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Inventory Control System Essay

This study is established towards gathering and developing strategies that could solve the inappropriate inventory system of 7-eleven Sto. Rosario, Angeles City Outlet. The researchers established Trend analysis (regress over time) and Basic Economic Order Quantity (EOQ) to solve problem of inappropriate inventory management. The findings of this study revealed the problem on the current inventory management system that is evident in the product overstocking and under stocking problem of 7-eleven. Forecasting demand may improve the ordering quantity every time they place an order and EOQ may result in the significant savings for the company.

The Story of Convenience Shopping 7-eleven pioneered the convenience store concept way back in `1927 at the Southland Ice Company in Dallas, Texas. In addition to selling blocks of ice to refrigerated food, an enterprising ice dock employee began offering milk, bread and eggs on Sundays and evenings when grocery stores were closed. This new business idea produced ideas that satisfied customers and increased sales, and convenience retailing was born.

The company’s first convenience outlets were known as Tote’m stores since customers “Toted” away their purchases and some even sported genuine Alaskan totem poles in front. In 1946, Tote’m became 7-Eleven to reflect the stores’ new, extended hours 7 a.m until 11 p.m., seven days a week. The companu’s corporate name was changed from the Southland Corporation to 7-Eleven, inc, in 1999.

Each Store focuses on meeting the needs of busy shoppers by providing a broad selection of fresh, high quality products and services at everyday fair prices, along with speedy transactions and a clean,safe and friendly shopping environment. In year 2004, 7-Eleven located at Sto. Rosario Street Angeles City was established under the management of Edgar Nucum who was the first manager under corporate group of the Philippine Seven Corporation. However, on May 2, 2005, the said business was turnover To Mevin Teopaco because of the conversion of the establishments from corporate to franchisee Mr. Teopaco who took the business through formal application and training on how to run the business. He is responsible for ordering, buying and maintaining inventory, hiring and training employees, as well on payroll, cash variation, supplies, certain repairs, maintenance and other controllable in store expenses.

The company’s mission is t offer time-conscious customers a full range of products and services that meet their ever-changing daily needs through quality, speed, selection and value in a safe, friendly and pleasant environment. And their vision is to “become a recognized leader in providing time-conscious consumers with a full-range of products and services that meet their ever-changing daily needs. We will be the customer-preffered convenience store by exceeding customer expectations through quality, speed, selection, and value in a safe and pleasant environment, treating our employees with dignity and respect, recognizing our franchisees and suppliers as business partners, being a good corporate citizen. Achieving our vision and continued growth will provide our shareholders with a beter than competitive return on their investments”.

Inventories are ordered on a daily basis and delivered through central distribution located in Pasig City. Inventories are individually monitored thorugh monitoring sheet report, sales and ordering are incorporated at SAS System that link to POS (Point of Sales). Although Mr. Teopaco had special training in managing the said business, still sometimes he experienced and encountered different problems related to operation such as inventory losses. Such problem is caused by different factors. This problem arises when the management encounters discrepancy in the delivery of the products. However, there are products, which the store provides but not salable. Such products sty longer in the store and become spoiled.

Which are referred to as bad merchandise or BM. In effect, the company experience losses on inventories because such scenario usually happens in the store. Since the store is open 24 hours a day and the security system of the store is not that fully implemented, there are customers who shop lift from the store especially “out-of-sight” and small products. Sometimes the management could not trace those products until they make an inventory count. Another thing is that some employees do unnecessary things in the store like eating some of the products or keeping them. In such case, inventory losses happen. The occurrence of these different factors led to the existence of a current problem, which need to be monitored and evaluated by the management in order to achieve the desired objectives of the said company.

The Current Situation on the Inventory Management of 7Eleven
The main problem 7Eleven is currently facing is the inventory losses as shown on Figure 1. This problem exists because of different factors that the management should eliminate or if not, at least minimize. Such factors are the theft and shoplifiting that result to lesser sales or profit, and obsolescence of the products that result to high inventory sales. Unavailability of the prodcuts results to stock-outs and lower sales because customers tend to patronize competitor’s products.

The second factor that led to the afordeimentioned problem is inefficient employees. Inefficient employees can occur just like not performing their duties well and sometimes by concealing merchandise in a purse, pocket, or bag and removing it from the store. It can also occur by stealing cash, allowing others to steal merchandise, eating the goods and sometimes some employees do not punch other products sold. Employee theft can sometimes be charges as embezzlement due to be trusted fiduciary status of the employee. Being inefficient employee can also result dissatisfied customer. All of these methods lead to loss of inventory(shrinkage) and/or profit for the merchant. Preventing employee theft and being irresponsible is a constant challenge for the store. The store knows that it must put systems in place to prevent or deter internal theft.

To be effective, loss prevention systems must be designed to reduce the opportunity,desire, and motivation for employee theft. Basic loss prevention steps involve good procedures for hiring, training and supervision of employees and managers. Procedures that are clearly defined, articulated, and fully implemented will reduce opportunity, desire, and motivation for employees to steal. For others, the only barrier to dishonesty is the fear of being caught. The employee thief risks being fired, arrested, jailed, and paying restitution. The other cause of the said problem is the inefficient inventory control system.With this, inventories are not properly controlled which results to a high percentage of spoilage or expiration of some products. When an inefficient valuation is assigned to the inventory, it may end up having higher inventory expense.

Moreover, it will be costly on the part of the store. To determine the cost to be associated with the inventory, a physical inventory must be taken in order to determing the number of units present. Then, the costs are attached to each item in the inventory. When dealing with the inventories, cost should be interpreted to mean the sum of all direct or indirect charges incurred in bringing an item of inventory to its existing condition and/or location. The store have a price tag or a universal product code, it is acommon practice to take the physical inventory at the store from these price tags and codes it can determine their inventory. Maintenance of inventory losses may result in lost sales and disgruntled customers.

The last factor is the lack of security control system because of limited employees that wil oversee the inventories specially those that are not visible. In effect, shoplifting and theft arises. Technology alone will not eliminate retail theft. Store who wants to reduce losses should also Strive to provide good customer service and promote high job satisfactions levels among its retail sales associates. Stores that utilize security technologies generally have lower overall inventory shrinkage than those retailers who do not. Technology also allows employees to focus more time on assisting customers and less on patrolling the aisles.

Inventory is considered the current asset to the store because it will normally be sold within the store’s operating cycle.  All of the said causes result in inventory losses and lead to different effects, such as, lesser profits/sales, dissatisfied customers, and stock-outs. These are not beneficial to the company so the management need to find ways on how to overcome the causes that lead to the above effects.

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