DESIGN AND IMPLEMENTATION OF AN AUTOMATED INVENTORY MANAGEMENT SYSTEM Case Study: Segofer Technical Services

DESIGN AND IMPLEMENTATION OF AN AUTOMATED INVENTORY MANAGEMENT SYSTEM Case Study: Segofer Technical Services

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CHAPTER ONE 
BACKGROUND 
1.1 INTRODUCTION  
 Inventories are part of the strengths of any business and can be applied as the firm’s own 
strategy in building its competencies. Through their application of the traditional counting, 
weighing, and recording systems, the inventory has never been the same in the intervention of 
technologies that can provide additional competency. However, it should be noted that 
inventory management is hardly a modern innovation. According to (Zipkin, 2000), the 
earliest humans kept caches of food and stone tools. Readers familiar with the bible will recall 
that Joseph was, among other things, a remarkably proficient inventory manager.  
Returning to here and now, the person who runs a business that involves selling products has 
a different viewpoint on inventories. This operation may serve about 70 busy, demanding 
people, and provides several dozen types, colors, and sizes of products, as well as hundreds of 
other kinds of supplies. It takes a serious, conscious effort to monitor all these items, to 
estimate their usages, to order new supplies from wholesalers at appropriate times, to decide 
when to discontinue rarely bought items and when to add attractive new ones, and so forth. 
These are the typical concerns of inventory management at the retail level; the operators of 
most retail businesses face basically the same set of problems (Zipkin, 2000).   
The basic, essential function of inventory management system is the ability to perform the 
main business transactions. Such transactions include product registration, customer and 
vendor tracking, tracking payment processes, purchase and order processing, and  the ultimate 
goal of maximising sales and profits. An example; the order processing is used to provide 
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management information on stock, sales, delivery notes, invoices, and so on. Such data or 
information is used for decision making at management levels (Whiteley, 2004).  
In order for businesses to have relevant and adequate information for proper management and 
decision making, it is common practice for businesses to invest in inventory management 
systems. These systems perform many activities among which is processing data into 
information that involve activities such as calculating, comparing, sorting, classifying, and 
summarizing data. These activities organize, analyze, and manipulate data, thus converting 
them into information for end users including managers who need it for decision making 
(O’brien, 2003).   
There are basically three fundamental reasons for all businesses to acquire or implement the 
use of inventory management systems. According to (O’brien, 2003) these are found in the 
three vital roles that these systems can perform for a business enterprise. These roles include 
support for its business processes and operations, support for decision making by its 
employees and managers, and support of its strategies for competitive advantage.   
In Uganda, the business sector is flourishing and many companies are dealing in the sale of 
various goods and products including electronics, electricals, and their accessories. Such 
companies include Appliance World Limited, New Master Electronics Ltd, Cellular Service 
Logistics, Anisuma Traders Ltd, Segofer Technical Services which is the case study, and so 
on (Uganda Business Directory 2008-2010). All the above companies have or need to invest 
in inventory management systems in order to be able to gain competitive advantage, satisfy 
customer needs, and maximize pofits which is the ultimate goal of every business/company.  
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1.1.1 Background to case study  
Segofer Technical Services is a company that was established in 2007 as a business enterprise 
that deals in the sale of electrical, electronics, and hardware materials. Located at Plot 57 
Hoima road Namungoona, it has since progressed and registered as a private limited liability 
company incorporated in Uganda on 21st May 2007. According to the Company profile, “the 
mission statement is to supply the company’s customers with quality products and services 
which meet their expectations; ensure safety, quality, and schedule in all projects for clients’ 
works; and to conduct businesses with integrity and responsibility” (Segofer Company 
Profile, 2007).  
According to research carried out, the company just like most businesses in Uganda operating 
on small scale basis, is facing challenges especially those related to controlling stock, 
identifying unpopular products  and those that are essential or those that should not miss from 
the stock so that appropriate decisions are made while purchasing, etc. All these are inventory 
management related and basing on this, this study believed that the development of such a 
system would help the company solve half if not all of its problems related to inventory. 
The company currently has no automated inventory management system it is using. Rather 
products are registered with reference to the purchasing receipts that the Purchasing Officer 
delivers with the products. Sales are recorded on a daily basis in a specially designed black 
book with columns designed to capture relevant data such as product name, selling price, 
profits, total sales, and so on. Other information such as customers’ and vendors’ payments 
and contacts are also recorded in company receipts and box files respectively.  
Company incomes, costs, daily and general expenses are recorded on specially designed 
forms which are then filed for reference purposes for the business managers. In general, the 
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current system being used at the company is purely manual and paper based and this is prone 
to challenges such as natural disasters like fires, floods, molds, and mishandling by the 
employees. Still there are no reports that can be automatically generated for all the business 
transactions that go on in the company and this is posing a big challenge and set back to the 
company as expressed by the company managers. All the above mentioned business processes 
and procedures are practically manual and according to results from the interview conducted, 
documents reviewed, and observations made, people expressed difficulty in tracing required 
information to help in decision making.  
1.2 STATEMENT OF THE PROBLEM  
For any one company that wishes to stay for long in business, one has to implement / use 
management information systems that support business processes and transactions ( ). 
Unfortunately at Segofer Technical Services, the system being used is not automated. The 
company is faced with challenges including delays in serving customers as more time is spent 
on one customer in recording items that are being bought which records later consume alot of 
storage space; poor decision making especially on restocking products as there are no 
statistics to show the most/or least demanded products and also when duplicate or double 
entry of records occur; uncordinated business processes that lead to duplication and data 
redudancy, alot of paper that needs storage space, miscalculations especially on sales and 
profits; and the inability to track available stock as there is no physical record of what is in 
and out of stock at specified times and also wrong projections as a result of using wrong 
records (General Manager’s interview responses, 2011). In addition the current system being 
used is more less a manual system as all their data are stored in paper files and in case of need 
for generating reports, the end users have no means of manipulating the system to have the 
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reports generated automatically. Furthermore, the system being used is more vulnerable to 
natural disasters like fires and floods for paper files, and even consumes a lot of storage space.  
1.3 RESEARCH OBJECTIVES  
1.3.1 General Objective 
The main objective of the research was to develop a working prototype of an automated 
inventory management system that is capable of performing the main functions of registering 
products and materials purchased, maximizing sales and profits, ensuring customer 
satisfaction, and controlling stock.   
1.3.2 Specific Objectives  i. To analyze the current system being used by the business in question in order to understand 
its strengths and weaknesses and identify opportunities for strategic automated inventory 
management interventions. 
ii. To determine the requirements that would enable the design of an appropriate inventory 
management system. 
iii. To design and implement a prototype of an automated inventory management system. 
iv. To test and evaluate the prototype inventory management system.  
1.3.3 Research Questions 
This study was able to attempt answer the following research questions: 
i. What are the strengths and weaknesses of the current inventory management system used by 
Segofer Technical Services Company? What opportunities exist for strategic automated 
inventory management interventions?  
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ii. What are the requirements for designing an appropriate inventory management system for 
Segofer Technical Services company? 
iii. What are the design features of a reliable and secure automated inventory management 
system? How can such a system be designed effectively? 
iv. To what extent does the prototype inventory management system meet the inventory 
management requirements for Segofer Technical services company?  
1.5 Scope of the study 
1.5.1 Geographical scope 
The project was confined to a business enterprise Segofer Technical Services that has three 
sections that is electronics, electricals and hardware. It also dealt with one other branch 
affiliated to the main branch. The processes that were emphasized while implementing the 
automated inventory management system included registering products, customers, and 
purchases, tracking sales and available stock, and registering staff.  Departments which were 
involved or whose staff contributed in data collection were sales, marketing, human resources, 
and accounts departments.  
1.5.2 Technical and/or System scope 
The research intended to cover the inventory management system and through analysing the 
gathered data, the Information system had three (3) main modules developed which had  
functionalities grouped under each. The developed modules would inter-relate to support the 
business achieve its objectives and these included: 
Inventory/stock Management: 
Under inventory management, the following functionalities were developed and implemented; 
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• Register product categories, products within the categories, and system users while 
assigning them login details.  
• Record sales per salesperson registered in the system. 
• Calculate profits after the sale of products and also provide the projected profits for the 
entire available stock. 
• Control stock by automatically deducting items at the time of selling and showing the 
remaining stock. 
• Enable the sale of products to customers within the shortest time possible.  
• Generate reports such as sales per salesperson, available stock, loyal customers, 
estimated profits in stock, etc. 
System Account Management: 
Under this module, the following functionalities were developed and implemented; 
• Registration of system users and assigning usernames and passwords. 
• Assigning the users priviledges according to the different roles they would perform 
within the system. 
Customer Management: 
In the customer management module, functionalities such as the ones described below were 
developed and implemented; 
• Registration of customers assigning them unique customer Ids. 
• Completing a purchase order with assistance of a salesperson. 
1.6 Significance / Justification of the study 
The automated inventory management system will enable the company view various reports 
containing vital data such as the estimated profits to be accrued from the available stock. The system 
can also easily give details such the name of the product, quantities sold and the quantities in store. 
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Such information is needed when making decisions on what items are reducing in stock and thus need 
to be purchased.  
The automated inventory management system will improve the process of selling products to 
customers that is quantities for sale will be identified against that customer and the system will 
automatically calculate the total costs for each thus saving on time spent while serving a customer.   
The system will enable the managers track transactions and total sales made by specific salesperson 
per day and also view reports of the loyal customers which information would later be useful for 
decision making. 
1.8 Conclusion 
With regard to the introduction given above, incorporating an inventory management system in any 
business, would help it succeed especially in planning, executing, and controlling the supply chain 
network. In addition there would be increased business value, customer satisfaction, and full 
maximization of sales and profits. Therefore this research intends to analyze, develop, and design a 
working prototype of an automated inventory managament system that would perform the mentioned 
functions above and also recommend it to Segofer Technical Services the case study. 

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