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CHAPTER I

THE PROBLEM AND ITS SCOPE

INTRODUCTION

Rationale of the Study

One of the most common problem faced by the manufacturing plants at

the Mactan Export Zone (MEZ) is poor inventory management that affects the

performance of the organization. Effectiveness of inventory management is a

vital part in the manufacturing organization to be more competitive.

Companies rely on the accuracy of available information on the status of

much needed materials and supplies for the production process. This vital

information is a critical input for the development of operating plans that will

guide the daily operations of the plant.

It becomes more important especially when the production system is on

JIT mode. Disruptions in the supply chain can create massive downtimes across

the system, and this must never happen. While many companies have adopted

and installed new inventory management systems, still the problem of inventory

discrepancies is a regular topic during management meetings.

In the Philippines, particularly in MEPZ2 Lapu-Lapu City, Cebu, many

companies have already established their quality programs to meet customer

demands. Among the many locators in MEZ is Fubu Electric Company. Like

many others inside the zone, it is adopting to the JIT mode in order to be

competitive.

To realize this, it has to deal with the constant variances in its inventory at
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the plant warehouse. Thus, this study intends to identify the problems of

inventory control and to determine which factors influence the effectiveness of

the plant’s inventory management.

Theoretical Background

This study is anchored on the theories developed by Tony Wild (2017)

which focuses on improvement of inventory record accuracy and Max Muller

(2012) on the physical location and control of inventory as critical components of

successful inventory systems.

Inventory record accuracy has become the main focus of attention for

many businesses because customers have higher expectations of the right item

being delivered on time, and competitive pressures do not allow for extra

stockholding. Businesses now have the opportunity to become much more

effective given the correct information, the development of better communication

and integration of systems. For inventory control as integral part of inventory

management, the pressure for most companies is to become more efficient and

hold fewer inventories (Wild, 2017).

On the other hand, physical location and control of inventory is very crucial

in forecasting and replenishment strategies. It is about more than counting what

they got. It is about understanding business realities and making decisions that

balance current demand with future needs-while keeping overhead and operating

cost to a minimum. It emphasized the forecasting and replenishment strategies,

the materials requirements planning and just-in-time inventory systems, and

simple formulas for calculating quantities and schedules (Muller, 2012).

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Inventory control is an integral part of inventory management which is the

supervision of non-capitalized assets (inventory) and stock items. It will supervise

the flow of goods from manufacturers to warehouses and from these facilities to

point of sale. A key function of inventory management is to keep a detailed

record of each new or returned product as it enters or leaves a warehouse or

point of sale. 

Inventory control is something that should be kept in mind for anyone in

the wholesale and retail distribution business. It involves having greater oversight

over one’s stock. Some refer to it as internal control or even as an accounting

system set up to safeguard assets. Inventory control is very important in

developing an effective system.

Understanding what an organization has, where it is in the warehouse,

and when stock is going in and out can help lower costs, speed up fulfillment,

and prevent fraud. A company may also rely on inventory control systems to

assess the current assets, balance the accounts, and provide financial reporting.

Inventory control is also important to maintaining the right balance of stock

in the company’s warehouses. Organizations do not want to lose a sale because

it does not have enough inventories to fill an order. Constant inventory issues like

frequent backorder and others can drive customers to other suppliers entirely.

When wholesalers and retailers have control over their inventories, they will be

able to provide better customer service. It will also help them get a better, more

real-time understanding of what to sell and what is not. In the same light,

commercial traders will not want to have excess inventory taking up space in
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their warehouses unnecessarily. Too much inventory can trigger profit losses–

whether a product expires, gets damaged, or goes out of season. Key to proper

inventory control is a deeper understanding of customer demand for company’s

products.

Inventory control, also called stock control, is the process of managing a

company’s inventory levels, whether that be in their own warehouse or spread

over other locations. It comprises management of items from the time they are in

stock to their final destination (ideally to customers) or disposal (not ideal). An

inventory control system also monitors their movement, usage, and storage.

Inventory control means managing inventory levels to ensure that they are

keeping the optimal amount of each product. Proper inventory control can keep

track of purchase orders and keep a functional supply chain. Systems can be put

in place to help with forecasting and allow the setting of reorder points, too.

Inventory control is vital for effective business operations. It can also come

with challenges. It may seem difficult to find the time and resources, and

developing a complete picture of your inventory can be difficult, especially for a

larger company or multiple inventory locations. However, these challenges can

be overcome to ensure effective control of one’s inventory. The best way to

manage all these challenges is to automate the inventory control process. Look

into the best inventory management software for the business.

Flow of the Research Process

The flow of the research process is composed of 3 stages: the input,

process and output.

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The INPUT of the study focused on the factors that led to the high

warehouse inventory discrepancies of materials at the Supply Chain Department

of Fubu Electric Company.

The PROCESS utilized document analysis and focused group discussions

with a selected group of workers assigned at the Supply Chain Department. The

records or documents were provided by the warehouse supervisor of the plant,

which then became the basis for the baseline data. The group of selected

employees composed the panel during the focused group discussions.

The group utilized the fishbone diagram approach of problem solving. The

determination of the most probable cause of the problem and the proposed

solutions were arrived at using the same approach.

The OUTPUT are proposed measures to reduce warehouse inventory

discrepancies materials in the Supply Chain Department.

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THE PROBLEM

Statement of the Problem

This research sought to study the factors causing high inventory

discrepancies at the Supply Chain department of Fubu Electric Company,

MEPZ2 Basak Lapu-Lapu City. Specifically, it intended to answer the following

questions:

1. What are the factors causing inventory discrepancy materials of Fubu

Electric Company, Basak MEPZ2, Lapu-Lapu City in terms of:

1.1 Man;

1.2 Machine;

1.3 Method, and;

1.4 Materials?

2. Based on the results of the study, what proposed measures can be

forwarded to reduce the high inventory discrepancies at the Supply

Chain department?

SIGNIFICANCE OF THE STUDY

This study will be beneficial to the following:

The Company: Fubu Electric Company

Results from this study will provide the company with useful information

and proper awareness about the causes rate value of inventory discrepancy

materials in Supply Chain Department and integrate the recommendations into

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their system. Through this, the inventory monitoring of the company will be

improved.

The Management Team of Fubu Electric Company

The Management and the Supervisors will be able to formulate and

implement a method that can minimize the obsolescence value of materials in

warehouse section thus making an increase materials support inventory and cost

reduction. This study will likewise provide very useful inputs to the management

team by utilizing some tools and techniques for reducing the materials

obsolescence rate for quality improvement and increasing the quality for

inventory management.

The Technicians / Workers

The results of the study will be cascaded to the concerned technicians /

workers. It will be able to acquire facts about the reduction of rejection rate

regarding the frequently occurred defects in the warehouse section. It will give

them information on the quantities of inventory needed in order to attain the

target and to meet the customer satisfaction.

The Researcher

This study will allow the proponent to expand her horizon in the area of

reducing obsolescence materials the warehousing section. This will give the

researcher an additional knowledge and information about the research. Through

the success study, the researcher will be able to gain additional learnings and a
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good training that will be useful for the researcher’s profession someday by

applying all the knowledge and learnings though the study.

Future Researchers

This study will allow the students and researchers to welcome a new study

as it enhances and enriches the knowledge base of specific fields. Future

researchers will find this paper a very useful source of information and reference

material and basis of their respective studies. They can use this study as basis

and will find this paper applicable for their future research.

RESEARCH DESIGN

Research Methods

This research utilized the document analysis method and the problem-

solving process using the fish-bone diagram. Official production line records

provided actual data which became the basis for the study. A team was created

to do focus group discussions (FGD) using brainstorming to come up with the

most number of inputs. The data gathered were tabulated, analyzed, and

interpreted thoroughly to obtain accurate results.

Research Respondents

The composition of the members of the project team that tackled this

project is shown in table 1.

Table 1
Members of the Project Team
n = 11
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Position Total

Fubu Electric Company – 1

Logistics Manager
Fubu Electric Company – 1
Warehouse Supervisor
Fubu Electric Company – 4
Material Storekeepers
Fubu Electric Company – 2
Warehouse shipping
Fubu Electric Company – 1
Inventory Analyst
Fubu Electric Company – 2
Receiving Clerk

Total 11

They were selected based on their knowledge and experience of the

operations at Supply Chain Department.

Research Environment

This research was conducted at the selected warehouse section, Supply

Chain Department of Fubu Electric Company, MEZ2 Lapu-Lapu City.

For the sake of confidentiality, the official name of the company will not be

used, instead it will be designated in this study as the “FUBU Electric Company”

This research was conducted in the plant compound of Fubu Electric Company.

Fubu Electric Company is located in Lapu-Lapu City, Cebu. It delivers to

the market with reasonably priced, high-quality Digital Consumer Electronics

developed on the basis of its own unique perspective.

In recent years, despite growing global demand in the Digital Consumer

Electronics market, intense competition continues to drive product prices sharply

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downward. However, it believes that this severe business environment also

presents us with an opportunity to fully realize our potential.

Since its founding in 1961, it has held an innovative return to the basics as

important, and will renew its focus on speed in all of its business activities.In

keeping with our Corporate commitment "to adopt continual product

improvements, to continually promote ever deeper trust, and to seek further

harmony and mutual prosperity," it will expeditiously develop products based on

a prompt and accurate perception of market and customer needs. Furthermore, it

will deliver products to the world market in a timely manner that are superior in

terms of cost performance and quality through proprietary production system, the

Fubu Production System (FPS), and the optimization of production facilities.

To optimize a step ahead of market needs and be flexible in responding.

To maintain a strong will, remaining steadfast in our resolve and not letting

stagnation set in. In these ways, the company believes that it will accelerate the

globalization of the Fubu Electric Company Group.

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Fig.2: Location Map of Fubu

Fig.3: Façade of Fubu Electric Company

Data Collection Techniques

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After the Manager of Fubu Electric Company agreed to this undertaking,

documents and records were made available to the researcher. They included

equipment records, operating costs from the accounting department, and records

of materials and supplies used during the servicing of requests.

Interviews with various sources provided additional information. During the

brain storming sessions, a lot of valuable information that proved to be very

crucial were shared and revealed. Teleconferencing with the respondents was

done with through the zoom apps.

Data Analysis

This research used the Problem – Solving – Process (PSP) with the aid of

the fish-bone diagram or the Ishikawa diagram. The PSP is the preferred method

used in manufacturing facilities. Production and service personnel use it to

identify the most probable cause or the root cause of the problem and from them

formulate solutions to correct it.

The fishbone diagram approach is used by Quality Circles (QC) and

Quality Improvement Teams (QIT) because of its simplicity and speed in

processing information. It is also used for evaluating the cost-benefit aspect of

solutions which ultimately become the basis for decisions.

The PSP in this research is modified and broken down into several steps

as follows:

1. Problem Statement

2. Data gathering

3. Prioritization
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4. Cause and effect analysis

5. Identifying the most probable cause

6. Solution formulation

7. Cost – benefit analysis

8. Preparation of action plan

9. Management presentation

In every step, all statements and information were validated prior to its use

during the process. Brainstorming for inputs and ideas was done at every step of

the process. The outputs are results of the team’s consensus.

DEFINITION OF TERMS

The terms being used in this study are operationally defined for a simpler

and better understanding.

Binning 

The smallest available unit of space in a warehouse is called the storage

bin. It describes the position in the warehouse where the goods can be stored. A

coordinate system is used to locate a storage bin.

Fishbone Diagram

This is a schematic presentation used in the PSP to show the root causes

of the problem. It is analyzed in the four areas of Man, Method, Machine and

Material.

Inventory

It refers to a complete list of items such as property, goods in stock, raw

materials, work-in-process or the contents of a building.

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Inventory Control

It refers to the inventory already in a distributor’s warehouse. It requires

knowing what products are in your inventory and where it is located within your

warehouse. It ensures the inventory remains in good condition and is organized

in a way that minimizes cost.

Inventory Discrepancy / Variance

It refers to the difference between the actual physical count against that of

the figures reflected in the records.

Inventory Management

It refers to the business processes of product replenishment and

forecasting. Management encompasses when to reorder products and how much

product to order, to avoid either stockouts or holding too much inventory. It

ensures that the right inventory is in the right place, at the right time, and in the

correct quantity

Inventory Taking

It refers to the act of taking a physical count inventory needed to ensure

that a firm's inventory records match the physical count, to support materials

management and to ensure that a correct ending inventory balance is reported

on its balance sheet.

Machine

When used in the fishbone diagram, this refers to all the activities that is

connected with machines or equipment that has contributed to the problem as

described in the "head" of the fishbone.

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Man

When used in the fishbone diagram, this refers to all the actions and

activities that are done by man that has contributed to the problem as described

in the "head" of the fishbone.

Material

When used in the fishbone diagram, this refers to all the actions, activities

and results that are related to the material used that has contributed to the

problem as described in the "head" of the fishbone.

Method

When used in the fishbone diagram, this refers to all the actions, activities,

processes and procedures both formal and informal that has contributed to the

problem as described in the "head" of the fishbone.

Mixed products

Maybe one product has been mixed in with others. This can occur,

especially if products or packaging are similar to each other. In the same way,

ensure that the correct product is counted correctly, as it may have been

mistaken for a similar product.

Problem Solving Process (PSP)

This refers to the process used in manufacturing facilities and service

organizations to tackle existing problems affecting the efficiency and productivity

of its operations. It normally covers 9 steps.

Radio Frequency Identification Device (RFID)

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Radio Frequency Identification (RFID) refers to a wireless system

comprised of two components: tags and readers. The reader is a device that has

one or more antennas that emit radio waves and receive signals back from the

RFID tag. Tags, which use radio waves to communicate their identity and other

information to nearby readers, can be passive or active.

Supply Chain Management

This refers to the management of the flow of goods and services and

includes all processes that transform raw materials into final products.

CHAPTER II

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

This chapter presents the data gathered from official company documents,

records and reports which were made available for this research. The tabulation,

presentation and analysis of the data are provided for easy comprehension and

understanding by the readers. The presentation is done according to the

sequence in the PSP as shown in the previous chapter.

The chapter is divided into three parts: the presentation of data, analysis

of the data, and the interpretation of the data. The presentation of data shows the

data in tabular form. The analysis and interpretation of data is done with the aid

of the fishbone diagram.

PART 1

PRESENTATION OF DATA
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Step 1: Presentation of Data

The following tables show the relevant data relative to the problem

statement.

Table 1 shows the causes of inventory discrepancies rate with their

corresponding frequency of occurrence and estimated losses. The estimated

operations related losses include the delays and idle time incurred at the other

related operations affected by the inventory record performance. The cost of the

related losses was released by the Bookkeeper of Fubu Electric Company.

Table 2
Causes of Inventory Discrepancies

Frequency of Estimated operations related

Cause
Occurrence losses ($)
Incorrect data recorded
during receiving / 25 / day $ 250.00 / day
inbound stock
Misplaced stock /
15/ day $150.00 / day
incorrect location
Wrong labeling of
10/ day $100.00 / day
items
Total $ 500.00 / day

Step 2: Prioritization

Prioritization is based on the item that has the biggest impact on

operations in terms of quality of the product and monetary value. The data for

cost involved were provided by the accounting section of Fubu Electric Company.

Table 3
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Problem Prioritization
Cost involved Cost involved –
Cause Priority
daily ($) annualized ($)
Incorrect data recorded
during receiving / $ 250.00 / day $ 78,000.00 / year 1
inbound stock
Misplaced stock /
$150.00 / day $46,800.00 / year 2
incorrect location
Wrong labeling of
$100.00 / day $31,200.00 / year 3
items
Total $500.00 / day $156,000.00 / year

* Annualized cost = daily cost X 312 working days per year

PART 2

ANALYSIS OF DATA

In analyzing the data that was gathered, the cause and effect diagram,

also known as the “Ishikawa fishbone diagram” or the “Why? Why? Diagram”

was used. The fishbone diagram dissects a problem into two: the head of the fish

represents the effect of the negative factors caused by the four M’s (Man,

Method, Machine, and Material).

MACHINE MAN

Incorrect Data
Recorded
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METHOD MATERIAL

Fig. 4: The fishbone diagram

Step 3: Cause and Effect Analysis

1) MAN

MAN

Incorrect data recorded during receiving/inbound

stock

Supervisor not updating the Human error during stocktake process

inventory system
Human error during order processing (e.g picking)

Incorrect Data
Recorded

As revealed during the FGD’s incorrect data recorded during

receiving/inbound stock happens when most of the receiving clerk are in a hurry

to meet their hourly production demands of materials. Thus, committing this

mistake. Also, lack of proper orientation to receiving, and unskilled clerk doing
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the job also contributed to the problem being encountered. Furthermore, there

are Supervisors who are not properly monitoring the warehouse transactions. In

some instances, materials were not properly checked upon receiving in the work

area. Statements highlighted in YELLOW are considered the root cause or the

most probable cause (MPC) in this area.

2) MACHINE

MACHINE

No enough space in rack for stocks.

Lack of forklift availability for
binning.

Computers used are old and obsolete.

Incorrect Data
Recorded

There is no enough equipment to be used during binning of materials.

Rack in facility is not enough space and labeled that will lead to mixing.

Computers are old version can lead to human error transactions.

3. METHOD

METHOD
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There is no established operating

procedure in materials issuance.

No established work instruction for

the warehouseman.

No QC inspection for materials

received after unloading from van.

Incorrect Data
Recorded

As observed, there is no established standard operating procedure in the

warehouse. Also, there is no established work instruction for the operation in the

warehouse.

4. MATERIAL

MATERIAL

Rack labels are not proper for identifications of stock

Receipts of material’s delivery is not clear.

Incorrect Data
Recorded

The low quality of receipts from material supplier leads to wrong

transactions due to indications are blurry and the papers used are low quality

used. Transactions might be mistakes due to quantity is unclear will lead to

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mistake details to input in computer

PART 3

MOST PROBABLE CAUSE

Step 4: Identifying the Most Probable Cause (MPC)

The Most Probable Cause (MPC) are those statements that are found at

the end of the branches (main or sub-branches). These statements are

considered the last cause or root cause of the problem.

In many situations these particular cause arises in the other branches of

the fishbone diagram. Their appearance in the other areas indicate that this is a

major cause for the entire problem. In the preceding step, the MPC are

highlighted in yellow.

The results are shown in table 4.

Table 4
AREA MOST PROBABLE CAUSE (S) Most
1. Incorrect data recorded during receiving/inbound stock
Probable
Cause(s)
2. Human errors during stocktake process.
MAN
3. Supervisor not updating inventory system.

4. Human error during order processing (e.g. picking).

1. Not enough space in rack for stocks.

MACHINE
2. Lack of forklift availability for binning.
CHAPTER
3. Computers used are old and obsolete.
III
1.There is no established operating procedure in materials issuance.

METHOD THE
2.No established work instruction for the warehouseman.

3.No QC inspection for materials received after unloading from van.

1 Rack labels are not proper for identifications of stock

MATERIAL
2 Receipts of material’s delivery is not clear.
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PROPOSALS

This chapter presents the proposals generated during the brainstorming

by the members of the Project Team. The expertise and experience of the

members provide a solid foundation for the proposals. The presentation is done

in continuation according to the sequence in the PSP as shown in the previous

chapter. The chapter is divided into four parts: the solution formulation, cost-

benefit analysis, the action plan and the management presentation.

PART 1

PROPOSED SOLUTIONS

Step 5: Solution Formulation

The proposed solutions are shown in table 5.

AREA MOST PROBABLE CAUSE
(S)
1. Incorrect data recorded during
receiving/inbound stock
2. Human errors during stocktake
MAN process.
3.Supervisor not updating
inventory system.
4.Human error during order
processing (e.g. picking).
1. Not enough space in rack for
stocks.
MACHINE
2.Lack of forklift availability for
binning.
3.Computers used are old and
obsolete.
1.There is no established
operating procedure in materials
issuance.
METHOD 2.No established work instruction
for the warehouseman.
3.No QC inspection for materials
received after unloading from
van.
1 Rack labels are not proper for
identifications of stock
MATERIAL
2 Receipts of material’s delivery is
not clear.
Table 5
Proposed Solutions Proposed
Conduct refresher training for Solutions
warehouseman and highlight
the key items that needs to be
improved.
Conduct refresher training for
warehouseman and highlight
the key items that needs to be
improved.
Train one warehouse personnel
to assist the supervisor
Conduct refresher training for
warehouseman and highlight
the key items that needs to be
improved.
Request for additional racks
The
Request for additional forklift
proposed
Request for new computers
solutions are
Establish the operating procedure
for material issuance
the result of
Establish the work instruction for
warehouseman
the
Establish QC inspection for
incoming materials from outside
Use RFID labels for easier
monitoring
Require suppliers to upgrade the
quality of their receipt (paper and
printing)
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brainstorming for ideas by the Project Team. Because the table have similar

MPC’s and PS’, it can be reduced by consolidation of similar items.

Table 6
Consolidated Proposed Solutions

AREA PROPOSED SOLUTION(S)

Conduct refresher training for warehouseman and

MAN highlight the key items that needs to be improved.
Train one warehouse personnel to assist the
supervisor

MACHINE Request for additional racks

Request for additional forklift

Dispose old computers and buy new ones.

Request Industrial Engineering (I.E.) to establish /

provide the Standard Operating Procedures and
METHOD Work Instruction in the warehouse.

Put a QC Receiving station for incoming materials

Use RFID labels for easier monitoring

MATERIAL
Require suppliers to upgrade the quality of their
receipt (paper and printing)

PART 2

COST – BENEFIT ANALYSIS

Step 6: Cost – Benefit Analysis

The results of the cost-benefit analysis are shown Table 7.

Table 7
Cost - Benefit Analysis
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AREA PROJECTED
PROPOSED SOLUTION(S) BENEFITS
COST ($)
Conduct refresher training for
Lesser errors and more
warehouseman and highlight the key $100.00 accurate reports
MAN items that needs to be improved.
Trained warehouseman can
Train one warehouse personnel to
assist the supervisor
$ 50.00 take over updating the system
in case the supervisor is absent

Additional space for increase in

MACHINE Request for additional racks $ 300.00 volume

Facilitates the movement of

Request for additional forklift $ 21,000.00 stocks due to increase in
volume
Dispose old computers and buy new More accurate data made
ones.
$ 5,000.00 available
Request Industrial Engineering (I.E.)
to establish / provide the Standard
Operating Procedures and Work
none More streamlined procedures
METHOD
Instruction in the warehouse.
Screens defective materials
Put a QC Receiving station for
incoming materials
$ 3,300.00 from suppliers before being
accepted by the company
Use RFID labels for easier monitoring $ 200.00 Easier tagging and retrieval
MATERIAL
Require suppliers to upgrade the
quality of their receipt (paper and none Lesser encoding errors
printing)

Total $ 29,950.00

The refresher / training participants will include 4 material storekeepers, 2

shipping personnel, I inventory analyst and 2 receiving clerks. Implementing the

proposed solutions will also eliminate priority problems 2 and 3.

Total annual losses due to defect : $ 156,000.00

Less: Total annual cost of proposal : $ 29,950.00

Total annual savings after elimination of causes : $ 126,050.00

PART 3

PROPOSED ACTION PLAN

Step 7: Action Plan

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Table 8 shows the proposed action plan developed by the Project team

Table 8
Proposed Action Plan

AREA PERSON(S) TARGET

PROPOSED SOLUTION(S)
RESPONSIBLE DATE

Conduct refresher training for

HR and Logistics
warehouseman and highlight the key items August 2022
MAN Manager
that needs to be improved.

Train one warehouse personnel to assist HR and Logistics

August 2022
the supervisor Manager

MACHINE Request for additional racks Logistics Manager August 2022

Request for additional forklift Logistics Manager August 2022

I.T. Manager / Logistics

Dispose old computers and buy new ones. August 2022
Manager
Request Industrial Engineering (I.E.) to
establish / provide the Standard Operating I.E. Manager / Logistics
August 2022
Procedures and Work Instruction in the Manager
METHOD warehouse.

HR Manager / QC
Put a QC Receiving station for incoming
Manager / Logistics August 2022
materials
Manager

Use RFID labels for easier monitoring Logistics Manager August 2022
MATERIAL
Require suppliers to upgrade the quality of
Logistics Manager August 2022
their receipt (paper and printing)

PART 4

MANAGEMENT PRESENTATION

Step 8: Management Presentation

The final step in the PSP is the Management Presentation. The results of

the study will be presented to the Management Committee of the company for

deliberation and approval. Once approved, all the proposals will be implemented.
 28

The results of the implementation and the projected savings will be

monitored monthly and reviewed to check if the proposed solutions have reduced

the number of times the problem has recurred. In addition, the monetary

equivalent of the non-recurrence will be reflected in the financial statements.

After one year, the consolidated results will be reviewed by the Project Team.

In the case of this research paper, the results of the study will be

presented to the ETEEAP faculty for review and approval prior to the

Management Presentation.

CHAPTER IV

SUMMARY, FINDINGS, CONCLUSION AND RECOMMENDATIONS

SUMMARY

Statement of the Problem

This research sought to study the factors causing high inventory

discrepancies at the Supply Chain department of Fubu Electric Company,

 29

MEPZ2 Basak Lapu-Lapu City, Cebu. Specifically, it intended to answer the

following questions:

1. What are the factors causing inventory discrepancy materials of Fubu

Electric Company, Basak MEPZ2, Lapu-Lapu City in terms of:

1.1 Man;

1.2 Machine;

1.3 Method, and;

1.4 Materials?

2. Based on the results of the study, what proposed measures can be

forwarded to reduce the high inventory discrepancies at the Supply

Chain department?

This research utilized the document analysis method and the problem

solving process using the fish-bone diagram. Official production line records

provided actual data which became the basis for the study. A team was created

to do focus group discussions (FGD) through the zoom apps. The data gathered

were tabulated, analyzed, and interpreted thoroughly to obtain accurate results.

FINDINGS

After processing all the data and inputs, the following are the factors that

led to high inventory discrepancies.

MAN : Incorrect data recorded during receiving / inbound stock

: Human errors during stocktake process.

: Supervisor not updating inventory system.

 30

: Human error during order processing (e.g. picking).

MACHINE : Not enough space in rack for stocks.

: Lack of forklift availability for binning.

: Computers used are old and obsolete

METHOD : There is no established operating procedure in materials

issuance

: No established work instruction for the warehouseman.

: No QC inspection for materials received after unloading from

van

MATERIAL : Rack labels are not proper for identifications of stock

: Receipts of material’s delivery is not clear.

CONCLUSIONS

Based on the findings of this study, it can be concluded that the problem

was caused mainly by a combination of man, machine, methods and material

factors that were used in the conduct of controlling the inventory at the

warehouse. That the value of the errors committed leaves a significant impact on

the profitability of the company if left unchecked.

The results confirm the theories developed by Tony Wild (2017) which

focuses on improvement of inventory record accuracy and Max Muller (2012) on

the physical location and control of inventory as critical components of successful

inventory systems.

RECOMMENDATIONS

Primary Recommendation
 31

The researcher highly recommends to the management of Fubu Electric

Company, MEZ2 Basak, Lapu-Lapu City to approve and implement the

proposals outlined in Chapter III of this study.

Secondary Recommendations:

To improve the efficiency and productivity of Fubu Electric Company, the

following activities are recommended:

1. The project team should continue looking for operation related concerns

and solving them as part of its continuous improvement initiatives.

2. Initiate a study aimed at assessing the productivity at Warehouse

Department of Fubu Electric Company.

 32

APPENDICES

LIST OF REFERENCES

Books

Muller, Max, Essentials of Inventory Management, (2012), Amacom, New York,

United States

Scolari, Elizabeth, Effective Inventory Management: 5 Best Practices (2015),

USA
 33

Waters, Donald, Inventory Control and Management, 2 nd Edition (2013), Wiley

India Pvt. Limited.

Wild, Tony, Best Practice in Inventory Management, 2 nd Edition (2002), Taylor and
Francis, New York, NY USA

Wild, Tony, Improving Inventory Record Accuracy-Getting Your Stock Information

Right, 2017, Elsevier Ltd., New York

Electronic Sources

https://www.amazon.com/Practice-Management-Peter-F-Drucker/dp/0060878975

https://encyclopedia2.the freedictionary.com/Production+Rejects (date retrieved:

March 10, 2019)

http://www.inventory.com (date retrieved: January 20, 2022)

https://www.onlinesupplychainmanagement.com (date retrieved: February 23,

2022)

https://www.onlineclothingstudy.com (date retrieved: January 20, 2019)

https://www.operationsmanagement/studyguide.com (date retrieved: March 1,

2022)

January 25, 2019

THE PRESIDENT
Funai Electric Company
MEZ2 Basak, Lapu-Lapu City
Cebu Philippines

Dear Mr. President,

 34

The undersigned is an employee of Funai Electric Company, previously

assigned as warehouse assistant, and at present is enrolled at the University of
San Jose-Recoletos in Cebu City, Philippines in the ETTEAP Program of the
school.

The ETTEAP Program is designed for students who are currently working
but have not yet completed their Baccalaureate Degree. It gives the students a
chance to study without sacrificing their work.

Part of the requirements for the degree Bachelor of Science in Business

Administration major in Operations Management is the submission of a Project
Study. The undersigned has chosen the topic “Factors causing inventory
discrepancies rate at warehouse Department of Funai Electric Company, MEZ2
Basak, Lapu-Lapu City”. The objective of the study is to identify the causes of the
problem and formulate solutions to solve it.

To achieve the objective, the undersigned would like to ask your

permission to have access to relevant data from the operations and accounting
files of the Company to make the study more concise and accurate. In addition, I
would like to ask for permission to form a Project Team composed of selected
employees to assist me in this undertaking.

Hoping for your consideration and approval.

ERWIN GALAS MARINDOQUE

Warehouseman
Endorsed by:

DR. EMILIO D. MATHEU JR

Project Study Adviser
CURRICULUM VITAE

PERSONAL INFORMATION

Name: Erwin Galas Marindoque

Address : Humay-Humay Stre

Baranggay Gun-ob,
Lapu-Lapu City
 35

Date of Birth: September 4, 1977

Civil status: Married

EDUCATIONAL BACKGROUND

Tertiary : University of San Jose-Recoletos

Cebu City
Bachelor of Science in Business Administration major in
Operations Management (ETEEAP)
2018 – 2019

: University of Lapulapu-Mandaue
Bachelor of Science in Criminology (First Year level)
2001-2001

: Asian College of Technology

Colon Cebu City
Computer Associate (Graduated)
1998-2000

Secondary : St. Alphonsus Catholic School

Poblacion, Lapu-Lapu City
1994

Elementary : Pajo Elementary School

Pajo, Lapu-Lapu City
1991

Professional Experience

Firefighter *Fire Suppression

Afras Trading & Contracting Company *Search and Rescue
Riyadh, Kingdom of Saudi Arabia *Overhauling
September 15,2018–Present *Other Emergency Assistance
(Site: King Faisal Specialist Hospital *Fire Prevention and
Safety
And Research Center KFSH&RC) *Maintenance of Fire Station’s
ools
and equipment

Firefighter *Fire Suppression

First National Operation and *Search and Rescue
Maintenance Company (NOMAC) *Overhauling
Jeddah, Kingdom of Saudi Arabia *Othere mergencey assistant
May 11,2015– December 31, 2017 * Fire Prevention and Safety

(Site: Qurayyah Independent Power
Tools Plant/QIPP)
Firefighter
Saudi Sicli Company
Jeddah City, Kingdom of Saudi Arabia
March 12,2013 – April 15, 2015
(Site: King Abdulla Unisversity of
Science and Technology)
Receiving Clerk
FUNAI Electric Company
Sinulog St., MEPZII Basak
Lapu-Lapu City, 6015
July 7, 2010 – March 13,2013
Material Handler
FUNAI Electric Company
Sinulog St., MEPZII Basak
Lapu-Lapu City, 6015
September 19, 2007- July 7,2010
House Detective
Criminology Anti-Crime Agency Inc.
4rth FloorAdela Building
General Maxilom Road
Mango Avenue, Cebu City
June 01, 2006- August 30, 2007
Warehouseman
36
* Maintenance of Fire Station’s
and equipment
*Fire Suppression
*Search and Rescue
*Overhauling
*Other Emergency Assistance
*Fire Prevention and Safety
*Maintenance of Fire Station’s
Tools and equipment
*Perform encoding of all transactions
*Certified forklift operator
* Maintain excellent housekeeping
* Verify all incoming materials
based on delivery receipt/invoice
*Unloading of incoming materials
using forklift equipment
*Make any discrepancy report of
items receipts.
*Implement proper safety handling of
all equipment
*Mark official voucher number
reflected during transaction on the
item as first in first reference.
*Emergency responder team (ERT)
*Perform daily inventory
*Certified forklift operator
*Binning all materials stored
*Support production raw materials
*Maintain excellent housekeeping in
area.
*Safety practice in handling
equipment
*Observe FIFO system of perishable
items.
*Emergency responder team (ERT)
*Reporting
*Communication
*Fire fighting
*Monitoring and control
*Body and belongings searcher
*First aide
*Perform daily inventory
 37

A2Z Logistics *Certified forklift operator

MEPZ1, Lapu-Lapu City *Binning all materials stored
September 27, 2005- January 30, 2006 *Prepare material issuance
*Received items based on
receipts

Production Operator *Follow work instruction

Lear Corporation *Maintain housekeeping in area

MEPZ1, Lapu-Lapu City, 6015 *Comply daily output target

August 12, 2004- June 11, 2005

Food & Beverage Server *Welcome guests

Waterfront Cebu City Hotel *Take order
Salinas Drive Road, Brgy. Lahug *Serve food and beverages
March 15, 2000-October 17, 2002 *Bus-outing and preparing for
set-
up
*Up-sale products

Aviation Security *Reporting

Philippine Aviation Security Services *Communication
Mactan Cebu International Airport *Fire fighting
July 1, 1998-March 15, 2000 *First aide
*Monitoring and control
*Body and belongings searcher