Inventory Management Practices in Selected Medium-Scale Boutiques in Sta.Rosa, Laguna

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Chapter 1: Introduction and Background of the Study


"Inventory" to many small business owners is one of the more visible and tangible aspects of doing business. Raw materials, goods in process and finished goods all represent various forms of inventory. Each type represents money tied up until the inventory leaves the company as purchased products. In a literal sense, inventory refers to stocks of anything necessary to do business. These stocks represent a large portion of the business investment and must be well managed in order to maximize profits. In fact, many small and medium-scale businesses cannot absorb the types of losses arising from poor inventory management. Unless inventories are controlled, they are unreliable, inefficient and costly.

Retailing is one of the major industries and fastest-growing segments of the Philippine economy today. As one of the nation's largest employers, the retail industry provides excellent business opportunities for the Filipinos. The entrepreneurs behind these ventures risk their capital, invest their time and make a living by offering consumers something they need or want. This could be attributed to the notion that a trading business is simple to operate and could easily generate cash. Retail business reports the cost assigned to unsold units left on hand as merchandise inventory, the only inventory account that appears in financial statement.

An inventory management is an important concern for managers in all types of business. Firms typically stock hundreds or even thousand of items in inventory, ranging from small thing to large items. Naturally, many of the items a firm carries in inventory relate to the kind of business it engaged in. For these reasons, management is vitally interested in inventory planning and control. Sales and customers may be lost if products ordered are not available in the desired style, quality, and quantity. Also, business must monitor inventory level carefully to limit the financing cost of carrying large inventories. In recent year, with the introduction and execution of “Just-In-Time” inventory ordering system and better supplier relationship, inventory level have become leaner for many enterprise.

Background of the Study

A medium-scale business or industry has an asset of P5 million or more. It is owned and operated by a single person, two business partners, or a corporation. It hires a specialized staff to run the business. Garment factory and boutiques are examples. Boutiques often have a harder time managing their inventory than big department stores, because bigger chains have money to hire outside inventory companies, or their inventory is closely tracked electronically. Boutique owners usually have to manually keep track of everything, which translates into a big job. Managing the inventory of an entire boutique can be a daunting task. It is a big responsibility and can be devastating if not done correctly. Inventory management is reported to be an area that most managers do not like to deal with, or have the most problems with. It can be time consuming and is a lot of work for one person. Inventory Management must be designed to meet the dictates of market place and support the company’s Strategic Plan. The many changes in the market demand, new opportunities due to worldwide marketing, global sourcing of materials and new manufacturing technology means many companies need to change their Inventory Management approach and change the process for Inventory Control.

Inventory is defined as the blocked Working Capital of an organization in the form of materials and usually a distributor’s largest asset. As this is the blocked Working Capital of organization, ideally it should be zero but still maintaining inventory. This inventory is maintained to take care of...
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