Proposal for an inventory system to control the

cleaning products of the Muñoz Supermarket in the

town of Suaza - Huila

Presented by:

Luz Dary Cardozo Galeano, Angie Paola Medina Rodríguez, Rafael Enrique Martínez

Hernández y María Paula Torres Collazos.

University Corporation of Huila

ABSTRACT

The growth of companies and their profitability depend on the way in which they carry all
their processes in order, complying with the respective standards and having strategies that
allow the fulfillment of their objectives to achieve the expected results or goals. One of the
most important issues, mainly in production and marketing organizations, is inventory
control, being able to even act as an accounting system configured to safeguard the
company's assets.

Currently, the Muñoz supermarket does not have an optimal inventory control system that
allows it to stand out in order to have greater control of the products sold and meet the
needs of customers. By achieving good management of these, the company will be more
efficient with respect to the supply chain. That is why this project is aimed at proposing
improvements to the inventory systems of the Muñoz supermarket in the town of Suaza.

INTRODUCTION

Carrying out the inventory control of a business or company is of great importance, since,
in this way, it is verified which products are stored by these entities, in an orderly and
detailed manner and that this information coincides with that which appears in the registry
or computer system that the company has. The importance of good inventory management
lies in the fact that this tool seeks to maximize profits while minimizing storage costs.
However, currently in small and medium-sized companies in Colombia there is evidence of
inappropriate management of inventories of raw materials, supplies, products in process
and finished products; that lead to poor logistics management, as is the case of
supermarkets, since one of the most common problems in these small businesses is the little
knowledge they have regarding inventory control, and this generates losses in supplies or
money, harming thus its economic activity.
Therefore, it is necessary that the logistics management of these companies in terms of
of inventories is more active to prevent problems that can generate serious consequences
and effective in finding opportunities for improvement in time.
Given the above, through this project, it is intended to contribute to the Muñoz supermarket
located in the municipality of Suaza to propose an inventory control system for its cleaning
line that allows it to improve, monitor and control both the product rotation rate and the
amount of stock by reference and the inventory policies, in such a way that when
implemented, there is the certainty of improving inventory management and, in turn, of
reducing the costs associated with the mismanagement that they have been carrying out.

FRAMEWORK

Based on the importance of inventories for the economic activity carried out by the Muñoz
de Suaza supermarket, we have the meaning of inventory as the set of merchandise or items
that the company has to trade, allowing the purchase and sale or manufacture for
subsequent sale, in an economic period. (Duran, 2012). Its primary purpose is to provide
the company with materials, products or inputs necessary for its continuous commercial
activity, which implies the representation of a large percentage of investment in the
companies, in such a way that their efficiency in terms of their management and
Management is considered a determining factor in the success or failure of any company.

It is important that companies maintain an adequate level of inventory, since, if they have
high inventories, the cost of their maintenance is also higher, which leads to financial
problems in these entities. Now, if it is the opposite, that is, if the inventory level is low, the
number of orders will have to be increased in the year, increasing said costs; In turn, this
would be a problem for customers, since by not satisfying the demand for said product, it
would generate a loss of customers.

Among the main objectives of inventories are to support the profitability of the company,
reduce lost sales and deliver products in a timely manner, these being in general.

Then we have depending on the types of inventories, such as the cyclical one, based on
carrying out regular counts, distributed throughout the year, of groups of references. Unlike
the periodic inventory, the count of some references is prioritized over others (according to
their value, turnover, expiration date, etc.).
And the permanent inventory that is constantly updated, recording each entry and exit of
items, and reflects the available stock in real time. It is the type of inventory that promotes
logistics 4.0 with digital information management thanks to a WMS and the
implementation of automated storage systems.

Inventory costs is another important concept that every company must have since
depending on the type of product, it will also be inventory management, these are defined
as those costs that are related to the storage, provisioning and maintenance of inventory in a
certain period of time. This cost is reviewed by management as part of its assessment of the
amount of inventory to keep on hand.

For a retailer or small business, this cost represents the average number of goods purchased
from their suppliers during a year. In turn, these costs tend to vary by business sector.

Inventories, whether raw materials or finished goods, are essential to the smooth running of
a business. Therefore, it is essential to make the right decisions to reduce the cost
considering its type.
Classifying them among costs, the supply costs that include the salaries of the supply
department and the related taxes and salary benefits, as well as all the work carried out by
the purchasing department in charge of selecting and issuing orders to suppliers. These
costs are usually included in other overhead costs and are assigned to the number of units
produced in each period.
Just as we also have storage costs (maintenance), these are related to the space needed to
keep the inventory, the money needed to acquire it and the risk of loss due to inventory
obsolescence. Typically, most of these costs are also included in an overhead fund and are
allocated to the number of units produced each period.
Maintenance or storage costs include space and obsolescence, the former is mainly related
to the facilities in which the products are housed, which in turn include warehouse
depreciation, insurance, public services, maintenance, warehouse personnel, racking, and
material handling equipment. There may also be fire suppression systems and burglar
alarms, which also incur a maintenance cost. Obsolescence goes Depending on how
perishable the inventory is, or the speed with which technological changes affect the value
of the inventory, this can be a significant cost.
Techniques for inventory control
There are different techniques that allow optimal inventory control, some of which are
mentioned below.

The ABC inventory analysis is used to design the distribution or classification of products
in high, medium and low rotation categories, in this way, the acquisition and placement of
products is prioritized due to the economic contribution they represent for the company.
The ABC system is based on the Pareto principle or 80/20 rule, which indicates that 20% of
the effort is responsible for 80% of the results. (MECALUX, 2020)

These references are classified into three categories, the first is category A, where those
products whose amount of occupation is 20% of the inventory correspond, but they are the
products with the highest turnover and their importance is strategic. The products found in
this category are those to which the company has invested the most budget and generates
80% of the income, so it is extremely important to avoid stock outages.

Category B includes those products whose amount of occupation is 30% of the inventory,
they correspond to the average rotation range. They are renewed less quickly, so their value
and relevance is lower compared to A products.

And in category C are the most numerous items, accounting for 50% of inventory
occupation, while they are the least demanded by customers. As they are not strategic
articles, the resources dedicated to controlling these references can be more modest and the
replenishment is usually adjusted with safety stocks. In any case, it is advisable to monitor
them so that they do not end up forming an obsolete inventory with no turnover.
(MECALUX, 2020)

Other techniques for inventory control is the FIFO (First In First Out) method, also known
as FIFO (First in first out), which consists of identifying the first items to enter the
warehouse so that they are the First to be sold or used in production. In other words, the
merchandise units that have been in the warehouse the longest are going to be the first to be
sold or marketed. This method is ideal for those companies or businesses that have
perishable products or products that have a high gap rate.
The Wilson method or EOQ (Economic Order Quantity) is a technique that determines the
order amount that most reduces inventory costs and is characterized by being based on 3
key assumptions, first that demand is constant and known a priori, second that the
frequency of inventory use is constant over time, and lastly that orders are received at the
exact moment that inventories are depleted.

DEVELOPING

For the development of this proposal, we analyzed different significant factors that could
improve the inventory system, this process was related to each of the objectives taken into
account for the investigation

Chart 1 Methodology

RESULTADO
OBJETIVO ACTIVIDAD
ESPERADO
Interview the employee in charge of the
execution of the processes that are handled in Interview
Identify the different the inventory control of the cleaning line
problems present in Follow-up for two weeks in the process from
the inventory process start to finish (suppliers-sales) - manual
Check list
counting and photographic evidence of
products in stock.
Application of a survey to the employees in
Poll
Evaluate the charge of the inventory process.
problems identified. DOFA matrix application to the Muñoz
DOFA Matrix
supermarket

Analysis of
Select an adequate Analysis of results
results
tool that controls and
guarantees a good Evaluation of
distribution of the adequate
inventories for the Evaluation of the adequate inventory control inventory
cleaning line in the system - inventory method control system
Muñoz supermarket. - inventory
method
 Taking into account all the information collected, the following activity was continued,
which was the elaboration of the DOFA matrix in order to be able to analyze and evaluate
this information.

Chart 2. DOFA matrix

OPORTUNITIES (O) THREATS (A)

- Search for improvement in all its
processes. - High stock levels not required.
- Search in the optimization of the
inventory control system. - Missing products by customers who
-Continuous learning. do not pay (ant theft)
- Generation of more reliable
information.
- Optimize the administrative
control of inventories.
- Increased negotiating capacity
with suppliers.
STRENGTHS (F) ESTRATEGY FO ESTRATEGY FA
- Ability to acquire Search for an optimal Create a strategy to ensure that
products that sell out inventory system that allows suppliers supply the agreed
quickly. better control of the products. products and not other products.
- High monitoring of
product supply. Create a database of local and Optimize the security system of the
- Product rotation. national suppliers that supply supermarket in order to reduce ant
- Application of the supermarket. theft within it.
electronic invoicing
regarding suppliers. Conduct training for Coordinate employees according to
Attitude to improve employees in inventory their corresponding functions in
the inventory control management. order to avoid fraud.
process.
WEAKNESSES (D) ESTRATEGY DO ESTRATEGY DA
- Inventory control Change the current inventory Implement technological inventory
empirically (manual) system to a more systematic and systems.
- Little knowledge of comfortable one.
current inventory Train staff in current inventory
systems Design manufacturing strategies systems.
- Inventory process for supermarket products.
every six months. Create strategies that allow employees
Confusion in the better handling of products within the
management of supermarket.
physical inventory and
take it to the
systematic.
ANALYSIS

According to the information collected regarding the inventory management currently

handled by the Muñoz supermarket, the following problems were observed that must be
improved within the company to obtain better results and carry a better and more reliable
inventory system.
To comply with this analysis, two activities are executed. The first focused on analyzing the
results obtained from the previous activities (interview, survey and DOFA matrix).
Through this matrix, it was sought to identify the points for and against the inventory
control of the cleaning products of the Muñoz supermarket of its internal and external
factors and in this way, determine strategies that allow improving the conditions of
monitoring and control of the product. inventory and in this way avoid monetary losses,
product losses and take into account the supply and demand of these cleaning products.
As the last activity proposed for the fulfillment of the third objective, the appropriate tool
must be selected for the inventory control of supermarket cleaning products, for the
development of this activity,
As one of the main problems of the company in the management and control of inventories
is precisely the existing imbalance between the inventory carried physically and through the
software that the company manages and whose control they do in a very long period of
time, generating difference in results and that generate data in red, that is, loss data for the
company.
That is why there is a need as a first step, to evaluate an inventory classification method
that allows a better organization of the stock according to the guidelines that are required in
order to avoid losses.
The classification methods chosen to evaluate which is the most appropriate to the
company's needs are: the ABC inventory method, the FIFO method, the Wilson Method or
EOQ (Economic Order Quantity), cycle counting and the Just in Time Method (JIT). )
which are described in the following table their advantages and disadvantages:
Chart 3. Advantages and disadvantages of inventory classification methods

INVENTORY
CLASSIFICATION ADVANTAGE DISADVANTAGES
METHOD
Better control of high Conflicts with other cost
priority inventory. systems, since it does not
comply with the Generally
More efficient cycle counts. Accepted Accounting
Principles (known by its
It allows statistics on the acronym in English as
success of product sales and GAAP) and conflicts with
is a tool that helps us to traditional cost systems. In
diagnose possible general, companies that use
unnecessary stocks in the this system must use two
warehouse. cost systems, one for
Segment customers and internal use (ABC method)
break down specific data and the other to comply
Allows you to identify more with GAAP.
valuable customers
ABC method
Facilitates strategic data It requires substantial
analysis resources, because when
Maximize profits cycle counts are performed,
Increases the usefulness and Class A inventory must be
credibility of cost routinely analyzed to
information. determine if it still consists
of high-priority items. If a
Eliminate activities that part of the inventory is no
have no product value longer used or in demand as
frequently, that part is
moved to another inventory
classification. This ongoing
process requires much more
measurement and data
collection.
It is the most More taxes are paid because
recommended for the FIFO system produces a
perishable products as it higher profit.
FIFO method
prevents them from
expiring. There is no guarantee that
older items will sell out
 They avoid obsolescence, first, which could cause the
the products are sold by product to reach its
age, so none of them are expiration date before it
left obsolete in the sells out.
warehouse.

They favor balances since

the sale price is estimated
based on the purchase
price.

This system is useful, not

only for stocks, but also for
the supply chain and
storage.

It reports a higher profit

for the company since
when the items that were
previously entered are
sold, the cost of the goods
sold is lower.

Reduces historical record

keeping because the stocks
that come out first are the
oldest.
Simplicity of realization The assumptions make the
compared to other types of model impractical or
similar models. unrealistic for many
It helps to optimize storage companies due to its
and purchase costs. characteristics.
Método Wilson o EOQ The assumption of constant
(Cantidad Económica de It allows avoiding demand makes the EOQ
Pedido) situations of overstock in model not useful for
the warehouse or companies with seasonal,
warehouse punctual or irregular
demands, or it can lead to
Defining the correct errors in the face of a
quantity of product to
 acquire helps to avoid drastic change in customer
stock outages. habits.

It has widely demonstrated The fact that purchase

results in situations that volume discounts are not
meet the indicated considered leaves a very
assumptions. relevant variable out of the
equation, which can offset
storage costs.

The assumption of
immediacy in inventory
replenishment is also not
entirely realistic, and
without considering this
variable, there may be
situations of out of stock
that must be taken into
account when developing
the model.
Greater accuracy in Time to freeze daily activity
inventory control, since, by in the number of pieces
performing this type of counted
inventory control in shorter
periods, knowledge of Time needed to count
warehouse stock is almost
complete, unlike an annual
record.

Greater productivity and

Cycle Count
profitability, since by
reducing errors and
controlling incidents in the
merchandise, productivity
will increase.

Reduction of errors in
warehouse management,
since if there are damaged
products, lack of stock,
 expired products, etc., their
detection will be faster and
the problem will be
identified in time to tackle
it.

We improve the purchase

decision

Best service offered.

Reduce production times. Delays may arise in the
minimum stock system if
Reduces the need to the supply of materials is
maintain large inventories. not correctly planned.

It allows a better use of Little margin to negotiate

physical spaces. price by volume, given that
the purchase of materials is
Promotes the acquisition of reduced to the maximum.
Método Just in Time (JIT) quality materials,
improving the final Initial resistance of the
products. workers to the change of
productive methodology.
Increase productivity
through continuous There is a risk of having
improvement processes. idle installed capacity,
It admits quick changes because there is no demand
because it is a flexible in the stage after the
system. production process.

When analyzing the different advantages and disadvantages that each of the existing
inventory methods has against the main problems that the Muñoz supermarket presents in
terms of its inventory control of the cleaning line, the ABC method is proposed, since what
is desired is to reduce high stock levels, and avoid the purchase of products that are less
required by customers, in addition, this method allows inventory counting more often and
an analysis of the key products of customers, it is a more according to the needs of the
supermarket and more efficient when obtaining the data.
Within the improvement strategies, the implementation of a new software is proposed to
management, which allows better control of the inventory system that the supermarket currently
carries.

The following table shows the benefits that the supermarket currently has with the implementation
of business intelligence software and the benefits that can be obtained with the WMS software,
which is the proposal for the Muñoz supermarket:

Chart 4. Advantages and disadvantages of the company's software compared to the proposed software

TIPO DE SOFTWARE VENTAJAS DESVENTAJAS

Simplicity in the analysis. Higher cost. The programs it
The software enables even requires are expensive, just
non-analysts to quickly as they require custom
collect and process integrations.
information.
Complexity in the
Process streamlining. implementation of the
Analytics are automated and datawarehouse.
complexity is removed from
business processes. Weather. It takes an average
of one and a half years for
Overview. the storage system to be
business intelligence
implemented.
Assign responsibility.
Limited use. Having had
Greater visibility of the large companies as a
processes and identification reference, the system may
of those that need more not be affordable on some
attention. occasions for small and
Productivity increase. You medium-sized companies.
can get reports with just one
click. This results in greater
efficiency in resources and
time.
They allow a wide visibility System failures: they
of the inventory. constitute one of the main
disadvantages of WMS
WMS
They improve the accuracy systems, due to the problems
of inventory control. that occur in the physical
support devices (hardware),
 Service levels improve. power outages and other
technical problems that
They synchronize the cause interruptions, loss of
warehouse with the supply information, time , and
chain in real time. ultimately delays and
irregularities in deliveries.
They use each space more
efficiently. Security flaws: Hackers are
a great threat in their action
They help to make the best to illegally extract important
use of each work team. information from
companies.
They achieve efficiency and
ergonomics in the Reduction of conventional
workforce. audits: this occurs because
the software tools
They reduce expenses. automatically perform these
operations.
They generate solutions for
the selection of the best
routes.

CONCLUSION

The supermarket lacks an adequate inventory control system for its line of cleaning
products, despite carrying it empirically, it has many shortcomings in terms of its
management, such as the difference in results in the physical documents as in the
accounting system that it has, however, presents opportunities for improvement that can be
solved by abiding by the recommendations of this project.

The staff lacks the knowledge that must be taken into account about the processes, reports
and formats that they must carry to guarantee an optimal control of the supermarket
inventory, therefore, it is important to carry out training that gives them feedback and in
this way, improve monitoring of inventory control.
Although the supermarket has software for systematic inventory management, there are
shortcomings in its management, therefore, it is necessary to resort to a different software,
which is more practical and guarantees a better result.

There is a large inventory imbalance due to the fact that its control is carried out every six
months, for this it is important to change its control time to shorter periods of time,
preferably from 8 to 15 days, in order to avoid this kind of inconvenience.

With the analysis of the ABC-type inventory method, it was defined that according to the
needs of the Muñoz supermarket, it is the most appropriate to optimize the current process
of managing its inventory of the cleaning line.

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