CHAPTER II

REVIEW OF RELATED LITERATURE

This chapter presents the review of related literatures and studies which bear significance

to the present study. This chapter also discusses the similarities and differences as well as the

Conceptual Framework.

Foreign Literature

The researcher came across the following relevant literature which aided in

conceptualizing the study.

Carson (2017) says that technology helps businesses maintain data flow, manage contacts, track

processes and maintain employee records. Technology makes it possible for businesses to operate

efficiently and effectively with minimal manpower and helps to reduce the cost of doing business.

Technology helps business operations by keeping them connected to suppliers, customers and their sales

force. Because of its ability to streamline operating costs, technology delivers instant access to supplies

and information, so businesses are better able to offer affordable pricing of goods and services without

sacrificing quality.

Kazmeyer (2015) explains that for businesses, investing in technology can bring a host of

advantages. As computers have increased in power and decreased in price, the benefits of

electronics in the workplace have even become available to small businesses. No matter the

industry, a company can take advantage of these advances in technology to increase profits,

streamline processes and open up new markets. According to him one of the biggest advantages

technology offers businesses is gains in productivity. Computers have allowed employees to

collaborate effectively, even across great distances, and the adoption of mobile computing
devices like laptops and tablets enables employees to work almost anywhere. Technology has

also led to the automation of many mundane business tasks, freeing workers to concentrate on

duties that are more important or to supervise the operation of efficient machines.

Sharma (2017) enumerates five powerful uses of technology in business. He emphasizes

that the use of Technology in business today helps to create less costly, environment and

customer friendly solutions. Technology is used in business to study and solve daily life

problems. He also adds that the use of technology in business is to create and produce top quality

goods and services to the public.

The aforecited literatures concerns with the importance of the use of technology in

business. These bear relevance to the present study in the context of using technology in the

business enterprise.

Kokemuller (2018) state that inventory is a current asset of the company’s balance sheet.

More important, it is a major part of your ongoing business operations. For manufacturers,

inventory includes raw materials used to make and assemble products. For resellers, it includes

products acquire to resell to customers. In either case, you need inventory to earn revenue.

Managing inventory in a cost-efficient way helps optimize profits. Managing inventory once you

have it is vital as well.

Marx (2018) emphasize that inventory control is also important to maintaining the right

balance of stock in the warehouses. When a business has control over inventory, they are able to

provide better customer service. It will also help them get a better, more real-time understanding

of what’s selling and what isn’t.

 Companies often depend on inventory to operate or fill client orders. Inventory is a major

company asset that helps a company with tasks such as planning and staying within budget. Thus

companies should see keeping accurate inventory records as a major management tool that has

multiple benefits. According to Thibodeaux (2018) affirms that when you keep accurate

inventory records, you have data that tells you whether you can take on client requests or

particular projects with the inventory on hand. You get a sense of when you will need to order

new items. You also can review the inventory records to identify inventory trends over time and

make some basic predictions about inventory that might run out faster than usual. All of these

elements mean that you are able to plan and strategize. In addition good inventory records mean

that when customers call or write with inventory-related questions, you can find the answer

quickly. A fast response time usually means the customer gets a better impression of the

company. When you know exactly what inventory you have and where it is stored, you can

retrieve it promptly and fill customer orders efficiently. The ability to deal with inquiries and fill

orders quickly means the company is able to serve more customers and move more inventory

through the company, resulting in higher profit. If customers have to wait for responses or

products, they may cancel orders and go to other companies. She also adds that proper inventory

tracking provides an opportunity to measure success.

The aforementioned literature stresses the reason why there is a need for inventory and

how it will help the business. These are vital information to the present study because they help

the researchers enrich their concepts of the study.

Levinson (2018) explain that an inventory management system can help you manage

your business’s inventory and stock items, keeping track of exactly where your assets are and

what they’re worth. The system also analyzes your business’s inventory needs and can even
automate your ordering. Inventory management systems are important for many industries

including retail, food and beverage, manufacturing, health care and more. A well-run system

helps you understand your assets and maximize their potential, thus improving your business

operations and increasing profits.

Put simply, an inventory management system oversees all of a company’s inventory and

stock items. An inventory management system helps keep your business more organized.

Without tracking and managing your inventory, it’s difficult to know what you need, when you

need it and in what quantity. With a quality inventory management system, you have detailed

records of every asset in your business. You can see all of the moving parts in one place. You are

easily able to see the products that are moving and those that are selling slowly. You can see if

certain inventory sells at certain times of the year, or even during certain times of the day. You

can even set your system to reorder a certain popular inventory item so it’s never out of stock for

your customers. Having all of this information and capability in one place allows you to make

informed decisions about the needs of your company.

Cross (2017) enumerate the reasons why inventory management is important to modern

retailers namely: increased sales bring challenges; multiple sales channels are tough to manage

alone; satisfy demand and avoid overstocking; keep your stock checks quick and easy; happier

customers equal more sales.

The above-mentioned literature deals with the inventory management system and its

importance in the modern retailers. These insights bear relevance to the present study in the

context of inventory management.

Foreign Studies

Kim and Kim (2015) found out in their study that inventory's primary role is to buffer

against uncertainty. That is, the firm holds inventory to cope with the market demand

uncertainty. There is another rather negative aspect of inventory: an excessive inventory reduces

firm's responsiveness to the changing market and thus has an adverse effect on the sales. To

study whether the inventory's position in the supply chain affects the firm's sales differently, they

look into three types of inventory separately, i.e., raw material, work-in-process, and finished

goods inventory. They analyze the panel data, which consist of 4,624 firm-year observations for

272 manufacturing firms in twenty-one different industries listed in the Korean stock market

indices from 1996 to 2012, and conclude as follows. For each inventory type, there is a positive

relationship between current inventory and current sales. On the contrary, controlling the current

inventory, the analysis shows the relationship between previous year's inventory and current

sales is negative. By showing that the relationship between inventory and sales is valid for each

of the three different types of inventory, we are making a contribution to the literature, where

most studies focused on the role of finished goods inventory in enhancing the firm's

performance.

Chan, Choi, and Ho (2016) their study investigated the real inventory decisions in a

fashion retailing company through a real sales data-based empirical study. Specifically, they

collect a nine months sample sales data set of 189 fashion product items from a Hong Kong-

based fashion retailing company, and statistically verify relationships between the order quantity

and several critical factors. They findings revealed that: 1) the mean of demand, the standard

variation of demand, and the profit margin of the fashion items are statistical significantly

correlated with the ordering quantity decision of the case company; 2) there is no statistically
significant difference on the order deviation from the mean of demand between the high and low

profit margin products.

Grubor, Milićević, Djokic (2015) found out in their study that increasing inventories,

retailers attempt to raise service levels, and thus increase sale. However, in addition to a positive

impact on product availability and sale, higher inventory levels may cause problems in

performing in-store activities. As poor backroom-to-shelf replenishment process emerges as one

of the most common causes of stock-out situations, this article compares store and on-shelf

FMCG product availability at SKU level in different stores of a single retailer. In relation to this,

besides direct, we have also investigated the indirect eff ect of inventory level on sale, by using

store and shelf out-of-stocks as mediators. The results of the research showing much higher level

of shelf- compared to store stock-out rate confi rmed the existence of the problem in the

realization of internal product fl ows within retail stores. However, despite the occurrence of this

problem, besides direct positive eff ect of inventory level on sale, its indirect eff ect was positive

as well. Therefore, these results were analyzed in the context of other similar studies. In addition

to empirical research, the article also discusses certain implications of more efficient

organization of in-store activities.

Ogbo, Victoria and Ukpere (2017) conducted a study that took into consideration the

relationship between effective system of inventory management and organization performance in

the seven-up bottling company, Nile Mile Enugu. A total of eighty-three respondent constitute

the sample for the study. The result of the analysis showed that flexibility in inventory control

management is an important approach to achieving organizational performance. It was found that

organizations benefits from inventory control management by way of easy storage and retrieval

of material, improved sales effectiveness and reduced operational cost. The study also found that
there is a relationship between operational feasibility, utility of inventory control management in

the customer related issues of the organization and cost effectiveness technique are implemented

to enhance the return on investment in the organization. Effective inventory control management

is recognized as one of the areas management of any organization should acquire capability. It is

recommended that organizations should adopt the inventory keeping method that best suit their

operations.

The cited study is similar to the researchers work since they both discussed the primary

role of inventory. However, the present study focuses on sales inventory of GFT Enterprises.

Masudin, Kamara, Zulfikarijah and Dewi (2018) reveals that to remain competitive

among other competitors in today’s market, organizations have been compelled to lower their

costs, increase revenue while maintaining highest quality of their products and services that are

delivered to their customers. Procurement management serves as an important strategy for

organizations to remain competitive for both present and future. In this competitive business

environment costs control serves as an important instrument to remain competitive in the market.

In such environment, inventory management ensures control over customers’ demands thereby

resulting to customer satisfaction and increase financial performance. The purpose of this

research work is to examine inventory management and procurement practices and their impact

on organizational performance. The performance measures examined in their research are

financial performance and customer satisfaction. The method used is secondary data collection

by gathering information relating to inventory management and procurement practices form

different articles, journals and books of various researchers. The results of this study found that

automated procurement practice like e-product enhances organizational performance;

implementation of world class procurement practices also enhance organizational performance.

The study also found that inventory management enhances organizational performance.

Kerketta and Kumar (2016) said that Sales and Inventory System is one of the basic

problems in almost every company. Before computer age and integration, paper tables and

paperwork solutions were being used as inventory management tools. These we very far from

being a solution, took so much time, even needed employees just for this section of organization.

There was no an efficient solution available in the many companies during these days. Every

process was based on paperwork, human fault rate was high, the process and the tracing the

inventory losses were not possible, and there was no efficient logging systems. After the

computer age, every process is started to be integrated into electronic environment. Now we have

qualified technology to implement new solutions to these problems. Software based systems

bring the advantages of having the most efficient control with less effort and employees. These

developments provide new solutions for also inventory systems in this context. In this paper, a

new solution for Sales and Inventory System (SIS) is designed and implemented.

The study underscored the importance and need for a sales and inventory system in the

improvement in the organization in the business enterprise. This is similar to the present study.

However, the present study focuses on Sales, Inventory and Service Monitoring System of GFT

enterprise.

Conceptual Framework

The conceptual paradigm (Figure I) presents and explains the concept of the study. As an

input the researchers will: create and implement sales module, Develop an inventory system that
will manage the information about products and provide an automated service monitoring.

Interview and documentary analysis are the process used to achieve the output of the study. The

interaction between the input variables and the process involved to achieve the output of the

study is shown by the arrow.

The arrows also point to feedbacking. In the process there maybe constraints that may

positively or negatively show the interrelationship of the variables in the study.

 INPUT PROCESS OUTPUT

 Create and
implement
sales module
 Develop an
inventory
system that Interview Deploy a sales
will manage inventory and
the Documentary
service
information analysis
monitoring
about
system
products
 Provide an
automated
service
monitoring

FEEDBACK
 Figure 1. Conceptual Paradigm

End Notes

1
The Role of Technology in a Business Organization by Andrea Carson - Updated

September 26, 2017. Retrieved from: https://bizfluent.com/about-6082161-role-

technology-business-organization.html. Date accessed: August 29, 2018

2
The Advantages of Technology in the Business World by Milton Kazmeyer. Retrieved

from: https://itstillworks.com/advantages-technology-business-world-2035.html. Date

accessed: August 29, 2018

3
5 Powerful Uses of Technology in Business Today by Vijay Sharma. December 25,

2017. Retrieved from: http://www.klientsolutech.com/use-of-technology-in-business-

today/. Date accessed: August 29, 2018

4
Why Is Inventory Important for a Business? by Neil Kokemuller; Updated April 13,

2018. Retrieved from: https://yourbusiness.azcentral.com/inventory-important-business-

2957.html. Date accessed: August 29, 2018

5
What is Inventory Control? By Johnny Marx on March 28, 2018. Retrieved from:

https://www.handshake.com/blog/what-is-inventory-control/. Date accessed: August 29,

2018
6
The Importance of Keeping an Accurate Inventory by Wanda Thibodeaux; Updated

June 28, 2018. Retrieved from: https://smallbusiness.chron.com/importance-keeping-

accurate-inventory-23304.html. Date accessed: August 29, 2018

7
Importance of Inventory Management Systems by Chelsea Levinson - Updated June 26,

2018. Retrieved from: https://bizfluent.com/about-5518506-importance-inventory-

management-systems.html. Date accessed: August 29, 2018

8
Why is Inventory Management Important to Modern Retailers? By Justine Cross on 24

April 2017. https://blog.brightpearl.com/why-is-inventory-management-important-to-

modern-retailers. Date accessed: August 29, 2018

9
Inventory types and their effects on sales. Authors: Bowon Kim; Sunghak Kim. Int. J. of

Inventory Research, 2016 Vol.3, No.2, pp.115 – 133 Submission date: 05 Nov 2015. Date

of acceptance: 02 Feb 2016. Available online: 10 Nov 2016

http://www.inderscience.com/info/inarticle.php?artid=80315.

10
How consumer demand affects order quantity in practice: an empirical study on

inventory management decisions in fashion retailing. Authors: Hau-Ling Chan; Tsan-

Ming Choi; Yee-Man Ho. Int. J. of Inventory Research, 2016 Vol.3, No.2, pp.102 – 114.

Submission date: 08 Apr 2016. Date of acceptance: 30 Jun 2016. Available online: 10

Nov 2016. http://www.inderscience.com/info/inarticle.php?artid=80327.

11
the effect of inventory level on product availability and sale Aleksandar Grubor, Nikola

Milićević,1 Nenad Djokic*

12
The Impact of Effective Inventory Control Management on Organisational

Performance: A Study of 7up Bottling Company Nile Mile Enugu, Nigeria by Ogbo, Ann

I., Onekanma Ifeyinwa Victoria, Wilfred I. Ukpere. Available from:

https://www.researchgate.net/publication/263138566_The_Impact_of_Effective_Inventor

y_Control_Management_on_Organisational_Performance_A_Study_of_7up_Bottling_C

ompany_Nile_Mile_Enugu_Nigeria. Accessed September 10, 2018.

13
Impact of Inventory Management and Procurement Practices on Organization's

Performance by Ilyas Masudin, Mohammed S. Kamara, Fien Zulfikarijah and Shanty K.

Dewi. April 2018. Available from: https://www.researchgate.net/publication. Accessed

date: September 10, 2018.

14
Sales And Inventory System by Ashutosh Rajat Kerketta and Gaurav Kumar. Retrieved

from:https://ijmter.com/papers/volume-3/issue-4/sales-and-envtory-system.pdf. Accessed

date: September 10, 2018.