenges encountered by the
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company. The study is only limited to the management itself. Thus, through the use of the data
gathering techniques the researchers gathered enough data to finish the study. The main output of
this study to recommend the management an enhanced inventory management system equipped
with the step by step procedures.
Background
Inventory is a highly-important in a merchandising business. It is even one of the core
elements protected through internal control. With this, the researchers believe that it is vital to
look into means on how to improve inventory management system among merchandising
businesses.
Afolabi (2017) exemplified that inventory management is bound by the efficiency of
product storage. Among the laid down principles for inventory management includes moving
load, delivery speed, service quality, operation costs, the usage of facilities and energy saving.
Mpwanya (2005) even shared that it is indeed that every management problem is a
decision problem; something that people in the organization, especially those charged with
governance need to ponder up. An effective inventory management system aids them to have
better management decision for it boosts the business’ efficiency and productivity. To note, the
allocation of resource, considering all other constraints present, is common to each and every
business. This call for effective and efficient resource allocation is necessary for the actualization
of the business objectives.
The main objective of inventory management is to have inventories at the lowest possible
cost with uninterrupted supplies for ongoing operations. Along with this, inventory control
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requires the organization of the availability of items to the customers. Good inventory
management and control facilitates positive correlation among sales, pricing, and customer
retention. Of course, this positive correlation is achieved through the management policies about
inventory.
For example, most stores implement a periodic inventory system in which inventory are
recorded and classified daily. Periodic inventory system is common to stores nowadays but using
this method can also bring about some predicaments. Lohrey (n.d.) identified that the most
common problem regarding periodic inventory system are the misplacement of items, lack of
system optimization and its inaccuracy.
To drill down the factors the predicament cited, the researchers had selected a retailing
business (King Louise Japan Surplus). The management of the aforementioned surplus store
experienced difficulties with its current inventory system. It has been operating since October
2013 and has been trading wide variety of goods, from household commodities to heavy duty
machineries. Furthermore, they use a weighted average system wherein items of the same kind
are measured together to arrive at inventory cost. In terms of inventory control, the surplus store
is supervised by the store owner, together with two employees. The prior mentioned personnel
are tasked with receiving, checking, recording, and dispatching of goods. Due to limited
personnel, it is identified that problems with authority and responsibility arise. Moreover,
definite task delegation among the employees yields unreliable inventory records for the surplus
store.
Record keeping is very vital in businesses for these records can be frameworks of what
can be improved in an organization. It can serve as a critical guide for further development.
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Putting in the context of the surplus store, loss of items and item theft become unrecorded.
Proper documentation is also limited. With the limited documentation, the business also
experiences the incomplete classification of goods as well as frequent misplacement of items.
Furthermore, the business is also having a problem with inventory valuation and dispatching.
The problems identified in the scope of the surplus store’s operations have rippled effects
upon the profitability of the surplus store. The assessment of whether the company gains profit or
become unaware of incurring losses is a puzzle due to the lack of proper documentation, and
inconsistencies and disparities with inventory control. This present predicaments also threaten
the quality of inventory management of the business. Thus, the researchers believe that it is of
high essence to conduct this study. Through this study, the researchers, as Management
Accounting students, can look into means of evaluating inventory management system of an
actual business operation and more importantly, can come up with workable suggestions using
the COSO Framework that can enhance the inventory management system of a Japan surplus
store.
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Purpose of the Research
This research aimed to assess the inventory management system of business.
Specifically, this sought to attain the following objectives:
1. To describe the business characteristic of the entity as to:
1.1. Nature of business;
1.2. Length of business operation;
1.3. Inventory class;
1.4. Facilities and warehouse;
2. To determine the current inventory procedure along with:
2.1. Recording;
2.2. Classification of inventory;
2.3. Measurement of inventory;
2.4. Dispatching;
3. 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;
4. To prepare an enhanced inventory management system.
Theoretical Framework
This study shall use the COSO model as its basis of obtaining understanding and coming
up of workable suggestions for the surplus store. COSO model is a product of the collaboration
of the Committee of Sponsoring Organization (COSO), Crowe and CommonSpirit Health. It is
further defined as Internal Control – Integrated Framework and is aimed at providing
implementation guidance to fortify overall governance and internal control structures. It is
likewise deemed that effective internal control is vital for all stakeholders as specified in the
primer on COSO by Schandl et. al (2019).
The framework laid down five integrated components of internal control: control
environment, risk assessment, control activities, information and communication, and monitoring
activities. These five components are further defined as follows:
1. Control Environment – entails a set of standards, processes and structures that can be
foundations for carrying out the internal control across the organization. As part of the
control environment, strategic objectives are vital for it provide reliable financial
reporting to internal and external stakeholders. Efficient and effective operations, along
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with compliance with applicable laws and regulations, and safeguard of assets are among
the key factors delineating control environment.
2. Risk Assessment – is used to determine how risks are to be management. With risk
assessment, management is expected to consider the impact and effects of possible
changes in the environment and to make actions to address these effects in order to
achieve the organizational objectives.
3. Control Activities – are the actions enacted by the management in order to counter risks
and to propel success for the organizational objectives. It is generally expressed through
policies, procedures and standards that can be preventive in nature and may be performed
all over the levels of the organization.
4. Information and Communication – works hand-in-hand to support the internal control
components. Information, to be exact, collated by the management through internal and
external sources while Communication is the avenue used to disseminate the vital
information.
5. Monitoring Activities- are the recurring actions undertaken by the management to
ensure that each components of internal control are present and functioning around their
products.
In applying the framework, the researchers shall identify these factors through the
constant observation and interview among the management of the surplus store.
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Literature Survey
Inventory, Banaag, F., Ducut, R. (2017) Inventory ManagementxAnd
Control. They depended on the GenerallyxAcceptedxAccounting Principles that
expressedxanxinventory 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,xworkxin process, and completedxmerchandise. The definition
given by Banaag will serve as a way for the familiarization of the management for
what inventoryxstands for.
An inventoryxsystem givesxthe authoritativexstructure and thexworking
strategiesxfor keeping up and controlling merchandise to be supplied. The system
is in charge of orderingxand receivingxthe receiptxof merchandise: timing the
order placement and monitoring what has beenxrequested, how much, and from
whom.
A typicalxarrangement of inventoryxexchanges includes getting items,
moving them to a quality reviewxarea, checkingxthem, 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 ofxexchanges, any of whichxcouldxbe made in blunder, however it
additionally includes a considerable number "contacts" of the inventory,

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expandingxthe chances of itemxharm. This discusses the typicalxarrangement of
inventory to thexmanagementxfor them to be aware of.
There are additional variances sought after where in a supply ofxinventory
on hand isxinsured, you don't generallyxrealize the amount you arexprobably
going to requirexat whicheverxschedule yet at the samextime there is a need to
fulfillxclient’s desires or productionxon schedule. Therexisxadditionally a
hiddenxinstability of supply thus inventory must shield you from untrustworthy
providersxwhen 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 strategicxdistance from the effect of costxinflation you should
purchasexamounts of inventory at properxoccasions which is calledxPrice
Protestation. In the event that you purchase a biggerxamount of a thingxless much
of the time the orderingxcosts are not as much as purchasing in smallerxamounts
again and again accordingly bringing downxordering costs. This lets the
management know the purpose of inventory.
Inventoryxaccuracy alludes to the inventoryxrecords and actualxphysical
total for the business to guarantee precision to computexthe inventoryxregularly
and coordinate it against the records. Cyclextallying is a physicalxinventory
takingxmethod in which inventory is computed as required ratherxthan
periodically.
Inventoryxcosts has a bigxrole in businessxwhich the management need to
be mindful of. Inventoryxincorporates costs like moneyxand space toxmaintain or

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purchase an inventory. Additionally, there are costs for labor toxreceive, check
quality, putxaway, retrieve, select, pack, ship andxaccount for to keep inventory as
sound as possible under thexcircumstances. Furthermore, ifxmerchandise
deteriorate, get harmed or be rendered obsolete, and stolen the business will be
consideredxresponsible.
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 explicitxissue, these costsxought to be taken in withxthought
and will impact the inventory size. Holding costsxincorporates thexexpenses 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 generalxsupport low inventory levels and regularxreplenishment. In setup
or productionxchange costs you make every item extraordinaryxby acquiring the
vital materials, organizing required papers, properly charging time and materials,
and moving out the past load of material. Ordering costs allude toxadministrative
and clericalxexpenses to set up the purchasexor production order. Ordering costs
incorporatesxeach and every bit ofxinformation, for example, tallyingxthings and
computing request amounts. Shortagexcost is a request forxwhat thing will be
anticipated until it is renewedxor dropped. At the point when thexinterest isn't met
and the request isxdropped, this is alluded to as a stock out. A backorderxis the
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pointxat whichxthe request is held andxfilled at a later date when the stock for the
thing isxreplenished.
Periodic and perpetual system are the twoxchief frameworks to decide
stockxamounts closexby. This definitionxwill introduce twoxof the systems that
the managementxwill encounter inxbusinesses.
To be able to distinguishxperiodic and perpetualxsystem from each other.
The periodicxsystemxrequires a physicalxcheck of products available toward the
finish of every period. A costxbasis is later connectedxto determine anxinventory
value. It is ideallyxutilized byxorganizations as it is straightforwardxandxrequires
records and modifications are generally toward the finish of the period despite the
fact that it does not havexplanning and control benefits of the perpetual system.
The perpetualxsystem requires persistent chronicle of receipt and payment
for each thing of inventory. It is the mostxfunctional system for hugexassembling
and merchandisingxcompanies to ensure sufficientxsupplies are close by for
creation or deal, and to limit dangers of machine shut-downs and client
grievances. With this meaning, the managementxwill bexfamiliar with the
perpetualxsystem and be able to distinguishxperiodic from perpetual.
The managementxmust be informed of the principlexcapacity of inventory
managementxwhich is to keep a meticulousxrecord of each new or returned item

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as it moves in or leaves a stockroomxor purposexfor sale. It monitorsxindividual
propertyxof the business.
Last-in, First-out (LIFO) – Inventoryxvaluation presumes that the newest
boughtxmerchandise are the first to bexutilized or sold paying little heed to the
real planning of their utilization or sale.
Average Cost Method – Inventoryxvaluation recognizesxthe estimation of
inventoryxand cost of merchandisexsold by figuring an averagexunit cost for all
productsxaccessible for purchasexthroughout a givenxtimeframe. Thisxvaluation
strategyxpresumes that endingxinventoryxcomprises of all productsxaccessible
for purchase.
Manualxinventory systems are believedxto 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.
Internalxcontrols are the mechanisms, rules, andxprocedures 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

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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 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
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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
a 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.
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 it.It 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
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policyholder is provided with. This shows the purpose of a delivery receipt as
they use it in the business.
The COSO Framework wasxintended to assistxestablishments to set up,
analyse and improvextheir internal control. The significance of Internal Control in
the Operations and Financial Reporting of a business can't be over-stressed as the
presence or the absence of the process decidesxthe quality of output created in the
FinancialxStatements. Educatedxdecision making can now bexdependedxupon a
presentxand working Internal Control process as thexamounts introducedxin
FinancialxStatements are precisexwhich givesxclients a reasonablexassurance.
An organizationxmay wind up holding stock that has anxunsure future;
which means thexorganization does not know whether or when it will sell. Out of
date quality, over supply, defects, significant value decays, and similar issues can
add to vulnerability about the "realization" (conversion to money) for goods. In
this manner, bookkeepers assess stock and utilize lower of cost or net realizable
value considerations. This essentially implies if stock is carried on the
bookkeeping records at more prominent than its net realizable value (NRV), a
re/cord from the recorded expense to the lower NRV would be made. Generally,
the Inventory record would be credited, and a Loss for Decline in NRV would be
the counterbalancing debit. This debit would be accounted for in the income
statement as a charge against (decrease in) pay.

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The weighted average method, which is basically used to assign the
average cost of production to a given item, is most regularly utilized when stocks
are intertwined to the point that it ends up hard to allot a specific cost to an
individual good. This is as often as possible when the stocks being referred to are
indistinguishable from each other. Moreover, this strategy expects a store to sell
the majority of its inventories simultaneously.
To utilize the weighted average model, one divides the expense of the
merchandise that are up for sale by the quantity of those units still on the shelf.
This estimation yields the weighted average cost per unit—a figure that would
then be able to be utilized to assign an expense to both ending inventory and cost
of goods sold.
SWOT (strengths, weaknesses, opportunities, and threats) analysis is a
frameworkxused to assess an organization's competitive position and to create
strategic planning. SWOT analysis analyses interior and outer variables, just as
present and future potential. A SWOT analysis is intended to encourage a
reasonable, fact based, information driven look at the qualities and shortcomings
of an association, its drives, or an industry. One of the primary phases of any
business is Inventory Management. A good system can provide transparency and
efficiency to a complex system by improving the inventory management. It can
also add accuracy, ability, data simplification and process recording. For entities
with constant flow of incoming and outgoing stock it is very important to have a
good inventory management system. (Zignuts Technolab, 2018)

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Guide for Making an Inventory Management System
In order to create a sound and efficientxinventory management system,
an entityxmust have these importantxelements regardingxinventory which are:
location names, labels, item description, item numbers, unit of measurement,
physicalxcount, inventory sheet to track all inventory activity, and employee
management.
The locationxnames and labels of eachxproduct need to be well
organized, easy to read andxunambiguous when creating an inventory system. In
order to helpxemployees, workxfaster, labels need to bexeasy to read and clearly
statexwhich location they arexreferring to. All products should have well-defined
descriptions and uniquexitem numbers, short andxunmistakable. Well created
and consistentxunits ofxmeasures should bexused to make stockxlevels, shipping
quantities, and orderingxquantities easier to understand. Once labeledxlocations,
properxdescriptions, created itemxnumbers and consistentxunits of measurement
are available, it will be much easier, faster and betterxorganized toxobtain a good
stockxlevel count. Finally, in order to make thexsystemxefficient, the creation of
policiesxand the trainingxof employees on the entirexinventory system will help
owners / managers to ensure that no errors are recorded.
Effectivexinventoryxmanagement helps to reduce costs that keep accounts
and finances under control. Inventoryxmanagement can help achievexinventory
tracking, where the systemxwill help maintainxinventory trackingxand provide a

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centralizedxview ofxstock across salesxchannels; costxcontrol, delivery
improvement, planningxand forecastingxmanagement. (Vinculum, 2016)
Basic Inventory System for SMEs
Settingxup stock andxsupplier information in a reliablexandxaccessible
systemxis the first step toxorganizing a smallxbusiness inventoryxsystem. For
each item, the variousxinformation to be tracked is: productxname, item number /
code, item shortxdescription, product class / category, cost, retail price, selling
price, size, vendor, supplier, reorderxquantity and shippingxdetails. In order to
quicklyxaccessxprovider contact information and paymentxterms, there is also a
needxto record keyxvendor data in the inventoryxmanagement system.
Creatingxand submittingxaccurate purchase orders is the next thing.
Purchasingxorders are the easiestxway to managexinventory purchases, toxtrack
stockxpurchasesxefficiently, from orderingto receivingxshipment, to paying the
bill. Anotherxkey aspectxof smallxbusiness inventoryxmanagement is to have a
method to receivexinventory shipments, to ensure thatxboxes are receivedxand
unpackedxtogether, all receivedxitems are accuratelyxcounted and checked for
accuracyxagainst purchasexorder. This could lead to stockxshortages,xbackorders,
and ultimatelyxlosses if there is an errorxduringxorderxentry. In addition, the
inventoryxneeds to bextagged and labeledxto help trackxinventionsxclosely and
speed up the checkoutxprocess. During thexstock receiptxprocess, a goodxtime to

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labelxinventory is because itxensures that the task is notxoverlooked and prevents
unlabeledxstock.
A goodxmanagementxsystem for smallxbusinessxinventories also records
in detailxevery order, includingxeveryxitem sold and the remainingxinventory.
You willxrecord ordersxby hand with a manualxsystem, then adjust thexinventory
manuallyxfor each item sold. This can be handledxmanually by a smallxoperation
as long as inventoryxreductions are regularlyxtracked, it can be daily, monthly.
Physicalxcounts can reducexinventory issuesxof all kinds. There are two
primaryxtypes of inventoryxcounts that mostxcompanies use annualxinventory
countsxthat countxitems for incomextax purposesxat thexend ofxeach year; and
cyclexcounts, which are periodicxspot countsxthat canxeasily fit intoxeveryday
activities. Even thexbest systemxand processxcan have faults. The firstxstep to
eliminatexthesexflaws is toxinvestigate the countxdiscrepancy where it can be an
actualxloss, such as theftxof employees, unreportedxdamaged goods, or stock
recordedxas receivedxbut never actuallyxarrived or incorrectlyxlabeled.
Whateverxmethod of inventoryxstorage, the storedxinventoryxneeds to be
wellxorganized, clearlyxlabeled and accessiblexfor counting and inventory.(Krista
Fabregas, 2017)
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Further, this study would also help individuals in the fields:
1. Owner
It will improve the present inventory management system of the
business by accurately maintaining records and provide the business an
assessed inventory management system by addressing and solving the
issues of their old inventory system. It will also give the management a
better control over its inventory as records are maintained with
accuracy.
2. Employees
It will help the employees to be more productive by obliging and giving
them the responsibility to record the transactions. It will also help the
employees to be more knowledgeable about the transaction process of
the business.
3. Clients
The service provided by the company will be better, because of the new
system. With the new system it makes it faster and easier to search the
item needed by a customer. It can also make the process of knowing the
product is available. And because of this the customers or client will
benefit from it.
4. Readers
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It will serve as a reference for the readers, especially to those who will
conduct the same kind of study. It will also give the reader a better
understanding about inventory management system of a merchandising
business and open the mind on the importance of the designed
inventory management system in the business.
5. Researchers
The study will help the researchers have further knowledge about
inventory management system as this study provides an additional
resource. It will also serve as a great experience and preparation to the
researcher’s future career as it presents common issues of inventory
management systems and addresses them with solutions. The
researchers will fully visualize and know how inventory management
system works as this study meticulously discusses the inventory
management system.
Statement of Desired Outcomes
The researchers proposes an efficient and accurate inventory management
system for the company that will generate a sound internal control over the
inventory for the long run. This study can be a basis for the further improvement
of the inventory management system of the company
Major Final Output

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This research based on the gathered and evaluated information aims to
recommend an enhanced inventory management system, through the use of
flowcharts and step by step procedures in handling the inventory of the company.
The researchers also designed new business documents that will be introduced to
the management that will be helpful to the management as well as to increase the
internal control of the inventory.
Target Beneficiaries
Target Beneficiaries
1. Management of King Louis
Japan Surplusxx
2. Students and Educatorsxx
3. Future Researchersxx
Table 1
Definition of Terms
Average Moving Method is an 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 is an Inventory valuation assumes that the first goods purchased are the first to be
used or sold regardless of the actual timing of their use or sale. This method is most closely
tied to actual physical flow of goods in inventory.

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Heterogeneous are products with attributes that are significantly different from each other,
makes it difficult to substitute one product for another.
Homogeneous are 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 means 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 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 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.
Inventory Management System is the combination of technology (hardware and software)
and processes and procedures that oversee the monitoring and maintenance of stocked
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products, whether those products are company assets, raw materials and supplies, or
finished products ready to be sent to vendors or end consumers.
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 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 is 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 mainly focuses on assessing the inventory management system
of King Louise Japan Surplus Store which is located at Allarey St. Barangay 3,
Lucena City. The research is conducted from December 2018 to April 2019. The
methods used by the researchers for data collection are interviews and
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observation. It is expected that not all information about the company or business
can be accessed by the researchers due to confidentiality. Furthermore, it is
expected that not all respondents are willing to participate as one of the key
respondents of the study. Due to limited experience and the short span of research
on the system of the business, the researchers wouldn’t be able to grasp the
situation. The study is limited to the main store only; the warehouse is not
included.
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
The researchers used a descriptive research design for this study. Kim
and Boyd (2017) defined descriptive method as a research design that primarily
focuses on describing the nature of a demographic segment, without focusing on
the cause a certain phenomenon occurs.

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An initial observation to the store and inquiry to the owner was conducted
by the researchers to describe the business characteristics of the store and to
determine the current issues of the Japan Surplus Store. Furthermore, a series of
interviews to the employees and observation were conducted by the researchers to
gain additional information of the current practice and assess the internal control
issues of the inventory system.
Research Instrument
Series of interviews, observation, visitation and SWOT analysis were
utilized as data gathering instruments. The contents of the questionnaires were
developed by the researchers based from research materials, books, and other
periodicals. The instruments used by the researchers are validated by the adviser
of the research. Thus, the questionnaires will act as the source of the information.
The first part of the questionnaire will be composed of questions regarding
business characteristics, which aims to determine the nature of the business,
length of operation. The second part will determine the current recording practices
and challenges, followed by questions on the classification and measurement of
inventory, dispatching of inventory and lastly, thoughts of the employees about
the enhanced inventory system.

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The responses were assessed and evaluated to provide understanding of
the entity’s current practices and establish a conclusion based from the findings,
to improve the current inventory management system of the store.
Data Gathering Procedures
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.
The researchers started gathering data for the study on the 28th of
November. The management was visited five times to collect all the information
needed for the study. The first interview and visitation the researchers conducted
was on November 28 and followed a thorough observation on the business on
March 2. As the researchers progressed in their research they held another
interview on March 9 and added another meticulous observation on March 16 to
check how things were going after a period of time. When the researchers were
near in collecting the entirety of the information they needed, a final interview
was organized to establish a conclusion for the study. The researchers first noticed
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the disorder of the display of products which creates an atmosphere of confusion
to the customers looking to purchase products. There was no specific arrangement
for items; they were all just randomly placed around the store waiting for a
customer to buy them. This could discourage future sales as it forces customers to
exert effort in finding products they would buy. Employees on the other hand
would also at times neglect their responsibilities like forgetting to record a sale
which leaves the management to guess whether items were stolen or sold.
Population and Sampling
The researchers used a purposive sampling technique in which it is a non-
probability sample that is selected based on the objective of the study. The
researchers choose these informants because they are reflection of the
management as a whole.
Subject of the Study
. The subject of the study was chosen due to their specific knowledge about
the information needed by the researchers in focus of the inventory management
system of the business. The data regarding the respondents, business background,
and the records was under the consent of the management. In accordance with the
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data privacy act of 2012, the entrusted information such as confidentiality of
business trades, operations and financial information. Thus, rendering the
obligation to guard and protect the information gathered from unauthorized
access, use, or loss. Furthermore, the collected information was necessary to reach
the level of having the optimal information needed for the objectives to be
fulfilled.
Conceptual Framework
Input Process Output
Business related Interview Business Profile

(Background of the
profile
business)
Evaluation and
Japan Surplus Assessment Enhanced Manual
Inventory Practices Inventory System
Figure1. The Conceptual Framework of the study.

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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 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
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.
Data Matrix
Research Questions Methodology
1. How do you describe your business in

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terms of? Questionnaire
a. Nature of Business Personal Observation
b. Length of Business Operations Visitation
c. Inventory Class
d. Facilities and Warehouse

2. What is the current practices of the
business over the inventory in terms Questionnaire
of? Observation
a. Recording Vistitation
b. Classification of Inventory
c. Measurement of Inventory
d. Dispatching
3. What is the current issues and
challenges of the business over the
inventory in terms of? Questionnaire
a. Recording Observation
b. Classification of Inventory Visitation
c. Measurement of Inventory SWOT ANALYSIS
d. Dispatching
Table 2
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Data Matrix is a systematic way of ensuring data is well addressed during the
research. Above is the matrix in which the researchers used a guide in presenting the data
gathered during the series of interviews, observation, and visitation.
1. Business Characteristics
.1 Nature of Business
The business is a sole proprietorship business; it caters Japan
Surplus retail products for the masses. A merchandising store, this Japan
surplus retailer sells used items, items previously purchased but unused or
items that are no longer needed. The business also promotes and sells
through online social media platforms such as facebook, to cater the
consumers who are not able to go at the physical store. The business also
sells wholesale items for resellers interested to start up a small business.
The business currently has two employees. One of the employees is tasked
to issue receipts and safe guard the cash. The other one is responsible for
helping out the former.
.2 Length of Business operations
For six years, the business is getting bigger than it was, with this
the inventory class is getting bigger as it grows. The business currently has
two employees safeguarding the store. The owner only comes every
morning to check and open the store then leaves, in the afternoon the
owner goes back to check and collect the sales for that day.
.3 Inventory Class
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The business categorizes their inventory into Furniture,
Kitchenware, Display Items, Paintings and Sculptures. The big items like
pieces of furniture are composed of cabinets, shoe racks, coat racks, bed
frame, sofa sets, bedside tables, vanity table, study table, dinning set and
other unique pieces. The big items also holds the paintings, display items
and the scuptures. On the other hand, small items like kitchen ware are
made up glass wares, dining sets, casseroles, etc.
1.1.1.4 Facilities and Warehouse
The business currently has a warehouse in Barangay Marketview
in Lucena City and the main store is located in Allarey St. Barangay III,
Lucena City. The business ships their goods from the warehouse to the
main store, the warehouse personnel hands in a delivery receipt and a
ready-made inventory sheet of the items delivered. Defective items are
sent back to the warehouse. The warehouse has a different inventory
management system.
2. Current Existing Inventory Practices
Current Inventory Practice in Accounting Applicable Principle in
terms of: Principle Principle Practice

1. Recording Periodic or Periodic System YES
Perpetual System
2. Classification N/A N/A N/A
3. Measurement Lower Cost and Net Net Realizable NO
Realizable Value Value

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4. Dispatching First in-First Out, Weighted Average NO
Weighted Average,
Specific
Identification
Table 3
The table above shows the current practice of the business in terms of:
recording, classification, measurement, and dispatching. The researchers guided
by the respective governing accounting principles of per objective determined the
current practices of the business. As shown on the table the current practice of the
management in terms of recording is in accordance to the periodic system in
which is one of the two offered recording systems. Thus, the following objectives
are not in accordance of any standard accounting principle.
3. Current Issues and Challenges encountered by the business.
SWOT Analysis
Weakness
Unreliable Recording
Strengths
Prone to theft
Delivery Option
Employee Productivity
Loyal Customers
Inefficiency during pick- up
Tracking of Inventory
Threats
Brokerage
Opportunities Loss of Items
Reliable Recording Customer unsatisfaction
over dispatching
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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.
3.1 Recording
In the first quarter of 2019, they implemented a manual inventory
system in the hopes of safeguarding the inventoriable good of the
business. Thus, the said system is not as effective as it seems for as it is to
deliver inconsistent records and employees having trouble of recording
transactions. Through the observation of the researchers, it was shown that
with the flock of customers and unorderly process of recording, the
management always end up with overstatement of the inventory, leading
the management to believe that the inventory items are still in the facility
but in fact it is already been sold. Cash balances are also affected by the
inconsistent recording; the balances are always in excess of what is
recorded.
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3.2 Classification of Inventory
The management’s classification of inventory is limited, through
the observation of the researchers. It is deemed that the inventory is not
properly classified. Defective goods are not classified in the inventory
sheet as well as there is no proper documentation of the defective items
and the items that are given as a freebie.
3.3 Measurement of Inventory
The management currently uses an estimation technique for the
measurement technique, through observation and interviews. The
researchers deemed it as unreliable and prone to fraud, loss, and theft.
3.4 Dispatching
Through the observations, the researchers deemed that the
challenges in the area of dispatching have different issues and challenges.
1. Walk-In Transactions
The researchers deemed that, one of the challenges
of this transaction is the counter checking of an item if it is
paid or not. This process lacks of a document fitted for
cross checking if an item is really paid for. Another
challenge for dispatching for walk-in customer is the choice
if the item is being delivered to the consumer or not.
Documentation forms supporting the delivery of an item in

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good condition is not present in the current inventory
dispatching process.
2. Online Transactions
The current challenge of online transactions
observed by the researchers is the coordination between the
consumer and management in terms of the way of the
delivery of the item bought. The challenge lies within the
logistical aspect of the dispatching.
3. Wholesale Transaction
A wholesale transaction on the other hand is the
most challenging as per the researchers’ observation. The
challenges entails within the means of releasing and
delivery of the products to the consumer
4. Enhanced Inventory Management System
The data gathered during the course of the study paved way for the
researchers to enhance the current inventory management of the system. Thus,
with the researcher’s knowledge about the issues and challenges of the business,
the researchers made it into an opportunity to create and enhance new procedures
that can improve the system.

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RECORDING
Figure 2
Old Recording System
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DR. CESAR A. VILLARIBA Proposed
RESEARCH Enhanced
AND Recording System
Effectivity Date: August 2017
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Recording of inventory is a must for every business establishment. It is an internal
control to safe guard assets against future theft and losses. Recording of inventory is a
major management tool utilized by companies and business owners to ensure efficient
operation. In figure 2, the old recording of inventory transaction will start with receiving
of goods, were it will be inspected by the employees if there are any defective item that
needed to return to the warehouse. The input, which were the goods received from the
warehouse, will be recorded to the inventory record sheet. All transactions recorded
would be summarized. The order to the supplier will be issued if there is still a need for
new goods.
Figure 3, the new recording of inventories starts with the receiving of goods
where they will be inspected if there are any defects. If there are any, the defective items
will be recorded in the return form before returning it back to the warehouse. This will
help the inventory management system to be more efficient and effective. If there are no
defective items received, the items will be recorded in the inventory sheet and to the
summary of transactions. The inventory level would be later checked if there is any need
to purchase. If the inventory level checked is low on supplies, a purchase order will be
prepared and issued.

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Classifying
Figure 4
Old Classification System
Figure 5
Proposed Enhanced Classification
System
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Classifying inventory is essential as it keeps the inventory arranged in an
organized manner. Figure 4 show the management’s first step is item acquisition wherein
the business receives products to sell. The items are then segregated in the second step so
that big and small items were separated from each other. It is then categorized for each
function in the third step as this was the management’s way of keeping the products in
order.
To assess the management’s current way of classifying merchandise, the
researchers would recommend a new one. In figure 5, the first step is the acquisition of
inventory for the management to sell new goods. It is then segregated into three classes
which are big small and defective in the second step. This helps a lot as it arranges the
products better by segregating the scrap from the ones in perfect condition. In step four,
defective items are prepared with a return form while big and small items in good
condition are categorized for each function.

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Measurement
Figure 6
Old Measurement System
Figure 7
Proposed Enhanced Measurement
System
For the management to make decisions, the inventory should be measured and
reported. According to Figure 6 illustrates that the first step in measurement is acquiring
goods to replenish inventory. With the management receiving goods, the business will
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have new products to sell. To earn a profit, the business’ second step is adding a mark-up.
For internal control, the entity’s third step is to estimate the value of the inventory as it
safeguards the assets and increases efficiency.
To solve the issues of the business’ previous way of measuring inventory, the
researchers came up with a new one. As stated in Figure 7, it starts by acquiring inventory
for the management to sell new products in the market. It is then followed by step two
which is inputting the received merchandise to the inventory sheet with an added mark
up. This step keeps track of the entity’s current inventory and creates a record for the
merchandise. After that, the management is to count the inventory which is step three.
This lets the management know the count of their current inventory. And in step four, the
inventory is measured at lower of cost and net realizable value as it is in accordance to
PAS 2 Paragraph 9 states that inventory shall be measured at lower of costs and net
realizable value.
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DISPATCHING
Figure 8
Old Dispatching
System
Figure 9
Proposed Enhanced
Dispatching System
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Dispatching is the process of transferring the goods to the consumer from the
supplier. In Figure 8, the old dispatching transaction system starts with the walk-in-
payment where the customer selects an item and pays for it directly. This will be
deducted to the inventory record of the company before the issuance of official receipts.
In figure 9, the new dispatching transaction system starts with the walk-in-
payment wherein the customers select an item and pay for it directly. The transaction will
be written in the record book of the company. If the item needs to be delivered, the
delivery receipts, official receipts, and release form would be issued. If there is no
delivery, the official receipts will be issued instead. Transactions concerning to the
delivery of the items will be recorded in the summary of release form and daily
transactions of the business will be written in the daily inventory sheet. Afterwards, the
inventory would be checked whether or not the inventory recorded corresponds to the
inventory counted on hand.

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Business Forms
The researchers designed these documents for the management, to
maintain control. The researchers designed five particular forms that will
be useful for the maintenance of the day to day operations of the business.
The following are the new business forms (See appendices for the designs
of each document):
1. Delivery Receipt
This document will serve as the proof of delivery
from the warehouse to the main store. This will ensure that
all items from the warehouse will be properly accounted
for.
2. Purchase Order
This document is a tool for the management for
product requisition from the warehouse.
3. Release Form
This document is issued alongside with the receipt.
It will be used a control document for dispatching of items.
4. Return Form
This document will serve as the proof of return of a
delivered item that is defective.
5. Inventory Sheet
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This document is a tool in which the management
can track the supply levels of each item in a period of time.
Importance of Inventory Reports
Businesses, whether merchandise, manufacturing or service,
maintains an inventory account in the statement of financial position. For a
reliable balance, a monthly inventory worksheet is prepared presenting the
inflows and outflows of stock through recording, classifying and
measuring available documents of transactions done within the month,
including the purchases and dispatching of inventory. Information
provided by the inventory worksheet traces theft and tracks down
shrinkages. It allows the store to make adjustments to match the balance of
financial accounts to the actual count.
Entries found in the old manual inventory system uses inventory
worksheet which is supported only by delivery receipts. Amounts assigned
to inventory and the physical count of inventory depend more on
estimation than actual measurement. Due to this, the enhanced manual
inventory system proposed three more documents that will support the
inventory worksheet, namely: purchase orders, release form and return
form. This will provide amounts and inventory count which relies on
actual measurement.
Role of Documentation in the new system

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Documentation is a tool to make recording reliable for decision
making, below are the roles of each documents for the new system.
Purchase orders are documents issued by an entity to its
warehouse which provide information about the entities request of goods
with exact quantity, desired quality and amount of order. Suppliers will be
properly informed about what the entity needs.
Delivery receipts is a document signed by the entity as a proof that
the goods purchased were delivered successfully by the personnel in the
warehouse. It also provides the exact quantity, desired quality and amount
of goods being delivered for the purpose of comparing what was ordered
to what was delivered.
Release form, on the other hand, is a document providing
information goods being dispatched by the entity. In other words, this
document identifies what goes out of the inventory, to be properly
informed of the amount of sales daily, monthly or periodically.
Return form, is a document used when goods delivered doesn’t
meet the certain qualities that the entity wanted or defectiveness on goods
occur. This document is a proof that some of the goods delivered are
returned to the warehouse. Upon recognition and completion of this
document, the defective item/product will be sent back to the warehouse,
in order to fix the said product.

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Inventory Sheet, is a document used to keep track of items the
entity uses or sells. Each sheet lists a single product and keeps track of
how much of the product is coming into your business and how much is
going out. It also measures the actual count of inventory.
Nowadays, in relation to man power, adopting the enhanced
inventory system is similar to the old inventory system. Employees are
still expected to record, classify and measure the transaction that happened
as part of their job. The only difference is that, in the new enhanced
system requires more documents are to be recognized.
Importance of Employee Management
Employee management is the effort to help employees do their
best work each day in order to achieve the larger goals of the organization.
There are many tasks and duties that fall under employee management, but
almost all of them can fit into one of five categories:
1. Selection entails finding and hiring the right candidates to fill open
positions to keep teams and departments running smoothly.
2. Monitoring includes the measuring and evaluation of employee
performance, also called performance management.

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3. Interaction covers the day-to-day exchanges between manager and
reports, as well as among peers, to communicate job expectations,
company culture, feedback, and more.
4. Reward includes the praise, recognition, monetary prizes, and other
incentives that managers may offer employees as a result of high
performance.
5. Discipline describes the measures that managers may take to improve
low performance, correct mistakes, and enforce company policies.
Effective employee management often hinges on individual
managers and their ability to motivate, communicate, and build trust with
their reports. The best managers act as coaches for their employees,
recognizing the great work they’re doing now while challenging them to
improve.
Duties and Responsibilities of Employees for Enhanced Inventory System
The duties and responsibilities of employees of King Louise Japan Surplus
for the enhanced inventory system are
1. Monitoring and maintaining current inventory levels, ensuring
quantities that appear in the system are accurate for planning of
purchase, promotions and marketing activities.

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2. Ensuring adequate inventory of product in accord with inventory
cycle.
3. Coordinates and manages daily physical cycle counts and
reconciles if actual counts reports.
4. Preparation of monthly consignment sales report to be submitted to
manager.
5. Preparation of daily inventory sheets in all location, store and
warehouse, every end of the day.
Because small businesses operate with a small staff, it is critical that
employees gain better understanding of their roles and responsibilities
within the organization. When everyone is aware of an organization’s
structure, operations are more efficient. In addition, well-defined job roles
often boost morale, as everybody is aware of their responsibilities and what
to expect of each other.

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Conclusions
1. Business Characteristics
The researchers deemed that the business is lacks the internal control
practices such as segregation of duties and inventory tracking and control. For a
business to flourish, control must be present to protect the management to theft
and loss.
2. Recording
Practice
The researchers found out that there is no existing documentation of
inventoriable products by the management and they often rely on an estimation
method to value their current inventory.
Issue
On January 2019, they implemented a manual inventory system in 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., rendering the system unreliable Thus, the researchers designed new
documentation procedures to enhance the current situation of the company

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3. Classification of Inventory
Practice
The researchers observed that the classification of inventoriable items are
limited. The management does not classify defective items, doing this so makes
the management prone to theft or loss.
Issue
The management does not account items given as freebies, this gesture can
lead to theft and loss for as the management does not keep track and does not
control the following inventory. The researchers had designed new forms in which
it could help the management account the defective and the freebie items.
4. Measurement of Inventory
Practice
The management measures their inventory through an estimation
technique for they have no idea on how many their inventory is.
Issue
The management doesn’t exactly know how many pieces of each item is
delivered before. Thus, the researchers improved their current reporting process
by introducing a new inventory sheet in which tracking and measurement can be
quickly known.
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5. Dispatching of Items
Practice and Issue
The researchers found out that after the sale of products, the staff often
forget to record a deduction to the inventory sheet due to certain obstacles such as
the flock of customers, inquiries and when the personnel forget to record it. Also
the items that were acquired online are not always recorded in the inventory sheet.
Thus, the researchers introduced a counter checking document for the
management. It can help the management to help prevent fraud and theft.
Recommendations
1. Recording
The researchers recommend to use new business forms such as purchase
order, to order inventory from warehouse; delivery receipt, used for delivery of
goods from warehouse to the main store; release form, used for tracking of
outgoing inventory instead of listing down through inventory sheet, at the end of
the day will be tallied and inputted to the inventory sheet; return form, it will
serve as the document for returning defective items found during inspection after
delivery; and inventory sheets, used to track down the levels of inventory, which
will be updated daily, specifically at the end of day.
2. Classification of Inventory
The researchers recommend to add a classification for defective inventory,
such as products/ items which are damaged, broken, and another classification for
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*freebies to record the number of items that the owner give for free. In order to
measure the exact number of inventoriables, to prevent theft.
3. Measurement of 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 pieces of each item is delivered before.
The researchers recommend using inventory sheets, which are updated daily, as a
basis to know how many pieces of each item is delivered, sold, unsold and
damaged.
4. Dispatching of Items
The researchers recommend to issue receipts alongside release forms,
which are used for tracking of outgoing inventory instead of listing down through
inventory sheet, in order to record the items that are sold, to be tallied and
inputted at the end of the day in the inventory sheet

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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?
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?
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?

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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?
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
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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
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
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?

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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.
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.
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.
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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?
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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Location of the Main Store
Blue Pin shows the exact location of the store

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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 Total
Details Pric
e
King Louis Japan Surplus

Return Form Date
Subtotal
TO:
Sales Tax
Goods Details Quantity Total
Shipping & Handling
Total Due
Received in Good Condition by the

undersigned
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Release Form Date
TO:
Goods Details Quantity
Checked by

Inventory Sheet
For the Month of _________
Items Item Quantity SRP Returne Defective.
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Code d
Prepared by: Checked by:
Observation performed during the study

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References
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Bragg, S. (2011). Inventory Storage. Inventory Best Practices Second Edition, 67-83
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https://fitsmallbusiness.com/inventory-management-for-small-business/#finish
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x13F4rhAIuz-zmg
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MANUEL S. ENVERGA UNIVERSITY FOUNDATION

Inventory Management System for a Japan Surplus Retailer

Presented to the Faculty of the College of Business and Accountancy

Manuel S. Enverga University Foundation

In Partial Fulfillment of the Requirements

for the Degree Bachelor of Science in Business Administration major in Management

Irish Anne V. Braga

Kyle Rayner A. Lopez

Paul John A. Arena

Royce Daniel A. Anareta

April 26, 2019

This thesis paper hereto entitled:

INVENTORY MANAGEMENT SYSTEM FOR JAPAN SURPLUS RETAILER

CARLOS JAYRON A. REMIENDO

RALYN E. BERMUDEZ ASHLEY D. PANGILIGAN

CATHERINE D. LIMJUCO, MBA, CPA

persons behind them through the course of this research.

encouragement, insightful clarifications and loving support.

expertise concerning our research.

us and guiding us about the nature of the business.

defying all odds and problems encountered through this study.

you for trusting us.

us in all the time of our research and writing of this manuscript.

To Our Almighty God.

To the people I love and care for,

To the 32’s, team cw, seekaynum and mudslap,

To my DotA 2, CSGO, RAN GS, The forest family.

To my dogs who made me happy.

life for me to do better while I’m reaching my dream.

parents, for giving me strength in everything I do and guiding me always.

-PAUL JOHN A. ARENA

To my all-knowing, all-powerful, and all-loving God,

and give me peace and comfort during my research work.

To my Mom and Dad,

the hands of our Creator.

Lopez, K., 2019

supported me all throughout.

Purpose of the Research 14

Significance of the Study 29

Statement of Desired Outcomes 30

Major Final Output 30

Scope and Limitation of the Study 33

Data Gathering Procedure 35

Results and Discussions 39

Current Existing Inventory Practices 42

Current Issues and Challenges encountered 43

Enhanced Inventory Management System 46

Research Title: INVENTORY MANAGEMENT SYSTEM FOR JAPAN SURPLUS

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

with the step by step procedures.

Inventory is a highly-important in a merchandising business. It is even one of the core

Afolabi (2017) exemplified that inventory management is bound by the efficiency of

of the business objectives.

system optimization and its inaccuracy.

experiences the incomplete classification of goods as well as frequent misplacement of items.