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Review of Related Literature and Studies Critical

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This chapter presents a brief discussion of the literature reviewed by the researchers which further enriched the conceptualization of the study and helped in describing the cognitive design that guided the conduct of the researcher.

Foreign Literature

Inventory Systems Summary

According to the U.S. Small Business Administration, “Inventory refers to stocks of anything necessary to do business” (U.S. Small Business Administration, 2010) The U.S. Small Business Administration publication describes what constitutes successful inventory management balancing cost versus benefits of inventory, including Maintaining a wide assortment without spreading the rapidly moving items too thin, Increasing inventory turnover without sacrificing service, Keeping stock low without sacrificing performance, Obtaining lower prices by making volume purchases, Maintaining an adequate inventory without anexcess of obsolute items.

Companies need Inventory System

According to Eugene F. Brigman, in the book of Fundamentals of Financial Management published at year 2000 in the publishing company of Holt, Richard and Winston Sounders College Publishing; Companies are increasingly employing Inventory System. A computer start with an inventory counts in memory. Withdrawals are recorded by the computer as they are made, and the inventory balance is constantly revised. When the recorded point is reached, the computer automatically places an order, when this new order is received, the recorded balance is increased. Retail stores have carried this system quite far, each item has magnetic codes, and as on item is checked out, and it passes over an electronic reader, which then adjusts the computersinventory balance, at the same time the price is fed to cash register tape.

Inventory System Consist

An inventory control system is used in many warehouses to track the location, quantity, and status of goods that are to be sold. Shipping and receiving of products is scheduled by an inventory control system. Inventory control uses barcodes and RFID tags to track specific items. An audit, or a physical count of inventory, is used to find out how many items are in an inventory. Inventory taking is often required in order to get an accurate count for accounting valuation purposes. Some inventory items have barcodes attached to them or imprinted on them. These barcodes can be read during an audit by barcode reading devices.

Steps for Inventory Management

This section of the paper looks at fundamental definitions and explanations relating to Inventory Control, Management and Planning. Typical conflicts within the organization that may affect inventory and what can be done to resolve and avoid these. According to article of Dr Geoff Ralph, Witek Brzeski and Gail Brad bear, published at year 2003; A simple stock classification method is discussed that gives details about the ABC technique, Pareto distribution and takes a look into further class level and part level analysis. There is a worked example of an ABC classification with valuable information about creating alternative scenarios and varying parameters for class boundaries and order frequency per class. he results are shown in a series of statistical tables.

Advantages of Inventory System

According to Kj Henderson, they have a three major advantages by using of inventory system these are (Time savings, Accuracy, and Consistency) which helps a lot for a businessman to increase the sales of their business.

Time Savings
As the old saying goes, “time is money”. The amount of time that can be saved by a business is, perhaps, the biggest benefit of using a computerized inventory system. A great example of this benefit is the retail industry. In cases where a shop maintains all data manually, its manager must reconcile each sales receipt with every piece of physical inventory. Depending on the size of the establishment and how many different products are sold, this can be a daunting and time consuming task. If that same store, however, used a computerized point of sale, POS, system, the master inventory list would be updated electronically each time a sale is made. The only thing a manager would have to-do each day is print out the report highlighting the inventory to be restocked.

An additional benefit of using a computerized inventory system is the accuracy it ensures. Eighteenth century English poet Alexander Pope is often quoted as having said, “To error is human.” When an inventory list is maintained by hand, the margin of error Widens with each update. If one mathematical calculation is wrong or one typo is made, disaster may occur. For instance, if a clerk accidentally adds a zero to the end ofa purchase order, a business could potentially end up paying for 10,000 units of merchandise as opposed to the 1,000 that is actually needed.

A small business operates most efficiently when its processes are executed in consistent manner. By using a computerized inventory system, a business owner can ensures that all orders, reports and other documents relating to inventory are uniform in their presentation, regardless of who has created them. This will allow ease of reading. In addition, uniformity creates a professional appearance, which can go a long way to impress associates, such as potential investors.

Disadvantages of Inventory System

According to Neil Kokemuller, by using of Inventory system they have some disadvantages by using of this. These are (Customer Needs, Inventory Costs, Coordination, and Risks).
Customer Needs

Balancing the goals of avoiding stock outs while minimizing inventory costs is at the heart of just-in-time inventory. One of the main benefits of automated and efficient inventory replenishment systems is that you can quickly respond to reduced inventory levels. Companies are now equipped to pull back on stock in a given product category and ramp up inventory in another as customer needs and interests change.

Inventory Costs

Minimization of inventory management costs is a primary driver and benefit of just-in-time practices. Inventory management has costs, and when you reduce the amountof holding space and staff required with JIT, the company can invest the savings in business growth and other opportunities, points out the Accounting for Managementwebsite. You also have less likelihood of throwing out product that gets old or expires, meaning reduced waste.


A disadvantage of managing a just-in-time inventory system is that it requires significant coordination between retailers and suppliers in the distribution channel. Retailers often put major trust in suppliers by syncing their computer systems with suppliers so they can more directly monitor inventory levels at stores or in distribution centers to initiate rapid response to low stock levels. This usually means build-up of Technology infrastructure, which is costly. This coordinated effort is more involving on the whole than less time intensive inventory management systems.


Just-in-time inventory is not without risks. By nature of what it is, companies using JIT intend to walk a fine line between having too much and too little inventory. If company buyers fail to adjust quickly to increased demand or if suppliers have distribution problems, the business risks upsetting customers with stock outs. If buyers over compensate and buy extra inventory to avoid stock outs, the company could experience higher inventory costs and the potential for waste.

Professional Inventory Management

According to Dr Geoff Relph,Witek Brzeski and Gail Bradbear; Inventory can be call as Professional Inventory Management if they meet the terms; (Good Inventory, Extending Stock Classification for Greater Control, A worked example showing the impact of moving from 3 to 6classes, Buffer Stock Methodology, Simple buffer stock, Stochastic buffer stock, A worked example showing the impact of simple safety stock and stochastic safety stock.

The Advantages of a Computerized Inventory Management System

According to Bonnie Conrad, Computerized Inventory Management System gives advantage to the business like first, the Speed and Efficiency. A computerized inventory management system makes everything from inputting information to taking inventory easier. Doing a hand count of inventory can take days, but with a computerized inventory management system, the same process can be done in a matter of hours. Second the Document Generation, once the computerized inventory management system is in place, managers and workers can use it to automatically generate all kinds of documents, from purchase orders and checks to invoices and account statements. Managers can also use the system to automatically order products when they run low. Third, the Timely Data with a manual system, the data is only as accurate and up to date as the last hand count. With a computerized inventory management system, the management team can pull a report and instantly see how many units are on the floor, how many have sold and which products are selling the fastest.

Disadvantages of a Computerized Inventory Management System

According to the article of Johnson Braham if they have advantages by using of Inventory System, they have also Disadvantages in using a computerized Inventory. First the Reliance on Technology, with a computerized inventory management system, the company is at the mercy of its technology. Outside factors like a power failure or the loss of Internet or network connectivity can render the system temporarily useless. Second the Accuracy Issues, a computerized system alone does not ensure accuracy, and the inventory data is only as good as the data entry that created it. Companies that plan to use a computerized inventory management system need to have a system in place to validate their data and check the numbers reported by the system. A select hand count or targeted audit may be necessary to ensure the integrity of the system. Third the Risk of Fraud, any computerized system carries the risk of intrusion, and with computerized inventory management system comes the risk of fraud as well. A dishonest vendor could hack the system to receive payment for products never delivered, or a dishonest employee could redirect checks to themselves.

Local Literature

Computer-based system is a complex system wherein information technology plays 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 nonintegrated 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 t 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.

Foreign Studies

Automation can draidatically affect all phases of inventory management, including counting and monitoring of inventory items; recording and retrieval of item storage locations; recording changes to inventory; and anticipating inventory needs, including inventory handling requirements. Effective Inventory Analysis. Get Data Related to Effective Inventory Analysis. For many distributors, inventory is the largest and perhaps the most important asset. Inventory Ties up more money than buildings or equipment, and is often less “liquid.” It is crucial, then, That distributors develop and use a comprehensive set of tools that allows close monitoring of the performance of inventory investments. Read more about simple measurements that can help you maximize your investment in inventory. According to the study of Edwin Bello and his fellow researchers of Computerized Monitoring and Inventory of Stock with Warning Level dated March 2005, many firms have thousands of items of inventory which require some form of control. The usage calculations and record keeping chores would soon become overwhelming were it not for the computer and its unique information storage and retrieval capabilities.

Local Studies

According to the study of Anna Marie Beltran Distort 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 tracks 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.


The proponents believe that every literature and every studies stated in this research is similar on the present study . The proponents relate and differentiate the research based on the flow of their transaction from the proposed study. The transaction and process and also the design specialization will easy help to acquire and accommodate and communicate with the user. The proponents get and use other research in this chapter, in which it helps to them, because they get knowledge during creating the systems. This Review of Related Literature and Studies, illustrate the specific and general task of the Inventory Management System, also the types of Inventory that gives a lot of knowledge for everyone before entering into business and using Inventory. In this chapter the proponents put a different opinion of others in terms of Inventory, the Literatures and studies should get on the Book articles on the internet.

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