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Canicara's Pasalubong retail store is a merchandising company engaged in the buying and selling of

delicacies from famous manufacturers in Pampanga. From the nature of its business operation, it can be
easily inferred that inventory is its most important asset.

However, based on the personal interview conducted, the company does not have a formal inventory
management system. The company purchases the quantity of goods and carries such in the inventory,
partly base on the store manager's judgement and partly on the company's previous year experience. As
a result of the unsophisticated way of handling the inventories, the business incurs higher carrying cost
due to to an excess of inventory overstock that is difficult to move and forgone profit from the stock
outs for low-priced, high volume products. Most of these problems are usually due to poor inventory
processes and out-of-date systems.

In connection with the above mentioned problems that the company encounters, e main objective is to
develop a formal, effective inventory system that will be suitable for the company's size and nature of
operation, and develop ways on how to improve its inventory processes using the least possible cost.
Specifically stated, this objective can be broken down into:

(a) To come up with a sophisticated technique to determine the right amount of the inventory to be
purchased and stored in the inventory.

(b) To develop a user-friendly but highly functional computerized system to keep track of inventories.

(c) To determine an inventory flow that will lead the company to an efficient and effective operation.

The problem's scope will be to the extent of inventory management in terms of three areas (1)the
quantity, (2) the system and (3) the inventory flow. Such scope will cover only from the purchase to
handling phase. The ways to promote or increase sales will not be addressed as part of the said

Although it may seem like the inventory is a non-pervasive problem, it is highly significant. The intensity
of such can be greater than expected because mismanagement of inventory can actually jeopardize the
business' operation.

It can cause the company to spend unnecessary amounts of money on items that will not profit the
business, lack of access to real time information you wont know how or where products move, so theft,
obsolete items, etc. will make tracking inventory nearly impossible and a lack of inventory balance
makes product shortages and overstocking unavoidable. Overstocks can result to loss due to shrinkage
while stock outs can increase lead time, disappoint customers and ultimately, disrupt the smooth flow of

Since the operation began, the problem was actually present. It was just not that significant and
prominent before because of less dynamic technology. And such problem can continue and can get
worse in the future if not given proper attention in the present. This might even lead to the company
incurring losses. The company has only a single branch which serves as the location or focus of the
The human elements that can be identified with the problem are the:

(a) Attitude of the manager and employee

(b) The skills of the manager such as critical thinking, problem-solving, attention to details, decision-
making skills and the ability to produce wise judgement.

(c) Training of the manager and employee


Since the business is not complex, it can easily be detected when it's having problems. Even without a
formal tracking system, the manager's observation was able to reveal and subjected such problem for