Introduction

Background of the Study

Inventory management is a very important part of a distribution

company, being able to manage correctly the balance of supply of

products in the warehouse depending on the demand of the current

market is significant to how a distribution company is able to provide

service availability to its client base. It is the practice of overseeing

and controlling of the ordering, storage and use of components that

a company uses in the distribution of the items it sells.

Managing your operations to balance inventory in an effort to

satisfy customer demand – that is, actual demand in the market for

products – without exposing the company to unnecessary cost and

risk is crucial. If you are going to sell products, you need to have

stuff available for customers to purchase.

Operational performance is affected by inventory management

in ways such as finished goods maintained in the inventory allows a

company to immediately fill customers demand for product thus

leading to customers satisfied and revenue maintained.

It is the object of this study to be able determine how practices

in the inventory management being implemented by a drugstore

affects the service availability to its client base.

Statement of the Problem

 This study aims to determine the inventory management

practices and its effect on the service delivery of drugstores in

Santiago to its client base.

Specifically, it seeks to find answers to the following

questions:

1. What is the profile of the respondents in terms of their:

a. Age

b. Gender

c. Civil status

d. Education attainment

e. Length of service in the company

2. What are the inventory management practices of drugstores in

Santiago City?

3. What is the perception of the employee-respondents in the

inventory management practices implemented by the

company?

4. What are the effects of inventory management practices on

service delivery of drugstores in Santiago City?

Significance of the Study

The study focuses on the inventory management practices of

drugstores in Santiago City and its effects on the service delivery of

the company.
 Drugstore Management . This study would provide the

company with different inventory management practices they can

implement and would thus help them effectively improve their

service delivery and provide better service and product availability

to their customers.

Customers of drugstores in Santiago City. This study would

ensure the company would be able to provide better service delivery

to them and guarantee better operation of their business specifically

in the area where they are able to provide the product demands of

their own customers because drugstores are able to provide them

with better product delivery and service availability when they need

it.

Researchers. This study will give the researchers a better

understanding on the effects of different inventory management

practices especially when they intend to work on a company that

provides different products to different customers with different

demands of them.

For future researchers. This study can be used as a

reference material for future researches that are of the same topic of

study. It could also be used as concrete basis for the information

that they need to collect for their own research.

Related Literature
Foreign Literature

Inventory management is the practice overseeing and

controlling of the ordering, storage and use of components that a

company uses in the production of the items it sells. Inventory

management is also the practice of overseeing and controlling of

quantities of finished products for sale. A business's inventory is

one of its major assets and represents an investment that is tied up

until the item sells.

Businesses incur costs to store, track and insure inventory.

Inventories that are mismanaged can create significant financial

problems for a business, whether the mismanagement results in an

inventory glut or an inventory shortage.

Successful inventory management involves creating a

purchasing plan to ensure that items are available when they are

needed — but that neither too much nor too little is purchased —

and keeping track of existing inventory and its use. Two common

inventory-management strategies are the just-in-time (JIT) method,

where companies plan to receive items as they are needed rather

than maintaining high inventory levels, and materials requirement

planning (MRP), which schedules material deliveries based on sales

forecasts.

Companies can save significant amounts of money and reduce

waste by using a JIT inventory management system. JIT means that

manufacturers and retailers keep only what they need to produce

and sell products in inventory, which reduces storage and insurance

costs, as well as the cost of liquidating or discarding unused,

unwanted inventory. To balance this style of inventory management,

manufacturers and retailers must work together to monitor the

availability of resources on the manufacturer’s end and consumer

demand on the retailer’s. Otherwise, JIT inventory management can

be risky. For example, a furniture retailer keeps no more than four

mahogany dining room chairs in stock. The retailer displays the

chairs in its showroom; no additional chairs are stored in the

backroom. A manufacturer orders no more than the amount of

mahogany needed from its source to produce those four chairs.

During the retailer’s peak season when customers special order 24

chairs, the manufacturer acquires the exact amount of mahogany

needed to manufacture and ship 24 chairs. If the manufacturer

cannot acquire the mahogany it needs from its source, however, the

retailer runs the risk of not being able to fill the customers' special

orders. For both the manufacturer and retailer, being out of stock

results in lost revenue and diminished reputation.

The MRP inventory management method is sales-forecast

defendant. This means that manufacturers must have accurate sales

records to enable accurate planning of inventory needs and to

communicate those needs with materials suppliers in a timely

manner. For example, a ski manufacturer using an MRP inventory

system might ensure that materials such as plastic, fiberglass, wood

and aluminum are in stock based on forecasted orders. Inability to

accurately forecast sales and plan inventory acquisitions results in a

manufacturer's inability to fulfill orders.

Local Literature

Computer-based system is a complex system wherein

information technology plays a major role. It makes the work easier,

faster and more accurate. Due to that fact, the automated scheme

has become essential to small and big companies for they are

expected to give the best services possible. Nevertheless, some

businesses still prefer sticking with the system that is not integrated

with technology. Probable causes are computer illiterate staff and

lack of funds. Companies, especially the big ones are recommended

to switch from manual to automated systems because this will

improve the efficiency and productivity of the business which will

uplift the industry’s reputation.

One of the most sought after automated systems of different

companies is a purchasing and inventory system which comes hand

in hand. A purchasing and inventory system is very important in

every organization because a good purchase and inventory

management can create excellent productivity. Primarily, i6nventory

work consists of input, output and restock. Input is a process of

buying new products into the inventory and replacing the old

products with the new ones. Meanwhile, output is a procedure of

taking out the products from the inventory for sales or usage and

refill is a process of increasing the number of existing products in

the inventory in order to fulfill the insufficient products or escalating

demands. Most of the retailing market is using traditional way in the

inventory management system where a person is assigned to check

and record the stock by hand using pen and paper. It is where

operations with regards to all the stock will be archived.

Lopez (1978) conducted a study on a restaurants in baguio

city and found out that: 1. Restaurants are largely sole

proprietorships in organization, they are mostly owned by Filipinos,

although many others are owned by Chinese and Americans; 2. Most

restaurant personnel are male, single and predominantly high school

graduates; 3. In terms of available facil;ities and practices, the

following are found: a) on service facilities, entrance and exits are

properly situated, good furniture and fixtures, parking space

available, good lighting and ventilation; b0 on control of operations,

promotion of the

Lewis (2002) stated that the reason for using computers vary

from person to person. Some of the computers in business are to

perform accuracy, to be as productivity, to decrease bottle necks or

hassles to alter cash flows or to simples elevate your status.

 Sybex Inc (1999) stated that visual basic provide a graphical

environment in which the users usually designed the forms and

control that become the building block of tour application . Visual

Basic support many useful tools that will help the user more

productivity.

The hardware of a POS system is also distinctive and

important. A typical system includes a display screen for the clerk, a

customer display, a cash drawer, a credit card swiping system, a

printer, and a bar code scanner, along with the computer loaded with

the POS software. Custom features may be added or removed,

depending on the industry. A restaurant POS system, for example,

may have a feature which prints order tickets directly in the kitchen,

or a grocery store may have an integrated scale for weighing goods.

Most small businesses underestimate the importance of

managing their inventory. They do not realize that many headaches

and fire drills are caused by the lack of control and knowledge of

their inventory. Whether it is a lack of knowledge of the quantity or

specs of a certain product, businesses too frequently use outdated

inventory systems. Insufficient systems do not allow them to get

the most out of their inventory, because when used properly,

inventory management systems allow businesses to make a

concise, real time analysis of products and markets that help them

make better business decisions. Inventory management systems

also allow businesses to better serve their customers since they

keep a detailed and accurate record of purchase histories and

trends so they can reorder products more efficiently restaurant

business was primarily through tie-ups with travel agencies, while

advertising through radio was utilized only by some establishments.

Related Studies

Foreign Studies

Akelo (2011) focused on establishing the impact of inventory

management practices on performance of Non-Governmental

Organizations. By targeting ten Non-Governmental Organizations

situated in Nairobi County, the research study focused on a total

sample of seventy respondents. According to the analysis of the

data via descriptive statistics, the study recognized that a unit in

ABC Analysis would lead to an increase in operational performance

of Non-Governmental Organizations by a factor of 0.683 whilst a unit

increase in Economic Order Quantity leads to an increase in

operational performance of Non-Governmental Organizations by a

factor of 0.702. On the other hand, a unit increases in Demand focus

inventory leads to an increase in operational performance of Non -

Governmental Organizations by a factor of 0.699. Finally, Akelo

(2011) argued that a unit increase in automatic replenishment leads

to an increase in operational performance of Non-Governmental

Organizations by a factor of 0.612. While this research study

provides significant information on the impact of inventory

management practices on organizational performance, this research

study only focused on Non-Governmental Organizations in Nairobi

County. As such, it does not provide answer to the impact of

inventory management on the performance of consumer goods

manufacturing firms in Nairobi County.

Kitheka (2010) focused on evaluating the extent of inventory

management automation and to determine the impact of inventory

management automation with respect to the performance of

supermarkets in Western and Nyanza provinces, Kenya. Based on a

survey design, in which the researcher targeted all supermarkets

(eleven operational supermarkets) in Kakamega, Bungoma and

Kisumu, Kitheka (2010) established that inventory management

automation impacts positively on the performance of supermarkets.

However, instead of focusing on consumer goods manufacturing

firms in Kenya, Kitheka (2010) focused on consumer services firms

in Kenya.

Muhayimana (2015) focused on highlighting and determining

the contribution of inventory management techniques on better

management of manufacturing firms. Muhayimana (2015) used Sulfo

Rwanda Ltd, which deals with manufacturing of consumer goods and

located in Kigali City and, as a case study. The purposive sampling

technique was employed so as to ensure that only individuals who

are able to provide relevant information regarding the research topic

were included in the sample of the study. Through purposive

sampling technique, fourteen respondents were selected. The study

found out that inventory management practices have a significant

impact on firm’s performance, especially on cost reduction. The

research also established that inventory management enable firms

to meet the demands of customers more effectively as instances of

unevenness in regards to meeting customers’ demand is reduced.

While the research study focused on consumer goods manufacturing

firms, this research study chose a small sample (14 respondents

from one firm); furthermore, the research was not carried out in

Nairobi, Kenya. Therefore, besides failing to answer more reliably

the impact of inventory management practices on performance of

consumer goods manufacturing firms due to small sample, the

results of the study are not applicable in Nairobi since the study was

carried out in Kigali, Rwanda.

Nsikan, Etim and Uduak (2015) are among the researchers

who also carried out a research in regards to the impact of inventory

management practices on the performance of firms. In particular,

Nsikan, Etim and Uduak (2015) aimed at establishing the inventory

management practices in flour milling manufacturing firms and their

effects on operational performance. In this regard, five flour

manufacturing firms were selected from which one- hundred and fifty

respondents were further chosen to answer the research questions

of the research study. The results of the study showed that with the

exclusion of large assembly firms, a majority of the medium-sized

flour milling firms use different inventory management strategies

from the scientific models. However, most of the inventory

management techniques were based on changing customers’

demand, the current industry practices, forecasted estimates, and

available production capacity. The research also reveals that firms

that adopt scientific inventory management techniques are more

effective in enabling the attainment of enhanced performance,

especially via capacity reduction, improved service level and

reduced lead time. While this study provides significant information

regarding the impact of inventory management practices on

performance of consumer goods manufacturing firms, this research

study is less reliable as it focused on one type of consumer goods

manufacturing firms, that is, flour milling firms. Furthermore, the

research results are not applicable in Nairobi, Kenya as the

research study was carried out in Lagos, Nigeria.

A different study signifying a positive correlation between

inventory management and performance was that of Eroglu and

Hofer (2011), which used the Empirical Leanness Indicator (ELI) as

a measurement for inventory management. Eroglu and Hofer (2011)

argued that inventory leanness is the most effective inventory

management instrument. According to Eroglu and Hofer (2011), lean

production regards inventory as a form of waste that should be

reduced, and has currently become one and the same with good

inventory management Eroglu and Hofer (2011)’s study on USA

manufacturing firms, within the period of between 2003 and 2008,

established that leanness impacts on the profitability of a firm.

According to Eroglu and Hofer (2011), firms that are slimmer

compared to the industry’s average usually experience positive

returns to leanness. Eroglu and Hofer (2011) established that the

impact of inventory leanness on organizational performance is

positive and in general non-linear. Eroglu and Hofer (2011) research

also denotes that the impact of inventory leanness is bowl-shaped

which is aligned with inventory management theory that there is an

optimal degree of inventory leanness beyond which the marginal

impact of leanness with respect to financial performance ends up

being negative.

The survey of three-hundred and fifty-one management

accountants by the National Association of Accountants (NAA) in a

cross-section of diverse industries to evaluate the present inventory

management techniques in the U.S showed that just in time

inventory management approaches are facing increased levels of

popularity; the researches also showed that automated time-phased

inventory re-order systems are also experiencing increased usability

among organizations. The survey furthermore found out that eighty-

five percent of the respondents have no plans to revolutionize their

inventory techniques and that actual experience in business

depended highly compared to the inventory quantitative models. In

addition, the research found out that a number of inventory

management approaches, including assessing inventory levels and

balancing stock-out costs in relation to expenses associated with

higher inventory levels are infrequently used in practice (Romano,

2011).

Lazaridis and Dimitrios (2005) highlighted the significance of

firms maintaining their inventory at an optimum level by assessing

the relation between corporate profitability and working capital

management, and emphasized that its mismanagement would result

in extreme tying up of money at the expense of cost-effective

operations. A related research by Rehman (2006) concluded that

there is a strong negative relation between the daily inventory

turnover and the profit of companies.

Sushma and Phubesh (2007), with respect to the study of

twenty-three Consumer Electronics Industry firms in India found out

that firm’s inventory management practices played a major role in

the income performance.

Also, Rajeev (2008), a study of ninety-one Indian Machine Tool

Enterprises to assess the association between inventory

management approaches and inventory expenses ascertained that

effectual inventory management techniques leads to better inventory

performance of firms; furthermore, the effectual inventory

management techniques have an ultimate impact on the performance

of the general businesses’ processes.

Local Studies

According to the study of Anna Marie Beltran Distor of

Proposed Sales Monitoring System issued 1995, the accelerated

work structure of the company proper monitoring is essential in

order to keep track of the company’s sales activities. Her system

aims to come up with an efficient, and accurate mechanized system

of preparing invoices that will keep trSack of the daily transaction

and generate reports. Important information will be provided by this

study in order to prove that the computerization of the company’s

operation and achieve a more reliable and efficient means of

monitoring day to day activities. Her system focuses on the analysis

and design of the sales monitoring system which will monitor the

stacks inventory of the sales departments. This system of hers is

somewhat related to our study but our system focuses more on the

inventory monitoring system of a trading company.

Popular author of Accounting, Waldo T. Passion (1990) in his

book stated that, to improve their efficiency and reduce their cost of
operation. Reports are more timely and accurate. Computers have

large capacity to store data and tremendous speed to manipulate

and recall data to the format a user wishes to use which the

introduction of microcomputer computation of business is more

affordable.

Methodology

In this particular study, the researchers used the descriptive

research method. This method of research involves careful selection

of respondents, the use of research instruments; well-planned

strategy for gathering and interpreting of data.

The descriptive research method of research is described as

follows; Descriptive research describes and interprets what is as is.

It is concerned with the conditions on relationship that exist;

practices that prevail; belief, point of view or attitudes that are held;

processes that are going on; affects that are being felt or trends that

are developing; the processes of descriptive research goes beyond,

the mere gathering and tabulating of data. It involves an element of

analysis and interpretation of the meaning and significant of what is

being described. Thus, description is combined with comparison or

contrast involving measurements, well-planned strategy for

gathering and interpreting the data.

 Descriptive study is designed to gather information about

present existing condition. It describes a nature situation as exists

at the time of study and explores the causes of pertinent

phenomena.

Respondents of the study

The respondents are 16 employees involved in the inventory,

and sales of products that drugstores within the city of Santiago with

a minimum capitalization of Php 1,000,000.00

Sampling Technique

Purposive sampling method will be used to select employee

respondents, for the purpose of the study is to determine the

inventory management practices of the company and only those

employees directly involved in the inventory and management of

stocks of the company will be included.

Data Gathering Procedure

The data gathering procedure were the following:

1. A permission letter is secured from the Dean of the College of

Business Administration of the University of La Salette to

conduct a survey the employees of drugstores within the city

of Santiago.
 2. The researchers personally distributed the questionnaires to

the interested participants and explained to them the primary

goal of the study and explained to them the contents of the

questionnaire.

3. The result of the survey was summarized by the researcher by

tabulating and tallying the responses given by the participants

in relation to the questionnaire handed out to them.

Statistical tools

The researcher used statistical measures to properly conduct a

scientific presentation, analysis and interpretation of data gathered

frequency and percentage count will be used. Stated below is the

formula for frequency count and percent:

P=_______________ * 100

Where:

P = Percentage

f = Frequency

N = Total number of respondents

100 = Constant for percentage

 As to evaluate the inventory management practices and its

effect on service delivery of the drugstore the respondents and their

perception was subjected to the Five point Likert Scale.

The points, range and descriptive (qualitative) interpretation

used in this study were as follows:

POINTS RANGE DESCRIPTION

5 4.51-5.0 Always

4 3.51-4.5 Often

3 2.51-3.5 Sometimes

2 1.51-2.5 Rarely

1 1.00-1.5 Never

The formula used to compute Weighed Mean is as follows:

∑fx

X = ------------------

Where:

X = Mean

fx = Sum of the product of the scores

N= Total number of Score

RESULTS
This section pertains to the analysis and interpretation of the data

gathered from the different registered drugstores in Santiago City with a

minimum capitalization of Php 1,000,000.00. The main purpose of this study is to

determine the inventory management practices and its effect on the service

delivery of drugstores in Santiago City. The data collected through the

questionnaires were tabulated, analyzed and interpreted in response to the

question of the study.

Research Question One

1. What is the profile of the respondents in terms of gender, age, marital

status, educational attainment and length of service in the company. The

table shows that majority of the respondents are female, with age bracket

between 20 to 29 years old, have a marital status of single, have an

educational attainment of having a Bachelor’s degree and have been with

the company between 3 to 6 years.

Table 1.Respondents Demographic Profile

Characteristics Category f %
Female 15 93.75
Gender
Male 1 6.25
20 - 29 years old 10 62.5
30 - 39 years old 4 25
Age 40 - 49 years old 1 6.25
50 - 59 years old 0 0
60 years old and above 1 6.25
Single 11 68.75
Marital Status Married 5 31.25
Widow 0 0
High School Graduate 0 0
Educational Attainment College Undergraduate 2 12.5
Bachelor's Degree 13 81.25
 Master's Degree 1 6.25
Others 0 0
Less than a year 4 25
1 - 2 year(s) 3 18.75
Length of Service in the Company 3 - 4 years 6 37.5
5 - 6 years 0 0
7 years and above 3 18.75
Total 16 100

Research Question Two

2. What are the inventory management practices of Drugstores? As shown in

table 2 majority of the drugstores here in Santiago City are using

Automatic Replenishment as their main inventory management practice,

followed by Just-In-Time Inventory, with Economic Order Quantity (EOQ),

Economic Batch Quantity (EBQ) and Demand Forecast Inventory

following behind.
Table 2. Inventory Management Practices
Inventory Management Practices f %
Scientific Inventory Model 4 25
ABC Inventory Model 2 12.5
Thumb Rule model 2 12.5
Economic Order Quantity (EOQ) 5 31.25
Economic Batch Quantity (EBQ) 5 31.25
Vendor managed inventory 4 25
Demand Forecast Inventory 5 31.25
Automatic Replenishment 8 50
Just-In Time (JIT) inventory 7 43.75

Research Question Three

3. What is the perception of the employee-respondents in the inventory

management practices implemented by the drugstore? As shown in table

3 in relation to the perception of the respondents on inventory

management practices implemented by the company, an overall mean of

3.32 or an interpretation of “Moderately Affect” was garnered. Regarding

the matter of stock replenishment being done continuously got the highest

mean of 3.88 or an interpretation of “Affect” was garnered. Garnering the

lowest mean is the inventory management decisions by the firm are based

on guestimates with a mean of 2.44 or an interpretation of “Slightly Affect”.

Table 3. Perception on the Inventory Management Practices of the Company

 Statements Mean SD Interpretation
Inventory Management Practices
Management is aware of existing scientific models of
3.38 1.09
managing a firm inventory. Moderately Affect
All inventory items in our stores are classified
3.75 0.93
according to their economic value and importance. Affect
In arriving at the optimum quantity to order and kept
at any point in time, management is guided by a 3.44 1.09
specific scientific model. Moderately Affect
Inventory management decisions in my firm are
2.44 1.09
based on guestimates. Slightly Affect
In determining optimum stock levels, management
strives to maintain a balance between minimum cost 3.31 0.87
of ordering and holding stock. Moderately Affect
There is a specific procedure of determining the cost
3.44 0.96
components of total inventory in this organization Moderately Affect
We operate a made-to-stock inventory system
3.69 1.25
pending when demand arises. Affect
Our stock management decisions are solely made
2.63 1.41
by our suppliers. Moderately Affect
Inventory decisions in this firm are solely based in
3.25 1.18
predetermined market demand estimates. Moderately Affect
Stock replenishment is done continuously 3.88 1.09 Affect
Overall Mean 3.32 Moderately Affect

Research Question Four

4. What are the effects of the inventory management practices on the service

delivery of drugstores? In relation to the effects of inventory management

practices on service delivery table shows that an overall mean of 4.01 or

an interpretation of “Agree” was garnered. Regarding the inventory control

preventing products shortage and stock-out costs a mean of 4.19 or an

interpretation of “Agree” was garnered which is the highest. IN relation to

an effective inventory management practice leading to reduced delivery

lead time a mean of 3.81 or an interpretation of “Agree” was garnered

which is the lowest.

Table 4. Effects of Inventory Management Practices on Service Delivery

Effects on Service Delivery

Inventory control prevents product shortage and
4.19 1.05
stock-out costs. Agree
Inventory management minimizes rejection or scrap
4.00 1.03
rate of our products. Agree
Effective inventory management practice of this
3.81 0.66
organization leads to reduced delivery lead time. Agree
Inventory control minimizes wastages of products in
4.06 0.85
the company Agree
Employee morale is boosted by efficient
4.00 0.82
management of inventory in this organization. Agree
Overall Mean 4.01 Agree

DISCUSSION
Summary of Findings
The findings of the study shows that majority of the personnel working in

the inventory of drugstores in Santiago city are female, in the age bracket of 20

to 29 years old, are single, having Bachelor’s Degree and have worked between

3 to 4 years in the company. Implying that most of the respondents are educated

enough to be able to handle the inventory and management of the products that

the drugstores are selling, it also means that most of them have enough

experience in handling the stocks of a drugstore that they are able to understand

its effect on the efficiency of their service delivery to their clients.

In accordance to the inventory management that the companies

implement it can be seen that automatic replenishment is the most common

practice used wherein when the inventory count of a product is diminishing the
stocks are automatically ordered to maintain the availability of the product and

avoid costly overheads when there is a stock-out.

In relation to the inventory management practices of the company, most of

the respondents are well aware of following protocols set forth by the company in

order to maintain a workable inventory of different products in relation to its

economic value and importance to its clientele. The inventory operation is also

entirely dependent on the demand situation of the company’s clients. The

companies clearly does not depend on their product suppliers regarding on the

amount of inventory of different products they are maintaining in their stores.

As to how inventory management affects their service delivery to their

clients, it agreed that if inventory management is sloppy it would also result to

poor service delivery to their clients thus the need for an efficient inventory

management so as to maintain overhead expenses and longer lead time in the

delivery of products needed by their clients.

Implications for Practice

Closer coordination with the suppliers of the company would be of great

importance to the drugstore because it would ensure that lead time in the

delivery of orders would be well coordinated so as to ensure that stock

replenishment is done continuously and reduces product outage situations.

Recommendations

In light of the aforementioned findings the following recommendations are

given by the researchers:

1. Aside from the usual manual inventory being done by drugstore personnel

a computerized inventory system would be of very much assistance so as

to be able to find discrepancies in the manual process being done by the

personnel.

2. Additional research on the awareness and proficiency of drugstore

personnel in inventory management and sales monitoring should be done

to ensure that balance is maintained in the inventory of products that they

have in their store and the economic value that it will give the company

after sales.

3. Purchase officer should avoid making guestimates so as to ensure that

they are ordering the in-demand products and storage of slow moving

product does not give additional overhead costs that could lead to lower

revenue for the drugstore.