i

FACTORS CAUSING INVENTORY DISCREPANCY OF RUSTANS

COMMERCIAL CORPORATION, CEBU

___________________________________

A Project Study
Presented to the ETEEAP Faculty of
University of San Jose Recoletos
Cebu City. Philippines

________________________________

In Partial Fulfillment
Of the Requirements for the Degree
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION MAJOR IN
OPERATION MANAGEMENT

_______________________________

By:
Cynthia S. Labastida
July 2024
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ACKNOWLEGEMENT

Heartfelt gratitude is due to the entities and persons who have extended their
assistance in making this study a reality.

To Dr. Jeanivic Idjao , the researcher’s adviser for sharing her time and expertise; the
following Panel of Examiners: Dr. Achilles S. Ponce, External consultant; Dr. Edgar
R. Detoya , Dean, School of Business and Management; and Dr. Lorecito M. Sy,
ETEEAP Director, for their insights and valuable suggestions; the ETEEAP faculty
experts, facilitators and staff for sharing their wisdom and valued assistance.

To all the respondents, for their patience and cooperation in spending a part of their
time answering questions, giving insights and suggestions.

To the researcher’s family, relatives and friends for their unqualified support and
fervent prayers; and all those who, in one way or another helped in making this study
a reality; and most of all, to the Almighty God for all the graces and guidance.

CYNTH S. LABASTIDA
Researcher
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TABBLE OF CONTENT

CHAPTER I

THE PROBLEM AND ITS SCOPE

INTRODUCTION
PAGE

Rationale of the Study

1 -2

Theoretical Background
3-5

Flow of the Research Process

6

Flow Chart
7

THE PROBLEM

Statement of the Problem

8

SIGNIFICANCE OF THE STUDY

9

RESEARCH DESIGN
10

Research Methods
11

Research Respondents
12
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Research Environments
13 - 14

Data Collection Techniques

15 - 16

DEFINITION OF TERMS
17 - 19

II PRESENTATION, ANALYSIS AND

INTERPRETATION OF DATA

PART 1: Presentation of Data

20 - 21

PART 2: Analysis of Data

22 - 28

PART 3: Most Probable Cost

29

III THE PROPOSALS

PART 1: Proposed Solution

30 - 32

PART 2: Cost – Benefits Analysis

33 - 34

PART 3: Proposed Action Plan

35

PART 4: Management Presentation

36

IV SUMMARY, FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

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Summary
37

Findings
38

Conclusions
39

Recommendations
40

APPENDICES
41

LIST OF REFERENCE
42

TRANSMITTAL LETTER
43

CURRICULUM VITAE
44 - 46
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LIST OF TABLES

TABLE NO. TITTLE

PAGE

1 Member of the Rustans Team

12
2 Causes of Inventory Variances
21
3 Problem Prioritization
22
4 Most Probable Cause
29
5 Propose Solutions
31
6 Consolidated Proposed Solutions
32
7 Cost – Benefit Analysis
33
8 Proposed Action Plan
35
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LIST OF FIGURES

FIGURE TITLE
PAGE

1 Research Flowchart 7

2 Location Map of Rustans Commercial 13

Corporation

3.1 The Fishbone Diagram 23

3.2 The Fishbone Diagram 24

3.3 The Fishbone Diagram 25

3.4 The Fishbone Diagram 26

3.5 The Fishbone Diagram 27

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CHAPTER 1

THE PROBLEM AND ITS SCOPE

INTRODUCTION

Rationale of the Study

In the dynamic landscape of retail, effective inventory management stands as a

linchpin for sustained profitability and customer satisfaction. Rustans Commercial

Corporation, a distinguished player in the retail sector, faces a pressing challenge of

dwindling inventory levels. This case study delves into the intricacies of Rustans'

inventory management dilemma, analyzing the underlying factors contributing to low

inventory levels and proposing strategic solutions to mitigate these challenges.

Amidst the evolving consumer preferences, fluctuating market demands, and

supply chain disruptions, maintaining optimal inventory levels emerges as a

formidable task for Rustans. The repercussions of low inventory levels reverberate

across the organization, from compromised customer experience due to stockouts to

increased carrying costs and lost revenue opportunities.

Understanding the root causes behind the depleted inventory levels is

imperative for devising effective remedial measures. Factors such as inaccurate

demand forecasting, inefficient procurement processes, inadequate inventory control

mechanisms, and supply chain bottlenecks may underpin Rustans' inventory woes.

Moreover, external factors like seasonal fluctuations, supplier reliability issues, and

economic uncertainties might exacerbate the situation.

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To address these challenges comprehensively, this case study will explore a

multifaceted approach encompassing data-driven analytics, process optimization, and

strategic partnerships. By leveraging advanced forecasting models, adopting lean

inventory management practices, enhancing supplier collaboration, and implementing

robust inventory control systems, Rustans can revitalize its inventory management

framework and ensure sustained operational excellence.

The insights gleaned from this case study will not only empower Rustans

Commercial Corporation to surmount its current inventory challenges but also offer

valuable lessons for other players grappling with similar issues in the retail landscape.

By embracing innovation, agility, and collaboration, Rustans can embark on a

transformative journey towards redefining its inventory management paradigm and

fortifying its position as a market leader in the retail.

Theoretical Background:
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This research is anchored on the theory of inventory control by Lisa Schwarz

(2022). Inventory management in retail industries is a critical aspect of operations,

directly influencing profitability, customer satisfaction, and overall business

performance. It involves the strategic planning, monitoring, and control of

merchandise, ensuring that the right products are available in the right quantities at the

right time to meet customer demand while minimizing costs and maximizing

efficiency. Several theoretical frameworks and concepts underpin effective inventory

management in retail, including:

Economic Order Quantity (EOQ) Theory: EOQ theory, developed by Ford

W. Harris in 1913 and later refined by others, provides a mathematical model for

determining the optimal order quantity that minimizes total inventory costs. It

considers factors such as ordering costs, holding costs, and demand variability to

strike a balance between inventory carrying costs and stockout costs. Retailers use

EOQ to optimize inventory replenishment decisions and minimize excess inventory or

stockouts.

Just-In-Time (JIT) Inventory Management: JIT is a philosophy originating

from the Toyota Production System, emphasizing the elimination of waste and the

continuous improvement of processes. In retail, JIT involves receiving goods from

suppliers precisely when they are needed for sale, reducing the need for large

inventories. By synchronizing production and inventory levels with customer demand,

JIT minimizes inventory holding costs, improves cash flow, and enhances

responsiveness to changing market conditions.

ABC Analysis: ABC analysis categorizes inventory items into three classes

based on their importance and value to the business: A (high-value, low-quantity

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items), B (moderate-value, moderate-quantity items), and C (low-value, high-quantity

items). This classification helps retailers prioritize inventory management efforts,

focusing attention on high-value items that contribute significantly to revenue and

profitability while applying less scrutiny to lower-value items.

Inventory Turnover Ratio: The inventory turnover ratio measures how

efficiently a retailer manages its inventory by comparing the cost of goods sold

(COGS) to the average inventory level during a specific period. High inventory

turnover indicates that goods are selling quickly, reducing the risk of obsolescence

and minimizing holding costs. Conversely, low turnover may signify overstocking or

slow-moving inventory, leading to increased carrying costs and potential losses.

Demand Forecasting and Inventory Planning: Accurate demand forecasting

is crucial for effective inventory management in retail. Retailers utilize various

forecasting methods, such as time series analysis, causal modeling, and qualitative

techniques, to predict future demand patterns and adjust inventory levels accordingly.

By aligning inventory levels with anticipated demand, retailers can optimize stock

levels, minimize stockouts, and capitalize on sales opportunities.

Vendor Managed Inventory (VMI): VMI is a collaborative inventory

management approach where suppliers monitor and replenish inventory levels at the

retailer's location based on agreed-upon criteria, such as sales data or predefined

inventory thresholds. VMI transfers some inventory management responsibilities to

suppliers, streamlining the replenishment process, reducing stockouts, and improving

supply chain efficiency.

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Studying inventory management in retail involves exploring various concepts,

methodologies, and strategies employed by retailers to efficiently manage their stock

levels. There are several reference authors whose works are widely recognized in the

field of inventory management in retail.

According to Philip Kotler, the strategic importance of inventory in the broader

context of marketing and business management, advocating for a holistic approach

that considers customer needs, supply chain dynamics, and technological

advancements.

James B. Ayers emphasizes several key insights about inventory management:

Strategic Importance: Ayers stresses that inventory management is not merely a

logistical task but a strategic imperative for businesses. Efficient inventory

management can significantly impact a company's bottom line, customer satisfaction,

and overall competitiveness.

Cost Considerations: Ayers highlights the costs associated with holding inventory,

including storage, obsolescence, and the opportunity cost of tying up capital.

Minimizing these costs through effective inventory management techniques such as

just-in-time (JIT) inventory and lean principles is crucial.

Supply Chain Optimization: Ayers emphasizes the interconnectedness of inventory

management with the broader supply chain. Effective coordination and collaboration

with suppliers and distributors are essential for ensuring optimal inventory levels,

reducing lead times, and enhancing overall efficiency.

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Donald J. Bowersox emphasizes the role of technology and information systems

in enabling efficient inventory management practices. He highlights the importance of

leveraging technologies such as inventory optimization software and RFID systems to

enhance visibility and control over inventory levels throughout the supply chain.

Flow of the Research Process

The research procedures consist of three phases: the input, the process, and the

output.

The INPUT of the study focuses on the factors affecting the inventory problem in

Rustans Commercial Corporation.

The PROCESS utilized documents analysis and focused group discussions with

all the relevant staff. The third – party account services provided the records and

documents, which then became the basis of the data. The group utilized the fishbone

diagram and problem – solving process. Determining the most probable cause of the

problem and the proposed solutions were arrived at using the same approach.

The OUTPUT aims to establish an effective inventory control system suitable for

Rustans Commercial Corporation.

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INPUT PROCESS OUTPUT

MAN

Documents Analysis
Factors Proposed mea
Causing Problem Solving
MATERIAL to addresse
Inventory METHOD
S  Fishbone Inventory
Discrepancy in
Rustans Diagram Discrepanc
 Brainstorming

MACHINE

FIGURE 1. Research Flow Chart

THE PROBLEM
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Statement of the Problem

This research sought to study the factors causing inventory discrepancy problem in

Rustans Commercial Corporation. Specifically, it is intended to answer the following

questions:

1. What are the factors causing inventory discrepancy at Rustans Commercial

Corporation in terms of:

1.1 Man

1.2 Machine

1.3 Method, and.

1.4 Materials

2. Based on the results of the study, what proposals for improvement can be

forwarded?

SIGNIFICANCE OF THE STUDY

This study will be beneficial to the following:

The Company: Rustans Commercial Corporation

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The outcomes of the study will provide the company with valuable insights and a

comprehensive understanding of the factors influencing inventory discrepancy

problem. The company can enhance its inventory management practices by

incorporating this insight into its operations. This will lead to an overall improvement

in the company’s inventory monitoring processes.

The Management Team of Rustans Commercial Corporation

The Store Operation Manager will be able to establish and implement an action

plan that can decrease the value of the product’s obsolescence, resulting in lower

expenses, the avoidance of stockouts, and higher customer satisfaction, leading to

enhance business operations.

The Staff and Personnel

The outcome of the research will be conveyed to the Rustans team, leading to the

efficient management of the inventory that involves timely placement of the purchase

orders to replenish inventory and maintaining accurate stock records, including

quantities and locations. The team will also enhance their abilities by using inventory

management software.

The Researcher

This research will enable the author to broaden her perspective in the realm of

proficient and successful inventory management systems while using specialized

software for inventory management. As a result of this successful study, the researcher

will acquire supplementary insights and valuable training that can be directly applied
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to her future professional endeavors. This process involves the practical application of

the knowledge and insights obtained throughout the study.

Future Researchers

This research will enable students and researchers to embrace a fresh investigation

that will amplify and enhance their understanding of their fields, leveraging the

opportunities presented by the digital age. Subsequent researchers will perceive this

article as a vital source of knowledge and an essential reference, serving as a

foundation for their research endeavors. Those who use it can utilize this research as a

basis and will find it relevant to their future investigations.

RESEARCH DESIGN

Research Methods

This research utilized document analysis and the Fishbone Diagram, both valuable

problem – solving methods. Document analysis facilitates data-driven decision –

making through the systematic extraction of insights from documents. In contrast, the

Problem – Solving Process provides a structured approach to identifying and

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addressing the fundamental causes of problems. Integrating these methods increases

the effectiveness of problem – solving and facilitates well- informed decision –

making. A team was formed to conduct focus group discussions (FGD) with the

greatest of inputs possible. The data was collated, examined, and interpreted properly

to acquire reliable results.

Research Respondents

Table 1 illustrates the arrangement of the Rustans team that undertook this specific

project.

Table 1

Members of the Rustans Team

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Position Total

Rustans Commercial Corporation

1
Store Branch Manager

Rustans Commercial Corporation

1
Store Branch Asst. Manager

Rustans Commercial Corporation

1
Store Operation Manager

Rustans Commercial Corporation

1
Store Consultant
Rustans Commercial Corporation
1
Department Head
Rustans Commercial Corporation
1
Receiving Manager
Rustans Commercial Corporation
1
Receiving Supervisor
Rustans Commercial Corporation
1
Concierge Manager

Rustans Commercial Corporation

1
Visual Merchandising Manager

Rustans Commercial Corporation

1
I.T. Supervisor
Total 10

Research Environment

The research on Inventory Discrepancy Problem were conducted at Rustans

Commercial Corporation, situated at Ayala Center Cebu. Rustans Commercial

Corporation has been operating its business for 70 years, making it a longstanding

entity in the industry.

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Figure 2: Rustans Commercial Corporation Ayala Center Cebu

Rustan's Commercial Corporation is a renowned upscale retail company based in the

Philippines. Established in 1951 by Bienvenido Tantoco Sr., Rustan's has become

synonymous with luxury shopping experiences in the country. Initially starting with a

single store, the company has expanded over the decades, operating multiple branches

across key cities like Metro Manila, Cebu, and Davao.

Specializing in high-end fashion, cosmetics, home furnishings, and gourmet food

items, Rustan's has curated a portfolio of prestigious international brands, making it a

preferred destination for affluent consumers seeking luxury products and personalized

service. Over the years, the company has diversified its offerings, catering to various

market segments through different retail formats such as Rustan's Department Store,

Rustan's Supermarket, and Rustan's Marketplace.

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In addition to its retail operations, Rustan's is also known for its commitment to

corporate social responsibility and community development initiatives. The company

actively engages in philanthropic efforts, supporting education, healthcare, and

environmental sustainability programs in partnership with various organizations.

Despite facing challenges from changing consumer preferences and evolving market

dynamics, Rustan's Commercial Corporation continues to uphold its legacy of

excellence, innovation, and customer-centric approach, ensuring its position as a

leading player in the Philippine retail industry.

Data Collection Techniques

As soon as the Store Branch Manager at Rustans Commercial Corporation

consented to the project, the researcher gained access to various documents and files.

These encompassed operational expenses noted by the third-party vendor and records

of materials and resources expended when fulfilling service demands. Further insights

were acquired through interviews with the Rustans Team. In brainstorming session,
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vital information was exchange and unveiled. The communication with respondents

was facilitated through weekly team meetings.

Data Analysis

The research is focused on using the Problem – Solving – Process (PSP) along with

the Fishbone Diagram, as methods for problem – solving and quality improvement.

The Problem – Solving – Process (PSP) is a method used to identify and solve

problems systematically. It involves a step-by-step approach to identify the root cause

of a problem and develop effective solutions. Fishbone Diagram (Ishikawa Diagram),

named after its creator, Kaoru Ishikawa, is a visual tool used to identify and analyze

the potential causes of a problem. It resembles a fishbone, with the main problem or

effect at the “head” and potential contributing factors branching out like the “bone.”

This diagram is particularly useful for visualizing the relationship between various

factors and the root cause of the problem.

The fishbone diagram’s simplicity and straightforward structure make it a popular

choice for problem-solving processes. It allows teams to quickly brainstorm and

organize potential causes, facilitating efficient discussion and analysis.

The PSP approach is useful for identifying causes and solutions and evaluating

the cost -benefit aspect of proposed solutions. This helps make informed decisions

about which solutions to implement, considering the potential benefits and associated

cost.

The PSP utilized in this study has been adapted and segmented into various stages,

outlined as follows:

1. Problem Statement
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2. Data gathering

3. Prioritization

4. Cause and effect analysis.

5. Identifying the most probable cause

6. Solution formulation

7. Cost-benefit analysis

8. Preparation of action plan

9. Management presentation

Overall, the combination of the problem- solving process (PSP) and the fishbone

diagram provides a systematic and visual approach to identify, analyze, and address

problems, as well as to improve processes and make informed decisions about

solutions.

DEFINITION OF TERM

In this research, the terminology employed is clarified and explained practically to

enhance comprehension and simplify understanding.

Fishbone Diagram

A fishbone diagram, also known as an Ishikawa Diagram or Cause and Effect

Diagram, is a visual tool used to analyze and display the potential causes of a specific

problem or effect. The diagram resembles the skeleton of a fish, with the “head”
 17

representing the problem or effect being investigated and the “bones” branching out to

represent different categories of potential contributing factors.

Inventory

Refers to the stock of goods, materials, or assets a business or organization holds

as part of its operations. These items include raw materials, components and finished

products, and supplies.

Inventory Management

It oversees inventory levels, including tracking, forecasting and demand,

optimizing stock levels, and managing orders to ensure smooth business operations.

Inventory Management Software

Technology solutions are designed to assist businesses in managing their inventory

effectively.

Inventory Tracking

Refers to keeping records of items in stock, including quantities, locations, and

product details.

JIT stands for “Just -in- Time.”

A system that aims to optimize processes by delivering the right quantity of

product or materials to the right place at the right time.

Inventory Discrepancy

It refers to a situation where there is a difference between the recorded inventory

(the amount of goods or materials listed in an inventory management system) and the
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actual physical inventory (the amount of goods or materials physically present in the

storage location). This can manifest as either a surplus or a deficit.

Machine

In the context of a fishbone diagram, the term “Machine” encompasses all the

operations and functions associated with mechanical or technical equipment that have

directly influenced the issue identified in the “head” of the fishbone diagram.

Material

In the context of a fishbone diagram, the term “Material” encompasses all the

actions, activities, and outcomes that have directly influenced the issue identified in

the “head” of the fishbone diagram.

Method

In the context of a fishbone diagram, the term “Method” encompasses all the

actions, activities, formal and informal processes, and procedures that have directly

influenced the issue identified in the “head” of the fishbone diagram.

POS system, or Point of Sale System

Refers to the hardware and software combination business use to complete a sale

or a transaction. The hardware components of the POS system include devices such as

cash registers, barcode scanners, receipt printers, and sometimes touchscreen

monitors. The software component of a POS system manages the sales process, track

inventory, generates receipts, and often provides reporting and analytics.

Problem – Solving – Process (PSP)

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PSP is a method used to identify and solve problems within various processes

systematically. It involves a step-by-step approach to identify the root cause of a

problem and develop effective solutions.

Supply Chain Management (SCM)

Refers to the strategic coordination and integration of various processes, activities,

and stakeholders involved in the flow of goods, services, information, and finances

from the initial production stage to the final consumption by end customers.

CHAPTER II

PRESENTATION, ANALYSIS, AND INTERPRETATION OF DATA

This chapter showcased the information obtained from company documents,

records, and reports, all of which were accessible for this study. The data has been

organized, presented and analyzed to simplify readers’ understanding. The

organization adheres to the sequential order outlined in the previous chapter’s

Problem – Solving – Process (PSP).

The chapter is structured into three sections: data presentation, analysis, and

interpretation. The data presentation segment illustrates the information in tabular

format. Analysis and interpretation of the data are facilitated using the fishbone

diagram as a visual aid.

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PART 1

PRESENTATION OF DATA

Step 1: Statement of the Problem

The subsequent tables present the pertinent data concerning the issue.

Table 2 displays the factors contributing to the inventory variance rate, associated

occurrence frequencies and projected losses. The projected losses encompass

operational delays and idle periods incurred in interconnected operation impacted by

the performance of inventory records. The bookkeeper furnished the expenses tied to

these losses at Rustans Commercial Corporation.

Table 2

Total Inventory in peso value at Rustans is 65 million pesos with a total of 13,000

SKU’s as of June 2024.

Causes of Inventory Discrepancy

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Estimated
Causes of Inventory Frequency of
Operation related
Discrepancy Occurance
losses(Pesos)

System Error 1/week 5,000/week

Delayed Shipping 1/week 30,000/week
Wrong Forecasting 1/week 20,000/week
Deffective Merchandise 1/week 10,000/week
Total 65,000/week

Step 2: Prioritization

Prioritization is based on the items that have the most significant impact on

operation regarding product quality and financial value. The third-party vendor of

Rustans Commercial Corporation provided the data for the cost involved.

Table 3

Problem Prioritization

Estimated Operation Estimated Operation

Causes of Inventory Frequency of related related
Priority
Discrepancy Occurance losses(Pesos) losses(Pesos)
per week per year
System Error 1/week 5,000/week 240,000 4
Delayed Shipping 1/week 30,000/week 1,440,000 1
Wrong Forecasting 1/week 20,000/week 960,000 2
Deffective Merchandise 1/week 10,000/week 480,000 3
Total 65,000/week 3,120,000/ year
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*Annualized cost = weekly cost x 48 weeks per year

PART 2

ANALYSIS OF DATA

A Fishbone Diagram, also known as an Ishikawa Diagram or Cause AND Effect

Diagram, is a visual tool used to analyze and display the potential cause of a specific

problem or effect. The diagram resembles the skeleton of a fish, with the “head”

representing the problem or effect being investigated and the “bones” branching out to

represent different categories of potential contributing factors.

MAN METHOD

INVENTORY
DISCREPANCY

MACHINE MATERIALS
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Fig 3.1: The Fishbone Diagram

Step 3: Cause and Effect Analysis

1. MAN
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MAN

In accurate data during ordering

Lack of inventory monitoring

Insufficient system tra ining
Wrong item ordered.

INVENTORY
DISCREPANCY

FIGURE: 3.2

As disclosed in the Focus Group Discussion (FGD’s) highlighted that incorrect

forecasting leads to a challenge within inventory management systems. Participants

noted that overestimation or underestimation of demand often triggers a surplus or

shortage of stock, disrupting supply chains and potentially impacting customer

satisfaction. Moreover, the financial implications of excess inventory, including

storage costs and potential obsolescence, were underscored as significant concerns.

The findings of the FGD underscore the imperative for organizations to address the
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impact of incorrect forecasting on inventory management comprehensively. By

adopting data-driven approaches and fostering collaboration across supply chain

functions, businesses can proactively mitigate inventory problems and enhance

operational resilience in an increasingly dynamic marketplace.

2. MACHINE

MACHINE
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Insufficient knowledge on how to operate the system

Obsolescence of software

Underutilized inventory management software

INVENTORY
DISCREPANCY

FIGURE: 3.3

Machine factors can significantly impact the accuracy of inventory data, leading to

discrepancies between recorded and actual stock levels. Employees who are not

trained enough on technology tools result in errors during use, affecting data accuracy,

especially if there’s a software update, and unauthorized or excessive manual

adjustments to inventory levels within the system lead to discrepancies if not properly

documented and verified

3. METHOD

METHOD

Inconsistent placement of order

Lack of standard operating procedure

Insufficient stock on hand Poor inventory monitoring.

INVENTORY
DISCREPANCY
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FIGURE: 3.4

As noted during the operational activities, use of bin cards needs to be applied for

proper counting and inventory monitoring. The current layout challenges our store

staff to navigate the aisles and locate products easily. As well as there was an absence

of well – defined and documented guidelines that outline the step- by – step

processes, protocol, and best practices for various tasks and activities. With robust

SOP’s, teams can handle tasks differently, leading to consistency.

4. MATERIALS

MATERIALS

Not Applicable

INVENTORY
DISCREPANCY
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FIGURE: 3.5

During one of our recent team hurdles, it was noteworthy that any concerns for

discussions were absent or raised in materials. This absence of material-related

concerns not only underlines the stability and efficiency of our current

material supply chain but is also a testament to dedication and expertise that

this crucial aspect of our workflow continues to function smoothly, allowing

the team to focus on other areas that may require attention and improvement.

This lack of concerns in the material department is a positive indicator of the

overall health of our organization.

PART 3

MOST PROBABLE CAUSE

Step 4: Identifying the Most Probable Cause (MPC)

The statement located at the end of branches, whether primary or secondary, is

identified as the Most Probable Cause (MPC). These statements are regarded as the

fundamental cause of the issue. Often, these specific causes arise in different sections

of the fishbone diagram. Their presence in other segments signifies their significant

role as a primary cause of the overall problem. In the preceding step, these MPC’s are

marked with a highlight in yellow.

The results are shown in table 4.

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Table 4

Most Probable Cause

AREA MOSTPROBABLE CAUSE

Inaccurate data during ordering
MAN Lack of inventory monitoring
Insufficient system training
Wrong item ordered
Insufficient knowledge on how to operate the system
MACHINE Obsolecence of software
Under utilized inventory management software
Inconsistent placement of order
Lack of standard operating procedure
METHOD Insufficient stock on hand
Poor inventory counting
MATERIALS Not Applicable
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CHAPTER III

THE PROPOSALS

In this chapter, the suggestions produced through the brainstorming efforts of the

Rustans Team members are showcased. The team member’s substantial expertise and

practical knowledge underpin these suggestions. The presentation arrangement

follows the order in the PSP, as demonstrated in the preceding chapter. The chapter is

structured into four sections: solution development, evaluation of costs and benefits,

the execution strategy, and the management presentation.

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PART 1

PROPOSED SOLUTIONS

Step 5: Solution Formulation

The proposed solution is shown in Table 5.

AREA MOSTPROBABLE COST PROPOSED SOLUTIONS

We will conduct a coaching session on how to check the
Inaccurate data during ordering
inventory when placing order through system record.
We will conduct a refresher training on how to monitor the
Lack of inventory monitoring
inventory level accurately.
Conduct coaching to all Department Head the importance of
Insifficient system training
MAN the updated report at all times.
Conduct coaching the importance of identifying the best seller
Wrong item ordered
items in placing reorders.
Insufficient knowledged on technology Tools Conduct a refresher training in system operation
Old system application Upskill the knowledge of the latest technology
MACHINE Underutilized inventory management software Consistent staff monitoring in utilizing the system software
Inconsistent placement of order Set a regular schedule of reorder list for submission
lack of standard operating procedure Conduct a training of SOP in forecasting
METHOD Insufficient stock on hand Place a buffer stock for bestselling lines.
Poor inventory counting Conduct a regular physical count activity.
MATERIALS Not applicable Not applicable

The suggested resolutions were gathered from the collaborative brainstorming efforts

of Rustan’s Team. Due to the most common Most Probable Causes (MPC’s) and
 32

Problem Statement (PS’s) in the table, these can be streamlined by consolidating

similar items.

Table 6

Consolidated Proposed Solutions

AREA PROPOSED SOLUTION(S)

We will conduct a refresher and
comprehensive training for all relevant
MAN
staff starting in Q3 in 2024 and highlight
the key items that need improvement.
Seek training from our software's
MACHINE technical support team to fully utilized the
software
Develop and enforced the SOP's for all
inventory related task, including
METHOD documentation, data entry and
reconciliation. Ensure that employees are
trained on procedures.
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PART 2

COST – BENEFIT ANALYSIS

TABLE 7
Step 6: Cost – Benefit Analysis

PROJECTED
AREA PROPOSED SOLUTION COST (PESOS) BENEFITS
We will conduct a coaching
session how to check the Lesser errors and more
NONE
inventory when placing order accurate report
through system record
We will conduct a refresher
MAN training on how to monitor the 3,000
inventory level accurately.
Conduct coaching the
importance of identifying the
NONE
best seller items in placing re-
orders.
Conduct always coaching the
importance of the updated NONE
reports
Conduct a refresher training in
3,000
system operation
Automated process and real-
time data tracking and updates
Upgrade the system software 500,000 streamline inventory- related
task, saving time and reducing
manual errors
Consistent staff monitoring in
MACHINE NONE
utilizing the system software
Set a regular schedule of reorder
NONE
list for submission
Consistently and Uniformity:
Conduct a training of SOP in SOP'S established consistent
3,000
forecasting procedure that all staff follow
to adhere to.
Mitigated Risks: SOP's help
identify and mitigate risk
Place a buffer stock for associated with inventory
METHOD 1,000,000
bestselling lines management, preventing
issues such as stockouts,
overstocking or discrepancies.
Conduct a regular physical count
NONE
activity
MATERIAL Not Applicable Not Applicable Not Applicable
 34

S
TOTAL
1,509,000 1,611,000
The results of the cost – benefit analysis is shown in Table 7.

During our brainstorming session with the Rustans team, our Receiving Supervisor

proposed to assist the Department Head in monitoring inventory levels, specifically

focusing on the best-selling lines. Additionally, the Division Managers recommended

assigning the task of providing a weekly reorder list to all sales consultants to ensure

that stock levels are consistently maintained.

Additionally, our Store Branch Manager will be responsible for developing

strategic store best practices and enforcing SOP’s.

Total annual losses due to issues : P 3,120,000

Less: Total cost of proposal : P 1,509,000

Total annual savings after elimination of causes : P 1,611,000

 35

PART 3

PROPOSED ACTION PLAN

Step 7: Action Plan

Table 8 shows the proposed action plan developed by Rustan’s Commercial

Corporation Managers and Department Heads.

Table 8

Proposed Action Plan

 36

AREA MOSTPROBABLECAUSE(S) PROPOSED SOLUTION PERSON(S) RESPONSIBLE TARGETDATE

We will conduct a coaching session

Inaccurate data during ordering on how to check the inventory when Managers and Department Head Jun-24
placing order through system record.

We will conduct a refresher training

MAN Lack of inventory monitoring on how to monitor the inventory level Department Head Jun-24
accurately.
Conduct coaching to all Department
Insufficient system training Head the importance of the updated Managers Jun-24
report at all times.

Conduct coaching the importance of

Wrong item ordered identifying the best seller items in Department Head Jun-24
placing reorders.

Insufficient knowledge on Conduct a refresher training in

I.T. Supervisor Jun-24
technology tools system operation
Upskill the knowledge of the latest
MACHINE Old system application I.T. Supervisor Jun-24
technology
Underutilized inventory Consistent staff monitoring in
I.T. Supervisor Jun-24
management software utilizing the system software
Set a regular schedule of reorder list
Inconsistent palacement of orders Manager and Department Head Jun-24
for submission
Lack of standard operating Conduct a training of SOP in
METHOD Manager and Department Head Jun-24
procedure forecasting
Place a buffer stock for bestselling
Insufficient stock on hand Manager and Department Head Jun-24
lines.
Conduct a regular physical count Manager, Department Head and
Poor inventory counting Jun-24
activity. Sales associate
MATERIALS Not applicable

PART 4

MANAGEMENT PRESENTATION

Step 8: Management Presentation

The concluding phase in the PSP involves the Management Presentation, where

the study outcomes will be presented to the company’s Management Team for

evaluation and endorsement. Upon approval, all the recommendations will be put into

action.
 37

Subsequently, the implementation results and projected cost savings will be

subject to monthly monitoring and assessment to determine whether the proposed

solution has effectively reduced the recurrence of the issue. After one year, the Store

Branch Manager and the Rustan’s Team will examine the consolidated results.

In the case of this research paper, the study findings will be shared with the

ETEEAP faculty for their evaluation and approval preceding the Management

Presentation.

CHAPTER IV

SUMMARY, FINDINGS, CONCLUSION AND RECOMMENDATIONS

SUMMARY

Statement of the Problem

This research sought to study the factors causing inventory discrepancy problems

in Rustan’s Commercial Corporation. Specifically, it is intended to answer the

following questions.
 38

1. What are the factors causing inventory management problems in terms of:

1.1 Man;

1.2 Machine;

1.3 Method and

1.4 Materials?

2. Based on the results of the study, what proposals for improvement can be

forwarded?

This study used both document analysis and the fishbone problem-solving

process. The actual records were gathered from our third-party vendor, and our

data formed this research fundamentals elements. A dedicated team conducted

focus group discussion (FGD) through weekly meetings to facilitate

comprehensive insights. It held meetings at least once a week. The

accumulated data underwent meticulous tabulation, analysis, and

interpretation, ensuring precise and dependable results were derived.

FINDINGS

This finding report addresses the issue of inventory discrepancy, inventory

discrepancy can lead to significant negative impacts across financial, operational,

strategic, and social dimensions. It underscores the importance of using robust data,

advanced analytics, and continuous review and adjustment in forecasting processes to

minimize these risks. The following findings provide a comprehensive overview of

the identified causes:

 39

In terms of Man, inadequate training for employees, inconsistent updating of

inventory data by the supervisor, and inaccurate forecasting methods can all

contribute to inventory variances.

In terms of Machines, underutilizing of inventory management software can result

in manual errors and deficient real-time visibility of inventory levels. Additionally,

insufficient knowledge on inventory management software and related technological

tools can lead to operational inefficiencies and errors in forecasting. These factors

collectively contribute to inventory management problems.

In terms of Method, the absence of standardized operating procedures during the

inventory management process, fosters inconsistent practices and recording methods,

leading to potential errors in forecasting. Moreover, poor inventory management

intensifies the challenges of accurately maintaining the ideal inventory level.

In terms of Materials, there’s no materials is being utilized during the studies.

CONCLUSIONS

Utilizing the findings from this research, it is evident that the issue primarily

arose from a blend of man, machine, and method in inventory management problem

at Rustan’s Commercial Corporation. The magnitude of these problems can

significantly affect the company’s profitability if not addressed promptly. The result

of the study confirms the theory of Lisa Schwarz (2022), that effective inventory
 40

control, also known as stock control, is crucial for ensuring that a company maintains

an optimal level of goods. By incorporating efficient internal management practices.

The organization can efficiently meet customer demands while ensuring financial

flexibility. Successful inventory management not only enhances client satisfaction but

also enables business to optimize profits with minimal stock investment. The

organization can significantly enhance data accuracy in wrong forecasting and

improve overall inventory control practices. It is essential to address these root causes

to prevent data inaccuracies from affecting operational efficiency and decision-

making.

RECOMMENDATIONS

Primary Recommendation
 41

The researcher highly recommends to the management of Rustan’s Commercial

Corporation to approve and implement the protocols outlined in Chapter III of this

study.

Secondary Recommendations

To improve the efficiency of Rustan’s Commercial Corporation, the following

activities are recommended:

1. The Rustan’s Commercial Corporation should persist in identifying and

addressing operational issues as part of their ongoing efforts to enhance

performance.

2. Commence an investigation focused on evaluating the efficiency of the

Rustan’s Commercial Corporation productivity.

 42

APPENDICES

LIST OF REFERENCES

Books

Lewis .C. (2012, May 23). Demand Forecasting and Inventory Control Routledge

Snyder, L. V. & Z., J. M. ( 2019, July 1 ). Fundamentals of Supply Chain Theory .

John Wiley & Sons

Walter, M.A.; Esper , T.L. (2014)

 43

Electronic Sources

CHAT GPT/ AI

Schwarz. (2022, June 30) Inventory control Management

https://www.netsuite.com/portal/resource/articles/inventory-management/what-are-

inventory-management-controls.shtml

Abby Jenkins (20 Inventory Management Challenges and Solutions for 2022 and

Beyond)

https://www.netsuite.com/portal/resource/articles/inventory-management/inventory-

management-challenges.shtml

The Branch Manager

Rustan’s Commercial Corporation
Ayala Center Cebu, Cebu City

To The Branch Manager,

I, the signatory worked as Store Branch Assistant Manager at Rustan’s Commercial

Corporation to formally request your approval to conduct a project study focused on
addressing the long-term challenges within the Inventory Discrepancy at Rustans
Commercial Corporation.
As you are aware, effective inventory management is crucial for the success and
sustainability of any retail operation. Over time, we have identified several persistent
issues within our current system that are impeding our efficiency and profitability.
These challenges range from inaccuracies in inventory tracking to delays in
replenishment processes, ultimately affecting our customer satisfaction and bottom
line.
 44

The objective of this proposed project study is to thoroughly analyze our existing
inventory management practices, identify key pain points, and develop
comprehensive strategies to streamline our processes for long-term success. By
undertaking this initiative, we aim to enhance our inventory accuracy, optimize stock
levels, minimize stockouts, and improve overall operational efficiency.
I assure you that this initiative will be conducted with the utmost professionalism,
dedication, and respect for organizational protocols. Furthermore, I am committed to
ensuring that the project study aligns closely with Rustans Commercial Corporation's
strategic priorities and values.
Your thoughtful consideration and approval are greatly anticipated.

Cynthia S. Labastida
Store Branch Assistant
Manager
Endorsed by:
DR. JEANIEVIC IDJAO
Project Study Adviser

CURRICULUM VITAE
 45

CYNTHIA SY LABASTIDA
Deca Homes Phase 2 Dumlog
Talisay Cebu Philippines 6000
Contact Numbers: 09175626563/09062328760
E-mail address: [email protected]

CAREER OBJECTIVES:
To seek a challenging career by occupying a suitable position for utilizing my
organizational skills and experience to contribute towards the progress of
organization company at the same time have the prospects for professional growth
and develop my career.

WORK EXPERIENCE:
STORE BRANCH ASSISTANT MANAGER
Rustan’s Department Store Cebu Branch
March 2016 until Present
 Managing 10,000 sqm. size store with 350 store manpower’s.
 Maintain and motivate positive sales team through communication, incentives and
evaluations.
 Ensure to meet the store KPI.
 Manage employees and lead day-to-day responsibilities.
 Loss and Profit control
 Responsible in driving the sales and meet the maximum growth against last year
or (LFL)
 Work to grow business and customer acquisition.
 Controlling cost and margin.
 Conducting market analysis.
 Addresses customer needs and resolves issues, ensuring positive and long-term
customer relationships.
 Ensures that the store always looks clean and inviting.
 Places and rotates merchandise to attract positive attention from customers.
 Performs other related duties as assigned, handling non-selling departments.
 Dealing with maintenance issues according to an approved budget.
 46

DEPARTMENT MANAGER
MARKS AND SPENCER Dalma Mall Abu Dhabi
Kids/Lingerie/Beauty Department
Alfuttaim Company LLC, September 2014 until October 2015
United Arab Emirates Middle East

STORE MANAGER
DOROTHY PERKINS Dalma Mall Abu Dhabi
Alshaya Company, March 2013 – August 2014
United Arab Emirates Middle East

STORE MANAGER
MONSOON/ACCESSORIZE (Dubai Marina Mall)
Jawad Business Group, December 2011 to January 2013
United Arab Emirates Middle East

STORE SUPERVISOR
MONSOON/ACCESSORIZE (Mall of Emirates)
Jawad Business Group, March 2010 – December 2011
United Arab Emirates Middle East

STORE MANAGER
SONY CENTRE, Philippines (June 2005-November 2009)
Ayala Center Cebu City Philippines

DEPARTMENT MANAGER
DEBENHAMS
Alshaya Company, January 2001- March 2005
United Arab Emirates Middle East

STORE MANAGER
COLOURS FOTO SHOP
December 1996- December 2000
Ayala Center Cebu City Philippines

SPECIAL SKILLS:

Exceptional customer services and guest relation skills, merchandising, Expert at

Point of Sales System (POS). Cash handling, cashiering and cash management.
 47

Knowledgeable in making Business correspondence, Operating MS Windows

Applications, Reliable office management and clerical skills. Very good interpersonal
skills. Process and goal oriented. Good communication skills, Competent and
Excellent in both oral and written English,
Filipino and moderate Arabic.

EDUCATIONAL BACKGROUND:

COLLEGE : University Of San Jose Recoletos

BSBA – Operation Management
July 2024 (ETEEAP)

Cebu School of Midwifery

B. Rodriguez St. Cebu City
1993 - 1995
Graduated- Diploma

SECONDARY : Holy Rosary School of Pardo

Pardo Cebu City
1989 – 1993

ELEMENTARY : Basak Elementary School

Basak Cebu City
1983 - 1989

CHARACTER REFERENCE:

Joselito D. Macachor
Store Branch Manager
Rustan’s Department Store
Mobile number: 09175383414

Lorna R. Alvarez
Consultant
Rustan’s Department Store
Mobile number: 09175384753
48