CHAPTER ONE

INTRODUCTION

1.0 Introduction

Inventory Management Systems is a key instrument for businesses when tracking their inventory. Typically, Inventory Management Systems are used by firms that either sell a product or manufacture a product for purposes of accounting for all the tangible goods that allow for a sale of a finished product, or parts for making a product. The size and volume of a firm help dictate whether or not a firm is in need of such a system as they can be quite extensive and costly. Large firms that have thousands of components must have a system in place for the primary objective of tracking their assets. There are three main reasons why an Inventory Management System is needed such as timing/lead time, forecasting, and utilizing economies of scale. In dictionary meaning of inventory is a “detailed list of goods, furniture etc.” Many understand the word inventory, as a stock of goods, but the generally accepted meaning of the word ‘goods’ in the accounting language, is the stock of finished goods only. In a manufacturing organization, however, in addition to the stock of finished goods, there will be stock of partly finished goods, raw materials and stores. The collective name of these entire items is ‘inventory’.  The term ‘inventory’ refers to the stockpile of production a firm is offering for sale and the components that make up the production. The inventory means aggregate of those items of tangible personal property which

(i) are held for sale in ordinary course of business.

(ii) are in process of production for such sales.

(iii) they are to be currently consumed in the production of goods or services to be available for sale.

Inventories are expandable physical articles held for resale for use in manufacturing a production or for consumption in carrying on business activity such as merchandise, goods purchased by the business which are ready for sale. In recognition of the relevance of inventory, there is need for a decision support system to enable store keepers know the inventory/stock level of products. Cadavid and Salianga (2011).

1.1 Theoretical Background

The decision making in inventory management must resolve mainly three basic issues: How often the inventory status should be determined? When a replenishment order should be placed? and How large the replenishment order should be? (Silver & Pyke, 1998). Some companies, to solve the first question acquire enterprise information systems in order to know the inventory status in real time, and with this information make the processes of purchasing, manufacturing and distribution. To solve the second and third issues, companies implement inventory control policies that require the definition of some parameter such as: reorder points, order quantities, inventory levels, security stocks, and service levels. Enterprise information systems include some inventories models but the inventory manager has the responsibility of determining, in most cases empirically, the parameters that is needed to process the information; but most enterprise information systems do not have tools that support the decision making for inventory management.

1.2 Statement of Problem

It is often the case that critical items are out of stock, leading to hasty buying because of low stock levels. There are cases of inaccurate recording or poor entering of some data information, which was a good indication of poor inventory control. There is at many times, discrepancy between the information provided by stock control ledger card and the actual physical stock balance. Organizations need a decision support system for inventory management to avoid unnecessary tying down of funds as well as loss in fund due to pilferage, spoilage and obsolescence of stock. They also need it to avoid too low inventories so as to meet users demand as at when needed. Therefore, the mere fact that ineffective inventory management affects virtually the organizational objectives necessitates this research work on decision support system for inventory management.

1.3 Aim and Objectives of the Study

The aim of the study is to develop a decision support system for inventory management. The following are the specific objectives:

To develop a database system to manage inventory. To incorporate decision support system to enable the effective monitoring of stock levels. To develop a system that will facilitate the presentation of inventory reports. To develop a system that will update the inventory level of products as they are being sold.

1.4 Significance of the Study

The significance of the study is that it will enable the management of pepsi bottling company, Ikot Ekpene to effectively manage their inventory records. It will provide useful information that will aid them make a decision on when to reorder for a product that has reached the set re-order level. The study will also serve as a useful reference material to other researchers seeking for information pertaining the subject.

1.5 Scope of the Study

This study covers decision support system for inventory management using Pepsi Bottling Company Ikot Ekpene as a case study. It is limited to the registration of stocks and their re-order level so as to know when to get more of the stock. It tracks down stock level as there are being sold.

1.6 Organization of the Research

This research work is organized into five chapters. Chapter one is concerned with the introduction of the research study and it presents the preliminaries, theoretical background, statement of the problem, aim and objectives of the study, significance of the study, scope of the study, organization of the research and definition of terms.

Chapter two focuses on the literature review, the contributions of other scholars on the subject matter is discussed. Chapter three is concerned with the system analysis and design. It analyzes the present system to identify the problems and provides information on the advantages and disadvantages of the proposed system. The system design is also presented in this chapter.  Chapter four presents the system implementation and documentation. The choice of programming language, analysis of modules, choice of programming language and system requirements for implementation.  Chapter five focuses on the summary, conclusion and recommendations are provided in this chapter based on the study carried out.

1.6 Definition of Terms

Computerize: To store information in a computer system or process it by computer.

Decision support system: An aspect of management information system that is focused on enabling its users make timely decisions with well programmed software systems.

Management: The organizing and controlling of the affairs of a business or a sector of a business

Inventory:  A record of a business’s current assets, including property owned, merchandise on hand, and the value of work in progress and work completed but not sold.

System: A combination of related parts organized into a complex whole.