Chapter1

Introduction

Rationale

The advancement of business sectors over the globe has prompted an

expansion in rivalry particularly among the made merchandise and

enterprises. The intensity of organizations later on will generally rely upon

how they react to the necessities of the clients toward the finish of a store

network superior to anything their competitors. Pressure is mounting on firms

to decrease their opportunity to showcase, oversee hazards in their stockpile

chains, diminish all production network costs and guarantee arrangement of

value administrations to the clients over the globe. Thusly, firms are probably

going to be compensated through an expanded piece of the overall industry.

Extreme point of stock is to serve the client. As clarified stock is an

extravagant resource in an association; be that as it may, this costly resource

can be supplanted by stock data which is more affordable. A portion of the

issues confronting fabricating organizations today are the capacity to offer

quality types of assistance to the clients whose underlying driver lies in poor

stock management. The principle challenge today among firms in Kenya is

the need to upgrade productivity while simultaneously accomplishing

adequacy (client satisfaction).However, firms in Kenya have been blamed for

poor stock administration methods and this has extraordinarily influenced their

capacity to fulfill their clients. The examination hence tried to complete an

examination on the job of stock administration on consumer loyalty among the

assembling firms in Kenya (Thogori ,2014).

Stock administration has issues that influence consumer loyalty levels.

Numerous enormous retailers are anticipating that producers should give

them great request conveyances. This examination looks at the connection

between successful stock administration and consumer loyalty with the

objective of having complete requests and on time conveyances. This present

research's motivation is to discover ways to improve stock administration, in

this manner expanding consumer loyalty.

In the Philippines, Inventory Management assumes an imperative job

in a business setting since it reduce the time and weight in performing stock

items. They spare business from information irregularities and all the more

significantly, forestall benefit misfortune. The activity of checking and

recording stocks in viewed as a strenuous action, by which PC and

programming come in. A fruitful business depends on numerous variables,

one of which is a solid stock administration framework. Stock administration

comprises of everything from exact record-keeping to delivery and getting of

items. Stock administration that is appropriately kept up can stay with as

production network running easily and effectively. In any case, there are

numerous normal stock administration issues that can happen. Stock

administration issues can meddle with an organization's benefits and client

care. They can cost a business more cash and can prompt an abundance of

stock overload that is hard to move. A large portion of these issues are as a

rule because of poor stock procedures and outdated frameworks (Deb, 2013).

However, the researchers have not come across any study that was

conducted on assessing the inventory management and customers'

satisfaction in Tagum City. It only shows that the present study shall make
specific contribution and generate new knowledge on the particular topic

among these establishments. The stated scenario persuaded the researchers

to look for the factors that can lead to assessing inventory management and

customers' satisfaction in Tagum City as this can raise awareness to the

intended beneficiaries of this study and possibly develop action to improve the

current practices of the vendors.

Objectives of the Study

The primary objective of this paper was to study the impact of inventory

management and customer satisfaction techniques on the performance of an

expanded and comprehensive supply chain. Specifically, we tested the impact

of many important Customer satisfaction parameters which are repeat

purchase, customer royalty, on time delivery, flexibility and quality on the

customer satisfaction. The results indicate that all the parameters have a

significant effect on Customer satisfaction.

The general objective of this study was to investigate the role of

inventory management and customer satisfaction of any SME’s in Tagum

City.

The specific objectives of the study were to:

1. To assess the level of inventory management of SME’s in Tagum City in

terms of:

1.1. Inventory Levels

1.2. Lead time

1.3 Inventory turns

2. To find out the level of customer satisfaction of any SME’s in Tagum City.

2.1. Repeat Purchase

2.2. Customer Loyalty

2.3. On Time Delivery

2.4 Flexibility

2.5 Quality

3. To determine significant relationship between the level of inventory

management and customer satisfaction among SMEs in Tagum City.

4. To determine which of the domains in inventory management significantly

influence customer satisfaction among SMEs in Tagum City.

Hypothesis

The hypothesis of the study will be tested at 0.05 significance stating that

there is no significant relationship between inventory management and

customer satisfaction among SMEs in Tagum City. Also, there is no domain in

inventory management which significantly influence customer satisfaction.

Review of Related Literature

This chapter gives a view of the selected existing knowledge from

literature on inventory management. It covers the overview of the types of

inventory levels, lead time, Inventory turns, indicators of customer satisfaction

and the relationship between inventory management and customer

satisfaction.

INVENTORY MANAGEMENT

Definition of inventory

The word 'inventory' has been characterized from multiple points of

view, as demonstrated in the writing. Three definitions have been picked

which appear to be progressively suitable to the theme created right now.

'Inventories are stores of crude materials, providers, parts, work in process,

and completed merchandise that show up at various focuses all through an

association's creation and coordination channel' (Ballou 2004:326).

In any business or association all functions are interlinked and

connected to each other and regularly covering. Some key aspects like

inventory management, logistics and inventory from the backbone of the

business delivery function. In this way these capacities are critical to

promoting money controllers. Inventory Management is very important feature

which determines the supply chain health as well as the balance sheet

financial health impacts. Growing company is continually trying to maintain an

optimum inventory so that it can fulfill its requirements and avoid inventory

over or under which the financial figures may be effect. Inventory has always
been dynamic. Inventory management requires constant and careful

assessment of external and internal factors and control through planning and

review. Many companies have a separate department or job role called

inventory planners who constantly track, manage and evaluate inventory and

communicate with manufacturing procurement and finance departments.

(Samanta, 2015)

Rationale for having inventory

There are numerous reasons that rouse organizations to have stock.

Bloomberg, Lemay and Hanna (2002:136-137) have recognized five purposes

behind holding stock, in particular:

a. Economies of scale. A firm can understand economies of scale in

assembling, buying and transportation by holding stock. On the off

chance that the business purchases huge sums, it gets amount limits.

Thusly, transportation can move bigger volumes and get economies of

scale through better gear usage. Assembling can have longer creation

runs if increasingly material is stocked, permitting per unit fixed cost

decreases.

b. Balancing supply and demand. A few firms must aggregate stock in bit

of leeway of regular interest. A toy producer sees some interest all

year, yet 60 percent or a greater amount of deals will come in the

Christmas season. By assembling to stock, creation can be kept level

consistently. This decreases inert plant limit and keeps up a generally

steady workforce, minimizing expenses. In the event that request is

generally steady yet input materials are occasional, for example, in the
 creation of canned natural products, at that point wrapped up stock

helps satisfy need when the materials are never again accessible.

c. Specialization. Stock permits firms with backups to practice. Rather

than fabricating an assortment of items, each plant can make an item

and afterward transport the completed items straightforwardly to clients

or to a distribution center for capacity. By practicing, each plant can

pick up economies of scale through long creation runs.

d. Protection from uncertainties. A primary reason to hold inventory ie. to

offset uncertainties in demand. If demand increases and raw material

stocks run out, the production line shuts down until more material is

delivered. Likewise, a shortage of work in process means the product

cannot be finished. Finally, if customer orders outstrip finished goods

supply, the resulting stockouts could lead to lost customers.

The Concept of Inventory Management

Inventory Management is a phrasing received by a firm to

assume responsibility for her interest in stock. It involves the chronicle and

observing of the degree of stocks, estimating of future interest and a choice

on when and how request could be executed. In this manner, inventories

describes things which are keep available to be purchased or are yet to be

utilized in the beneficial procedure, while a stock framework is an element of

the specific level to be supported, when to recharge stock and how the

request size will resemble. Each stock arrangement planned for having set up

enough and supported amounts of magnificent quality things open to outfit

client needs and simultaneously decreasing stock conveying costs. Stock

must be very much overseen so as to augment benefits "Since "numerous

independent company couldn't ingest the sorts of misfortunes emerging from

poor stock administration". Fundamentally, stock administration targets

enhancing client support which is accomplished through prepare for stock out

because of flexibility in the commercial center. Stock administration targets

improving creation adequate. This examination embraces the accompanying

stock administration rehearses as the elements of stock Key Provider

Association.( N. Nwokah Gladson) (Ph.D) 2016.

In the most punctual long stretches of shop keeping, vendors recorded

buys, or they took a gander at what number of units were gone at the day's

end and afterward put forth a valiant effort to figure future needs. Experience

and instinct were key abilities. However it stayed an estimated strategy, in any

event, when applied to tasks that were very little by the present benchmark.

After the Mechanical Insurgency, proficiency and large scale manufacturing

became the principle objectives of organizations, alongside an improved client

involvement with the retail location. A group at Harvard College structured the

principal present day registration framework in the mid1930s. It utilized punch

cards that related with list things. A PC would peruse the punch cards and

pass the data to the storeroom, which would then carry the thing in advance

to the holding up client. On account of the robotized framework, the machines

could likewise produce charging records and oversee stock. The framework

end up being too costly to even think about using, yet a variant of it is being

used today in certain stores, where dealers place cards with item data on the

path for clients to choose and bring to the checkout line. This generally
applies to things that are costly or huge and to con-trolled things, for example,

prescriptions.

Traders realized they required a superior framework, and analysts

made the trailblazer of the cutting edge bar coding framework in the late

1940s and mid1950s. It utilized bright light-delicate ink and per user to stamp

things available to be purchased. Once more, the framework was excessively

bulky and come up short on the processing power expected to make it work.

Innovation still couldn't seem to make up for lost time with their thoughts. The

advancement of reasonable laser innovation during the 1960s resuscitated

the idea. Lasers permitted littler, quicker and less expensive per users or

scanners. The cutting edge standardized tag, or the Widespread Item Code

(UPC), was conceived and got on just before the 1970s. As registering power

turned out to be better, the intensity of UPC codes to help follow and oversee

stock improved exponentially.

During the mid to late 1990s, retailers started executing current stock

administration frameworks, made conceivable in enormous part by propels in

PC and programming innovation. The frameworks work in a roundabout

procedure, from buy following to stock checking to re-requesting and back

around once more. Another famous method for mechanized stock control is

seller overseen stock. Right now, seller is answerable for keeping its items

supplied on a store's rack. The merchant and retailer work intently together

and share restrictive data.

This framework likewise has numerous points of interest for sellers. It

permits them to guarantee their items are appropriately shown and

accessible, and it likewise places them in close contact with the retailer and its

business information. The input the merchant gets can assume a significant

job in its showcasing, re-search and improvement. The desire to make the

progression of merchandise and ventures increasingly productive is maybe

indistinguishable with the inclination of human progress itself. The world's

most punctual known composing (- 5300 years) portrayed stock proprietors,

sums, and providers (Dr. Gunter Dreyer of the German Foundation of

Prehistoric studies. (Faisal Hassan, et al), (2012).

Inventory management may strike terror fear into very being. It could

bring back memories from your high school cashier’s “back in the day”, job

when you had to spend hours counting endless rows of cereal boxes or racks

of women’s jeans by hand. But now, as a small business owner, you’ve

already learned that inventory management is completely important if you’re

going to operate an efficient company. (Brian, July 2019)

Inventory Management may requires a constant struggle between

carrying too much inventory and incurring high inventory loading costs, and

carrying too little inventory and therefore causing stock outs. One of the key

reasons for maintaining inventory above the bare minimum is to fulfill

consumers demand. When you are unable to comply with the consumer’s

orders due to stock shortages, you risk damaging your reputation as a

reputable manufacturer and risk losing the customer as well. Over time, a

systemic failure to control inventory rates will lead to lower sales and reduced

market share. Through monitoring stock in real time, inventory management

software can make it possible to eliminate stock shortages without needing to

carry large reserves of safety stock. (Melanie, 2019)

 Research and observation shows that planograms, particularly

computer-based planograms, are one of the most important aspects used to

improve a retail outlet 's financial efficiency, and can also be used to improve

inventory management and the vendor relationship. However, it is a difficult

and time-consuming process to generate planograms because the simplest

form of planogram problem is already a multi-knapsack problem, a well-known

NP-Hard problem that is very complicated to resolve. If we consider other

items, such as fresh food , clothes, and frozen food, the challenge is further

increased. That's because of their special show specifications and because

they don't use regular shelf fitments. The development of planograms is

generally mainly a manual operation (software assistance is available (e.g.

Galaxxi, Spaceman) but most are drag-and - drop procedures or semi-

automated processes requiring considerable human interaction) and the

allocation of shelf space is focused primarily on certain basic rules (Chen,

2016).

In a research paper entitled “An Overview on Consumer Perception of

Service Quality Variables in Selected Organized Retail Outlets” tried to study

the customer perception of Retailer's Service Quality variables with the goal of

defining the dimensions that organized retailers deliver to clients. An study of

the specific quality variable for retail service was performed to clarify the

relationship between them. The study also tries to explore the element that

draws customers in the capital city of Kerala (Trivandrum) towards the

organized retail market. This study also reveals that the perception of service

quality is influenced by the different natures among different customers, and

even some of the general factors such as Personal Interaction, Physical

Aspects (Space Management) are the dimensions on which customer

perception remains constant and popular with the entire customer. And the

retail outlets have to frame their own plans to draw more customers (Nair,

2013).

In addition, an empirical analysis of customer expectation and

perception in the organized retail Sectors tried to define the difference

between expectations and perceptions of organized customers in the retail

sector by using the renowned service quality model i.e. SERVQUAL model. In

the results it concluded that in terms of space management , service

efficiency, empathy etc., there is a substantial difference between expectation

and perception (Motwani, 2012).

In a recent study entitled “Changing Consumer Preferences From

Unorganized Retailing to Organized Retailing”, which attempted to examine

the factors influencing consumers to prefer organized retailing to unorganized

retailing and vice versa, to identify the problems faced by consumers from

both oganized and unorganized retail outlets and to describe the demographic

profile of retail outlets This notes in the study that most customers are visiting

organized formats for choice, easy availability, cleanliness with additional

children's entertainment facilities and convenient parking facilities. In the

event of unorganized store locations, the tilt is offset by credit and negotiating

service. In comparison to older groups who tend to frequent Kirana shops, the

younger generation is more inclined towards organized retail. Families with

less than 4.0 Lakh annual income and a single bread earner prefer shopping

with nearby mom-n-pop shops. Higher-qualified consumers were found to be

drawn more towards organized retail outlets (Gupta, 2015).

 In lieu with this, consumer behavior towards organized retail stores

showed that the behavior of consumers in organized retail stores during this t

determine which styles of customers exist; select which of them they're best

off trying to serve and, finally, implement our segmentation by optimizing our

products/services for that segment and communicating that that they had

made the selection to tell apart themselves that way. They found that the

convenience and personalized service offered by the unorganized sector

holds its future in good stead for the long run. Organized retail these days has

seen an amazing boom and is attracting more people to the department

stores. Interestingly, market pressures from India's burgeoning consumer

class and their growing demand have already began to spur agricultural

reform and increased investment in India's "farm to retail" field by the private

sector. It seems that India's growing consumer market can be absorbing a

lifetime of its own (Reddy et. Al. (2012).

A study by entitled “ Factors Involved in Retailer's Decision to Assign

Shelf Space to Private and National Brand and their Effect on Sales” made

the researchers tried to understand the retailer's decision about the

distribution of shelves to private and national brands and their effect on sales.

They also identified that image building and private label shelf space

contribute greatly to which bargaining power is the least factor contributing.

Given that shelf room is valuable to the consumer, shelf space is important to

national brand producers in the same way. The distributor wants shelf space

for distributors to market the national brand. Manufacturer offers the retailer

premium sum to get the right shelf space for its products. Furthermore, every
chosen city's image building is different from each other. Bargaining power in

all cities isn't comparable either (Zameer et.al., 2012).

In addition, critical review and a model with price changes and

adjustable shelf heights tried to critically review the existing literature of shelf

space allocation optimization models and solution techniques. Then,

proposed a comprehensive model for shelf space allocation for a product

category. In this new model with an objective to maximize the retailer's daily

gross profits he tried to emphasize that demand not only as a function of the

space allocated to a product, in terms of the number of display facings, but

also as a function of vertical product location in a shelf section and price

sensitivity. Stack ability of the products is also considered and products can

be stacked depending on their package. Further, he tried to show numerically

that, price changes and adjustable shelf spaces can have major impacts on

the retailer's profits. (Coskun, 2012).

In On Shelf Availability in Retailing: A Literature Review and

Conceptual Structures, the researcher researched OSA 's value and found it

to be a key performance predictor, as well as having a major effect on

consumer loyalty and retail income. This thesis / paper tries through a three-

step method to define the drivers of poor OSA results. First, an

comprehensive analysis of the literature was undertaken to classify the OOS

(out-of-stock) drivers discussed in current literature. Second, interviews with

industry experts identified possible causes of low OSA results that were

discussed at the level of industry. Finally, the two lists were examined against

each other and the possible drivers identified (Spielmaker, 2012).

 Nsikan, Etim and line (2015) investigated the inventory management

practices in flourmills manufacturing firms with aggregate staff population of

2569 which constituted the unit of study. Questionnaire was used as the major

source for data collection. The mean and standard deviation was used to

analyze descriptive data. Results indicates that in exception of the large

manufacturing companies, most of the medium-sized flour milling firms adopts

different inventory management strategies and polices were rather based on

factors such as changing level of customer demand, prevailing industry

practices, forecast estimates and guesses, and available production capacity.

The results also showed a significant gap between effective inventory

management and optional operating efficiency. The study suggests the need

for manufacturing firms to adopt models of scientific inventory management to

better address supply shortages, commodity stock outs, and pile up

components with significant penalties.

Management and Customer Satisfaction

Modern business relies heavily on consumers, and faces the challenge

of designing processes that meet people's demands The demands come to

inform the diversification of the product and the policy to be considered

relevant to the competitive industry. A well-managed inventory network has a

direct connection to client satisfaction. Studies shows that consumers are

more happy when suppliers are able to respond and meet their orders within a

given period of time (Christopher, 2014).

The ability to please the consumer helps the Supply Chain participant

to store buffers. It also puts the manufacturer in a long-term relationship with

the consumer and therefore continuity in the supply achieved, which is why

the customer's satisfaction is judged as the spirit of achievement in the current

competitive business setting, (Wang, 2017).

The effect of effective inventory management on the competitiveness

of Ghana's manufacturing companies were studied and adopted the cross-

sectioned method, using secondary data. The data collected from the cross-

sections covered the period 2004-2014 from the annual reports of four

manufacturing companies listed on Ghana stock exchange ( GSE). The four

companies were chosen through the method of judgmental sampling.

Rentability measures were examined and linked by manufacturers to proxies

for efficient inventory management. Data analysis employed the ordinary least

square ( OLS) that came in the form of multiple regression models. The study

found that the link between inventory management and the profitability of

manufacturing companies in Ghana is significantly high. Therefore, the study

advises that efficient management of the inventory of raw materials should be

a major factor Ghanaian manufacturing needs to consider in enhancing or

boosting its profitability (Kwadwo, 2016).

Recent studies showed how inventory management influenced

manufacturing firms' performance in Kenya. The method adopted for the study

was both descriptive and explanatory. Information was obtained from 320

frims logistics department heads by using a questionnaire. A pilot study was

conducted to test the reliability of validity and practicability of the research

instruments Descriptive static's such as parentages and frequencies were

used, while linear regression was the inferential statistics used. All data

obtained by the use of the social sciences statistics kit. The results showed
that one-unit change in inventory management would lead to an increase of

0.300, 0.423 and 0.143 units respectively in marketing efficiency , financial

performance and customer satisfaction. The research also found that

inventory management affects all business output assessment constructs

(market success, financial performance , and customer satisfaction). The

study therefore recommends that managers in manufacturing companies in

Kenya integrate logistical management practices, such as inventory

management, into the strategic corporate success plan (Nwangi, Guyo and

Arasa, 2015).

Inventory management and performance

Past research in inventory management and performance shows that

the relationship between IMPs and performance has been important. For

example , a significant and negative relationship between gross operating

income and number of inventory days was revealed, based on a sample of

Belgian non-financial firms. The findings indicated managers could build value

for their shareholders by reducing to a fair minimum the number of inventory

days (Deloof, 2013).

Studies that analyzed inventory turnover in the manufacturing sector in

Belgium and the impact of inventory reduction on financial performance found

that firms with the highest inventory ratio had a higher chance of bad financial

performance. The study concluded that the most likely companies with high

inventory ratios were poor financial. Similarly, it revealed that high inventory

turnover associated significantly with a higher return on sales. This concluded

that high inventory levels were associated with poor long-term stock returns.
Next, it indicated that the higher the level of inventory, the lower its rate of

returns. It also found that inventory turnover ratio was negatively correlated

with gross margin (Boute et al., 2016).

For another study it found that managers were able to generate value

by reducing their inventories and the number of days their accounts were

unpaid for. This showed that the reduction of inventories had a direct and

substantial impact on results. This also suggests that inventory conversion

time had an inverse relationship with the profitability of the companies , i.e., as

the conversion period of inventory (ICP) days increases, the firm's profitability

decreases, and vice versa. First, it found that while the inventory-to-sales ratio

negatively affected the performance of the company in the initial growth and

maturity period, it exercised a positive and important performance coefficient

either in the rapid growth period or in the recovery stage (Elsayed and

Wahba, 2016).

Additionally , studies concluded that the manner in which safety stocks

and lead times were calculated and checked was of great importance for the

planning success of MRP methods, while the determination and review of

order points, review rates, and run-out times were important for reorder point

methods. They also studied the relationship between inventory efficiency and

financial results in the manufacturing sector in the United States based on the

financial information collected from 1980 to 2005. The analysis found a strong

positive link between the performance of the inventory and the financial

performance indicators. The study found a close association between the

turnover of the inventory, the size of the company and the rise in revenue. It

also suggested a positive correlation, using a sample of UK companies,

between improved income gain and reduction in inventory days. Inventory

management efficiency may be related to a company's size (Pong and

Mitchell, 2012).

Some studies have noted that firm size may affect the ability of a firm

to achieve improved competitiveness and financial results. Their study found

that the rise in inventory turnover and sales success depends on the size of

the company. That is because bigger firms are more likely to have greater

market share and stronger market power. Moreover, bigger firms have more

access to resources than a smaller unit. Given numerous important data in

the relationship between IMPs and the success of the company, there is little

evidence showing conflicting findings (Cannon, 2014).

For example , one study showed no relation between inventory

turnover and performance. It also found that there was no correlation between

the effectiveness of inventory management and the overall financial

performance. When taking into account the impact of time , average turnover

increase had a marginally negative effect on asset return. Investigations into

the performance-profit relationship found that the findings did not support a

clear positive association between efficiency and profitability. Industries with

the potential to manufacture their goods using the best practices were not

always able to achieve the full income. Similarly it showed that organizations

with the lowest (highest) inventory level often had the worst (best) level of

efficiency. They concluded that it was not always advisable to step towards

zero-inventory situations. There was also no meaningful link between the

turnover of inventory and the effects of financial performance (Folinas and

Shen, 2014).
 Inventory management practices and knowledge of IMPs

Previous studies contend that consideration should be given to

qualified personnel with sufficient knowledge of inventory management in

running IMPs. One of the critical barriers to adoption of inventory

management is the inadequacy of skilled personnel, who have little

knowledge of how to effectively manage inventory management. Others

indicated that companies, in recognizing the inventory management system,

should offer adequate instruction to key workers. It argued that the skill of the

management could be acquired in these functions with good knowledge. In

addition, the culture of good inventory management practices will spread

knowledge among the employees through training and information sharing.

Thus, it is crucial for any organizations to acquire expertise and knowledge for

better inventory management practices (Ogbo et al., 2014).

Knowledge of IMPs and performance

In the context of small and medium-sized businesses, one common

problem that may hinder the implementation of systemic practice is capacity

of skilled human resources. Previous studies highlight the value of skilled

human resource for the adoption of sophisticated management practices, thus

it can improve firm efficiency. Expertise and expertise are the strategic skills

to be learned by each organisation. It argued that inefficiency in inventory

management was caused by the lack of qualified personnel and knowledge

regarding demand and the inaccuracy of virtual and real stock in the stores

(Ahmad and Mohamed Zabri, 2015).

 In addition , a study found that different stores within the same

companies and departments within the same stores delivered different

outcomes, mainly due to human factors, specifically in terms of critical

thinking, functional knowledge and management. There were different

planning conditions in each planning and control situation which impact the

likelihood of favorable application modes, but which could also have a direct

effect on planning results. Such requirements included the level of education

and expertise, dedication to management, and planning and control

organizational design and work. It suggested adequate knowledge was critical

to the implementation of systematic IMPs. Therefore, we propose that a

stronger adoption of IMPs is correlated with the involvement of experienced

workers or owners / managers (Strohhecker and Grobler, 2013).

Conceptual Framework

The conceptual framework presented in figure 1 of this study discusses

the inventory management and customer satisfaction in any SME’s in Tagum

City with the help of indicators in making an action plan.

The inventory management and customer satisfaction in any SME’s in

Tagum City with the following indicators: inventory levels refers to high

inventory rates increase the probability that consumers will get what they

want, boost revenue and service rates, lead time means that goods and

information flow in a seamless manner that enables all members of the supply

chain to the needs of the customers while keeping the inventory to a

minimum, increased distance from the manufacturer premises and difficulty in

 the logistical aspects also result in longer lead times and higher inventory

rates, inventory turns refers to the company that consists of the inventory of

distribution costs (possibility cost, insurance, rent), ordering costs (distribution

charges, insurance for goods in transit, inspection of good inward) as well as

the expense of shortages(idle equipment,

Customer Satisfaction
labor cost, loss of sales (Thogori, 2014).
 Repeat Purchase
The study serves as the basis for a
 Customer loyalty
proposed action plans as shown in figure 1.
 On time delivery

 Flexibility

 Quality

Inventory Management

 Inventory levels

 Lead time

 Inventory turns
Figure 1.The Conceptual Framework of the Study

Significance of the Study

Researcher has found a lot of research on inventory management and

customer satisfaction, but there is a lack of conversation on customer

cooperation, which is an significant aspect of both inventory management and

customer satisfaction. This work will consider the value of customer

cooperation in the transition of efficient inventory management and customer

satisfaction. The research result will aid in the design of strategies to ensure

that improved inventory management, driven by successful customer

cooperation, contributes to better customer satisfaction. It will add to the work

provided on inventory management, customer engagement and customer

loyalty in the downstream of the companies. Provide awareness and

opportunities for future researchers and also the result of this study may shed

some light on the students in the same field of the academic careers.

Furthermore, the results would provide guidelines for SME’s and in

policy making, some work has been done by researchers on inventory

management and customer satisfaction but the integration of customer

engagement with inventory management and customer satisfaction is still

lagging behind in the available research portion.

Definition of Key Terms

Inventory. This is the quantity of products, services or parts carried out

in storage or warehouse, example On going work or (WIP), raw materials,

financial products resale of maintenance, repairs, operation (MRO) items.

Inventory Management. It is the supervision of non-capitalized assets,

or inventory, and stock items. As a component of supply chain management,

inventory management supervises the flow of goods from manufacturers to

warehouse and from these facilities to point of sale.

 Customer. Defined as individuals or businesses that consume or use

goods and services, it could be purchasers within the economy that buy

goods and they can exist as consumers.

Customer Satisfaction. Refers to a measurement that determines

how happy consumers are with a company’s products, services, capabilities.

It may include surveys and ratings, can help a company determined how to

best improve or changes its products and services

Chapter 2

Methodology
This chapter will present the research design, research locale, population and

sample, research instrument, data collection, and statistical tools.

Research Design

The researcher used a descriptive or concise research method to

explain the problem as it occurs. It is also done in order to define and be able

to describe the characteristics of the element of concern in the situation. It

must take into account the analysis of inventory management strategies and

customer satisfaction. (Eunice, 2011)

The survey must deal with objective data on the phenomenon. The

quantitative component is an acceptable timeline for correcting the data

intended for the target respondents to answer the questions.

Research Locale

The findings of this study will be specific to the context of SMEs Tagum

City, Davao Del Norte. The possibility for the general applicability of the

findings will be limited by the scope, and the sample. Accordingly, even

though there could be common features, the findings may not have general

applicability to other systems. Presented in figure 2 is the

 Figure 2 .Map of the Philippines Highlighting Davao delNorte

map of the Philippines consisting of 17 regions in which the City of Tagum,

Province of Davao Del Norte is located in Region XI. Moreover, presented in

figure 2 is the vicinity map of the respondents in which place of residency of

managers and owners of SME’s located in the City Tagum.

Tagum, officially the City of Tagum, is a first city and capital in the

province of Davao delNorte. It is the top most liveable cities in the Philippines.

The city is located 55 kilometres north of Davao City, the main economic and
administrative center of region XI. The city lies between 7 o26’ N latitude and

125o48’ E longitude. It is bounded by the Municipalities of Asuncion, New

Corilla, and Mawab on the north, Maco on the east, and B.E. Dujali on the

west. Carmen lies on its southwestern borders, while it faces the Davao Gulf

directly to the south.

The location of the respondents is located at Tagum City, Davao del

Norte. Wherein, Tagum City is subdivided into 23 barangays consisting of

growing numbers of SMEs. Furthermore, the place of the respondents and the

conduct of the study is located in Tagum City, Davao del Norte, Philippines.

Population and Sample

Complete data will be used for the selection of the respondents. The

subjects of the study will be the SMEs. The researchers will choose 200

respondents among these individuals in Tagum City. The respondents of the

study will be the SME in Tagum City for the year 2020.

Distribution of Respondents

Location of Business Number of Respondents

Apokon 10

Bincungan 5

Busaon 5

Canocotan 5

Cuambogan 5

La Filipina 10
 Liboganon 5

Madaum 5

Magdum 10

Mankilam 10

New Balamban 5

Nueva Fuerza 5

Pagsabangan 5

Pandapan 5

Magugpo Poblacion 5

San Agustin 5

San Isidro 5

San Miguel (Camp 4) 10

Visayan Village 15

Magugpo East 15

Magugpo North 20

Magugpo South 20

Magugpo West 15

Total 200

Selection of the respondents of the study will use the quota sampling of

1 vendor per business coming from 23 barangays in Tagum City with a total of

200 vendors. The distribution of the respondents as shown in table 1 is as

follows: SME operators or owners of Tagum City coming from different kind of

business ventures which are commonly present in the 23 barangays in Tagum

City that is being itemized in table 1. The total number of vendors will be 200.

Research Instrument
 The instrument will be using researcher-made questionnaire in the

study to suit to the context of the study. The first set of questionnaire deals

with the dependent variable which is Inventory Management by SMEs with

variables: Inventory Levels, Lead Time and Inventory turns. The contents of

the instrument will be presented to the group of experts for validation. In

assessing inventory management by SMEs, the five orderable gradations with

their respective range of means description were considered:

Range of means Descriptive Equivalent Interpretation

4.30 – 5.0 Very High This means that

the inventory
management is
very much
observed.

3.50 – 4.20 High This means that

the inventory
management is
much observed.

2.70 – 3.40 Average This means that

the inventory
management is
moderately
observed.

1.90 – 2.60 Low

This means that
the inventory
management
skill is less
observed.

1.00 – 1.80 Very Low This means that

the inventory
management is
not observed.
 The second set of the instrument embarks with the customer

satisfaction. It was composed of five (5) indicators such as Repeat Purchase,

Customer loyalty, On time delivery, Flexibility and Quality. For the customer

satisfaction, the following five orderable gradations with their respective range

of means and descriptions were considered:

Range of means Descriptive Equivalent Interpretation

4.30 – 5.0 Very High This means that

the customer
satisfaction is
very much
observed.

3.50 – 4.20 High This means that

the customer
satisfaction is
much observed.

2.70 – 3.40 Average This means that

the customer
satisfaction is
moderately
observed.

1.90 – 2.60 Low

This means that
the customer
satisfaction less
observed.
1.00 – 1.80 Very Low This means that
the customer
satisfaction is not
observed.

Data Gathering Approach

After the approval of the panel members the researcher will undergo

the following steps and procedures in gathering data for the study.

The researcher will ask permission from the office of the Business and

Licensing of the City of Tagum to conduct study to the different SMEs in

Tagum City. Upon the approval, the letter of endorsement will sought to

accommodate the researcher to administer the survey questionnaire to the

respondents of the study. The researcher will be personally handling the

questionnaire and will explain the research tool and its purpose. Furthermore,

the researcher will be retrieving the survey questionnaire after the

respondents have answered all the items. Finally, the researcher will tabulate

all the data gather from the respondents, subject to statistical analysis. The

statistical results will be analysed and interpreted. With the data, conclusions

will be drawn and recommendations will be formulated base on the findings of

the study.

Statistical Tool

The statistical tool the researchers will use for data analysis and

interpretation is:

Mean. This statistical tool will be used to assess inventory

management and customer satisfaction in Tagum City.

 Pearson (r). This statistical tool was employed to determine the

significance on the relationship between Inventory Management and

Customer Satisfaction among SMEs.

Multiple Regression Analysis. This statistical tool was used to

determine the influence of Inventory Management and Customer among

SMEs.