unlicensed failure in inventory management at fashion department in khatoco trading co , ltd

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business PHAM THI PHUONG LINH FAILURE IN INVENTORY MANAGEMENT AT FASHION DEPARTMENT IN KHATOCO TRADING CO., LTD MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2019 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business PHAM THI PHUONG LINH FAILURE IN INVENTORY MANAGEMENT AT FASHION DEPARTMENT IN KHATOCO TRADING CO., LTD MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR NGUYEN PHONG NGUYEN Ho Chi Minh City – Year 2019 LIST OF CONTENTS EXECUTIVE SUMMARY .1 PART – BACKGROUND Company background 1.1.1 History of establishment and development 1.1.2 Mission of the company 1.1.3 Company’s size 1.1.4 Internal structure 1.1.5 Geographic distribution .2 1.1.6 Stakeholders 1.1.7 Current development and market analysis 1.1.8 Organizational performance Symptoms 1.2.1 Complaints of clients about wrong shipping products 1.2.2 Differences between the stocks on count (floor) and stocks on system (sheet) 1.2.3 Differences between stocks quantity on accounting system and that on warehouse system .9 Initial cause-effect map 11 Updated cause-effect map 14 PART – PROBLEM JUSTIFICATION .21 Problem definition 21 2.1.1 Definition of inventory management 21 2.1.2 Central problem: Failure in inventory management 22 Problem existence .24 Problem importance – consequences of the problems .24 PART – CAUSE VALIDATION .26 Potential causes 26 3.1.1 Outdated and separated inventory control system .27 3.1.2 Insufficient inventory control procedures and regulations 27 3.1.3 Culture miss-match: No connection between relevance departments in inventory control 28 Cause existence 28 3.2.1 Insufficient inventory control procedures and regulations 29 3.2.2 Outdated and inconsistent inventory system .30 Cause importance .33 PART – SOLUTION AND IMPLEMENTATION 34 Alternative solutions 34 4.1.1 Written working processes in inventory management 34 4.1.2 Setting up integrated system for inventory control 44 4.1.3 Solutions summary 48 Implementation 49 4.2.1 Objectives 49 4.2.2 Targeted outcomes 49 4.2.3 Project details and schedule .50 Conclusion .54 SUPPORTING INFORMATION 54 5.1.1 Methodology 54 5.1.2 Research tool .55 REFERENCES 58 APPENDIX 57 LIST OF FIGURES Figure 1: Company structure Figure 2: Sale and Profits of The Company and Fashion section from 2016 to 2018 Figure 3: Number of agency's complaints from 2016 to 2018 Figure 4: Portion of customer complaints in 2018 Figure 5: Fashion Sale, Cost of goods sold and GPM in 2016, 2017 and 2018 .11 Figure 6: Initial cause-effect map 12 Figure 7: Updated cause-effect map .17 Figure 8: Amount of client’s orders during 2016-2018 26 Figure 9: Final cause-effect map 32 LIST OF TABLES Table 1: Fashion sale and profit growth rate from 2016 to 2018 .5 Table 2: Transportation cost from 2016 to 2018 Table 3: Stock reconciliation at 31st December 2018 .8 Table 4: Stock reconciliation between warehouse system and accounting system at 31st December 2018 Table 5: Stock clearance and normal sale in 2017 and 2018 10 Table 6: Participants of second in-depth interviews in March 2019 18 Table 7: Inventory turnover days of fashion products 25 Table 8: Participants of third in-depth interviews in April 2019 28 Table 9: ERP’s estimated costs 47 Table 10: ERP project schedule .51 LIST OF FLOWCHARTS Flowchart 1: Goods reception process 35 Flowchart 2: Goods delivery process .37 Flowchart 3: Inventory internal transfer .40 Flowchart 4: Goods return process .42 Flowchart 5: ERP implementation process 50 EXECUTIVE SUMMARY Nowadays, cost management is more concentrated by many corporations over the world, especially in highly competitive market Hence, to maintain the growth in long term and achieve sustainable competitive advantages over rivals, any business line or any company needs to be effective and efficient in managing its internal activities and Fashion business line of Khatoco Trading Co., Ltd is also not an exception Although the financial results of fashion section in the company still show some positive signals with an increase in sales and profits, non-financial aspects indicate some problems include: increment in customer complaints, discrepancies in inventory information between accounting system and warehouse system as well as between stock counts and system records These are the significant symptoms which should be focused and analysed to find more inside problems Based on the deep interview technique of qualitative research, secondary data analysis and literatures review, some potential problems and central problem of failure in inventory management are identified This problem does exist because of some causes related to insufficient inventory management procedures and regulations as well as outdated and inconsistent inventory system Therefore, to solve those causes effectively and efficiently, the recommendations of compiling written working processes for all inventory activities and building ERP system for Khatoco Trading are raised in details These solutions will not only solve the main problem related to stocks control in short-term but also in the long-term of business life More than that, they also help Board of Directors in managing and controlling entire company’s processes and save costs for the company PART – BACKGROUND Company background 1.1.1 History of establishment and development Khatoco Trading Co., Ltd (Khatoco Trading), one of the subsidiaries of Khanh Viet Corporation with 100% owned by the Parent Company, was establish on 21st May, 2002 under the Decision No 77A/2002/QD-UB of the Chairman of Khanh Hoa Provincial People's Committee and officially wen to the business on 1st July, 2002 The company was operated on the basis of separation and re-arrangement from the rooms and branches of Khanh Hoa Tobacco Import and Export Division, including: Textile and Garment Business Department; Cigarette Trading Department with branches at Hai Phong, Ha Noi and Can Tho Upon the establishment, the number of Khatoco ’s employees were 108 people who were recruited and chosen from other members of Khanh Viet Corporation The initial function of Khatoco Trading was to consume textile products of Tan Tien Textile Factory (one member of Khanh Viet Group) and men’s shirts produced by Khatoco Garment Factory with the fabric supplied by Tan Tien Textile Factory In May 2003, Khatoco Trading Company established a Cigarette Trading department on the basis of withdrawing the cigarette market staffs from Khatoco Khanh Hoa Cigarette Factory in Khanh Viet Group and recruiting new employees From 2014, the company have had three following business activities, in which cigarette and men fashion are the two key business lines: - Cigarette trading: Specialize in wholesale and retail trading domestic cigarettes that were produced and supplied by Khatoco Khanh Hoa Cigarette Factory - Men Fashion trading: Design, process the textile products and distribution the men fashion products include shirts, T-shirts and trousers - Ostrich and crocodile trading: Purchase and sell ostrich and crocodile meats, products from ostrich and crocodile meats, other food products (ostrich eggs) 1.1.2 Missions of the company - Mastery over the nationwide 360-degree cigarettes trading chain including Distribution - Agency - Retail - Consumers - Khatoco Men's shirts become one of the strong brands in the market segment of modern, masculine and stylish middle-age men from 30 to 50 years old 1.1.3 Company’s size Currently, Khatoco Trading is ranked as a large company not only in Khanh Hoa Province but also in Viet Nam with the total number of full-time staffs is more than 700 employees Moreover, the average annual turnover (profits before taxes) of the company in recent years was approximately VND173 billion and the total asset calculated as at 31st December 2018 was about VND1,777 billion 1.1.4 Internal structure The internal structure of Khatoco Trading is shown in the following chart: Figure 1: Company structure Source: Company structure Decision No 27/QD-CTTM 1.1.5 Geographic distribution Khatoco Trading’s products are widely distributed throughout Viet Nam from northern area to southern area In which: - The cigarettes are focused in many provinces spreading over regions in Viet Nam such as: Ha Noi, Lang Son, Cao Bang, Hai Phong, Thai Binh in Northern area; Nghe An, Hue, Da Nang, Binh Dinh, Khanh Hoa, Binh Thuan, Dak Lak in the Middle and Highland area; Ho Chi Minh, Long An, Ben Tre, Bac Lieu, Kien Giang, Ca Mau in Southern area - Towards men fashion products, Khatoco Trading concentrates mostly on middle area including Khanh Hoa, Binh Dinh, Da Nang, Nghe An and Can Tho province in Southern Vietnam Products are mainly distributed through agency channel and showrooms Besides, the products are also distributed in Ha Noi, Ho Chi Minh, but the volume is not as many as mentioned area - Ostrich and Crocodile meats are mainly sold to the restaurants and food shops in the whole country 1.1.6 Stakeholders To be a one of member of Khanh Viet Group – State owned entity, the major stakeholders of Khatoco Trading include the Parent Company – Khanh Viet Corporation, Khanh Hoa Province People's Committee as well and related parties and internal suppliers: Khatoco Khanh Hoa Cigarette Factory, Khatoco Garment Factory, Khatoco Ostrich - Crocodile Trading Company, customers, employees and managers of the company 1.1.7 Current development and market analysis The increase in the legislations towards tobacco industry creates difficulties for the company to develop this business line, even nowadays, cigarette product of Khatoco is one of strongest brands in Viet Nam market and directly compete with Thang Long Tobacco Company and Sai Gon Tobacco Company Therefore, men fashion is considered as key products that company will invest in to gain the competitive advantages in long-term period Moreover, the potential growth of Vietnam apparel market is supposed to be high expected to rise by 12-14 percent from 2019-2022 and gained annual growth rate of 10 percent in 2017 according to the statistic of Vietnam Textile and Apparel Association (1) Furthermore, the domestic demand is climbing powered by young aged to middle aged consumers who are living in the urban with their increased disposable incomes In addition, spending on apparel keeps going up and reaches the second place and closely behind foods spending This is the reason why fashion market is more attractive The main markets of Khatoco Trading’s fashion products are Nghe An, Da Nang, Binh Dinh, Can Tho and Nha Trang, and these markets are also developing in the number of young citizens who desire to express their characteristics and status via outfits Khatoco Trading is also focusing on exporting clothing by processing orders from foreign partners in EU and USA Therefore, a positive signal for export section of Khatoco Trading is that export was forecasted to rise by 15 percent per annum from 2016 to 2020 [1] As a result, the bright sight of the market in the near future creates more opportunities for men fashion products of Khatoco Trading Currently, the close competitor of Khatoco Trading in apparel industry is Owen at the middle-age and middle-class men segment 1.1.8 Organizational performance The growth in revenue and profits of the whole company are shown in the following chart: Figure 2: Sale and Profits of The Company and Fashion section from 2016 to 2018 Source: Company’s financial statement 2016, 2017 and 2018 According to the above chart, there is the down trend in revenues and profits of the company from VND 7,363 billion in 2016 to VND 5,722 billion and from VND 193 billion in 2016 to VND 133 billion in 2018 respectively The decrease in total sales and (13) Kumar SA, Suresh N Production and Operation Management 2nd ed New Delhi: New Age International; 2008 (14) Russell RS, Taylor BW Operations Management: Creating Value Along the Supply Chain 7th ed United 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management practices on business performance: Institute of Personnel and Development London; 1997 (22) Kaplan Publishing ACCA Strategic Business Leader (Study Text) USA 2018 (23) Antonova R, Georgiev G ERP Security, Audit and Process Improvement Smart Technologies and Innovation for a Sustainable Future: Springer; 2019 p 103-110 (24) Hitt LM, Wu D, Zhou X Investment in enterprise resource planning: Business impact and productivity measures Journal of management information systems 2002;19(1):71-98 APPENDIX First round of depth interview Purpose of the interviews: To find the potential problems of three symptoms Customer’s complaints about wrong shipping products Differences between stocks on count and stocks on the system Differences between stocks quantity on accounting system and that on warehouse system 7.1.1 Transcript 1: Interview guide – Warehouse staff – Mr Pham Hoai Phuong Part 1: Introduction Interviewer: Thank you for your time to join the meeting today My name is Phuong Linh and I am an internal controller of Khatoco Trading allocated from Parent company Currently, Khatoco Trading’s internal control department and I are conducting the research related to problems in inventory management Hence, we need your support in sharing your idea as well as your experiences and evaluation following to interview’s questions and the discussion will take around 10-30 minutes We highly appreciate your collaboration because your answers will help the company much in finding the root causes of these problems and solve them effectively To avoid the information missing in this interview, please allow me to record your answer I promise that your sharing will be confidential and be an important document for the company to the business actitives So, please feel comfortable and free whenever you have the questions for me Do you need more explaination? Mr Phuong: No Could we start the interview now? Mr Phuong: Yes, of course Part 2: Main questions Interviewer: Recently, there are some complaints of our customers about received products are different from their order in terms of quantity and kinds of good also Do you know any reason caused from warehouse activities? Mr Phuong: No, of course not Interviewer: We have checked at customers’ sites that all package seals were in good condition Further, our seal is unique and very hard to counterfeit The problem should be come from our warehouse activities Could you please tell me any possibilities? Mr Phuong: hmm… I think that maybe mistakes come from picking order before delivering to customers Interviewer: Could you please tell me more? Are there any objective reasons that can cause wrong picking? Mr Phuong: There are a lot of SKUs in the warehouse at a time and sometimes, it becomes very difficult to distinguish visually each type of products because they are somehow similar in color, especially, in size We just distinguish each SKU by a small tag on each item Oh! I’ve just thought of a case which may not be resulted from us There is one separated position to place ready-to-shipping goods but the package for each customer was not marked clearly and this results in the shipment errors Interviewer: Your answer is very informative Thank you so much, Mr Phuong 7.1.2 Transcript 2: Interview guide – Warehouse staff – Mr Doan Minh Thong Part 1: Introduction Interviewer: Thank you for your time to join the meeting today My name is Phuong Linh and I am an internal controller of Khatoco Trading allocated from Parent company Currently, Khatoco Trading’s internal control department and I are conducting the research related to problems in inventory management Hence, we need your support in sharing your idea as well as your experiences and evaluation following to interview’s questions and the discussion will take around 10-30 minutes We highly appreciate your collaboration because your answers will help the company much in finding the root causes of these problems and solve them effectively To avoid the information missing in this interview, please allow me to record your answer I promise that your sharing will be confidential and be an important document for the company to the business actitives So, please feel comfortable and free whenever you have the questions for me Do you need more explaination? Mr Thong: No, I not Could we start the interview now? Mr Thong: Yes, I’m ready Part 2: Main questions Interviewer: I have asked Mr Phuong about the discrepancies in shipping orders resulted from picking errors and part of it comes from the fact that it seems difficult for you to clarify each SKU Do you have any comments about it? Mr Thong: Yes, I agree with Mr Phuong Interviewer: Could you please specify it? Mr Thong: I think wrong pickings likely incur in peak season, especially, the period prior to Tet holiday due to large amount of shipping goods and orders because we don’t have enough time to check them all manually carefully In peak season, we mostly focus on big orders and recheck them before shipping, for small orders, we can easily replace the wrong picked items quickly In normal cases, we usually check them carefully before shipping Interviewer: Recently, we have reconciled inventory amount between your system (inventory management system) and accounting system and there are some differences between them Could you tell me the reason of it? Mr Thong: I don’t know what you exactly mean but our system is only subject to our inventory management purpose We only confirm the total amount of each category to Ms Hoa (accountant) only Interviewer: We also found many unusual transactions in your system What are they? Mr Thong: As mentioned above, sometimes, we randomly stock count for those items that have many transactions during the period and correct them to reflect the actual amount Further, we are responsible to input transactions into inventory management system but sometimes Mr Long finds out that there are some small mistakes of information input in the system and he has made adjustments Interviewer: Thanks for your sharing! 7.1.3 Transcript 3: Interview guide – Warehouse keeper – Mr Bui Van Long Part 1: Introduction Interviewer: Thank you for your time to join the meeting today My name is Phuong Linh and I am an internal controller of Khatoco Trading allocated from Parent company Currently, Khatoco Trading’s internal control department and I are conducting the research related to problems in inventory management Hence, we need your support in sharing your idea as well as your experiences and evaluation following to interview’s questions and the discussion will take around 10-30 minutes We highly appreciate your collaboration because your answers will help the company much in finding the root causes of these problems and solve them effectively To avoid the information missing in this interview, please allow me to record your answer I promise that your sharing will be confidential and be an important document for the company to the business actitives So, please feel comfortable and free whenever you have the questions for me Do you need more explaination? Mr Long: No Could we start the interview now? Mr Long: Yes, let’s start because I don’t have many times Part 2: Main questions Interviewer: I have asked your staffs, Mr Phuong and Mr Thong and found out that packages for each customer are placed in ready-to-shipping area but they are not clearly marked for each customer, aren’t they? Mr Long: Yes, we have worked for long time and we know which package is about to ship to corresponding customer So, I think that it is not necessary to mark them Interviewer: Do you realize adjustment transactions in inventory management system? Mr Long: Yes, we have to input all information manually, sometimes I randomly check the input amount with document, I will make adjustments or tell my staff to make adjustments in case of differences, also we will make adjustment when we perform random count Further, sometimes, system went down, became slow and we have to start input over if we had not saved the pending workdone I think mistakes in inputting information is also attributable to this Interviewer: Do you perform reconciliation between your system and accounting system timely to prevent any wrong input? Mr Long: Yes, of course we did Monthly, Ms Hoa (accountant) sends me a report from accounting system, I will check the amount with the information in our system in terms of total amount of each category, then, I will sign on her printed report Interviewer: Thank you for your information 7.1.4 Transcript 4: Interview guide – Accountant in-charge – Ms Le Thi Phuong Hoa Part 1: Introduction Interviewer: Thank you for your time to join the meeting today My name is Phuong Linh and I am an internal controller of Khatoco Trading allocated from Parent company Currently, Khatoco Trading’s internal control department and I are conducting the research related to problems in inventory management Hence, we need your support in sharing your idea as well as your experiences and evaluation following to interview’s questions and the discussion will take around 10-30 minutes We highly appreciate your collaboration because your answers will help the company much in finding the root causes of these problems and solve them effectively To avoid the information missing in this interview, please allow me to record your answer I promise that your sharing will be confidential and be an important document for the company to the business actitives So, please feel comfortable and free whenever you have the questions for me Do you need more explaination? Ms Hoa: No, I not Could we start the interview now? Ms Hoa: Yes, ok! Part 2: Main questions Interviewer: Do you perform reconciliation between accounting system and inventory management system? Ms Hoa: Yes, because systems are not integrated, I have to perform reconciliation monthly Interviewer: Please tell me about how you perform reconciliation in details Ms Hoa: Monthly, I extract inventory balance report at the end of each month and send them to Mr Long, warehouse keeper, his responsibility is to check the ending balance of each category in the report and confirm with me, after all, I will print the report and he has to sign on it as a proof of confirmation Interviewer: Are there any discrepancies between systems so far? Ms Hoa: No, in case of difference, warehouse keeper has to check the differences and adjust the system to make sure total amounts are matched Interviewer: How about stock count’s results? I have checked those reports and found out that there was no discrepancy happened Ms Hoa: No, of course, there are discrepancies However, warehouse keeper and his staffs are responsible to control all stock in their warehouse, any discrepancies would be compensated by them That’s our practice so far Interviewer: Thank you for your answer 7.1.5 Transcript 5: Interview guide – Chief accountant – Mrs Nguyen Thanh Tam Part 1: Introduction Interviewer: Thank you for your time to join the meeting today My name is Phuong Linh and I am an internal controller of Khatoco Trading allocated from Parent company Currently, Khatoco Trading’s internal control department and I are conducting the research related to problems in inventory management Hence, we need your support in sharing your idea as well as your experiences and evaluation following to interview’s questions and the discussion will take around 10-30 minutes We highly appreciate your collaboration because your answers will help the company much in finding the root causes of these problems and solve them effectively To avoid the information missing in this interview, please allow me to record your answer I promise that your sharing will be confidential and be an important document for the company to the business actitives So, please feel comfortable and free whenever you have the questions for me Do you need more explaination? Mrs Tam: No Could we start the interview now? Mrs Tam: Ok! Part 2: Main questions Interviewer: Ms Hoa said that reconciliation is performed monthly Do you check the reconciliation workdone of Ms Hoa? Mrs Tam: Yes, of course I Monthly, she will send me the report with signatures of her and warehouse keeper as confirmations for the reconciliation I check those printed and confirmed amounts with system and finally sign on this report as a reviewer Interviewer: What’s your solution to differences after stock count? What are the causes of those differences? Mrs Tam: Warehouse keeper and his staffs would compensate for the any differences After that, we will adjust the amount as a sale transaction to him and receive his compensate We all agree with this practice for a long time without deeply finding the root causes leading to discrepancies Interviewer: Thank you so much, Mrs Tam Second round of depth interview Purpose of the interviews: To find more potential problems referred from literatures 7.2.1 Transcript 1: Interview guide – Warehouse staff – Mr Pham Hoai Phuong Part 1: Introduction (refer to interview guideline) Part 2: Main questions Interviewer: Based on your sharing in the first interview, you realized some mistakes in ordering picking before shipping to clients So, Do you think if we have any other problems incurred in warehouse activities? Mr Phuong: Let me think Hm…m, probably yes Warehouse have very small tasks, even they are not complex, but sometimes I and my colleagues did not know who will be responsible clearly Jobs sometimes are allocated orally based on the work load of each person and I think we got troubles in conducting our works because every task seem not be clear at the beginning Interviewer: Did your department have any regulations or procedures about checking stock before delivering or receiving? Mr Phuong: As I shared with you, everything is unclear even the regulation or procedure All activities of the warehouse belong to management of warehouse keeper and staffs, so we discussed to conduct job based on the most suitable ways as we agreed Therefore, no document regulated about checking methods Interviewer: Do you know why we did not have any regulations about this? Mr Phuong: Sorry, I not know Interviewer: So, have you ever raised this issue to your manager? Mr Phuong: We all know about this problem include my manager, my colleagues and I And we are waiting higher level for making the right decisions to solve this problem Interviewer: Thanks for your sharing! 7.2.2 Transcript 2: Interview guide – Warehouse staff – Mr Doan Minh Thong Part 1: Introduction Part 2: Main questions Interviewer: As you mentioned in the first meeting of us, there were some problems like difficulties in clarify each SKU or some mistakes in recording on system So, whether you get any different troubles in doing workdone, or not? Mr Thong: Yes, sometimes, but they are not important For example, Mr Phuong and I were confusing in conducting tasks like one task was done twice by Mr Phuong and I or missing in doing something because I thought Mr Phuong was in-charge but he thought it was me Interviewer: It seems that you and Mr Phuong were unclear about your jobs sometimes, doesn’t it? Mr Thong: Yes, I agree with you Interviewer: So, how about the regulations? Have you ever thought you need a clear regulation in doing some tasks like for stock checking or something like that? Mr Thong: Yes, I remember that our company did not have any regulations for checking stock The regulations are very important to us because we can refer to them to perform our jobs Interviewer: It mean that in the past, you did not read any regulation about checking stock before delivery, did you? Mr Thong: Yes, you’re right Since the first day of work, I have been working following to directions of warehouse keeper and never seen official instructions or regulations of company about stock checking process I think every member in our warehouse all knew, you can ask Mr Phuong or Mr Long because they and I talked about this issue sometimes 7.2.3 Transcript 3: Interview guide – Warehouse keeper – Mr Bui Van Long Part 1: Introduction Part 2: Main questions Interviewer: Have you ever re-checked your staff workdone? Mr Long: Yes, I have had performed re-check their works However, in the peak seasons when workloads were huge, I did not have enough time to review all Interviewer: Do you think that in case you could not re-check their jobs, some mistake could incur? Mr Long: Hm…mm You are right, mistakes could incur For example, there are many product codes which are not completely distinguished, so sometimes my staffs or even I cannot ensure entirely correct inventory input information Moreover, we input number on the system by hand, so human error may be unavoidable like I said in the first interview Interviewer: Your staffs mentioned that both of them realized that our company had insufficient regulations about warehouse activities like stocks check regulations Are there any difficulties to you in performing your jobs? Mr Long: Maybe, a clear regulation can help me and my staffs a lot However, because our company still did not pay attention much in issuing fully regulations for every activity, so I guided my staffs based on my experience without any regulations or guideline documents I have been working for the company for a long time, so I understood clearly how to operate the warehouse that can adapt to the requirement of sale department in distributing and arranging goods Interviewer: You knew that warehouse system is separated with accounting system So have you ever thought that our company should integrated two systems into one single system? Mr Long: I think it is depended on the purpose of higher levels But for me, I not need an integrated system because warehouse system is just used for our reference and management Accounting system belongs to accounting department Whenever accountant needs us to confirm accounting amounts We will compare with our system and sign on their report if total quantity is matched because the accountant is mainly focus on total stock amount Therefore, no direction of managing inventory records were agreed by both of us as well as I have never seen any regulations about this situation yet” Interviewer: About warehouse arrangement, as confirmed in previous interview, your employees chose a place for ready-to-shipping goods without clearly mark on each package, so you use any techniques in arranging or storing your stocks to avoid goods lost? Mr Long: No official or profession methods about arrangement were used because balance of goods is really large in peak season However, we totally control stocks based on its tags from suppliers and they are distinctive to each other Interviewer: Thanks for your sharing! Third round of depth interview Purpose of the interviews: To find the potential causes of central problem: Failure in inventory management 7.3.1 Transcript 1: Interview guide – Warehouse keeper – Mr Bui Van Long Part 1: Introduction Part 2: Main questions Interviewer: According to your sharing in the second interview, you mentioned about some problems related to warehouse activities, so you think the root cause of these ones may due to insufficient written processes? Mr Long: Yes, I agree with your idea There were some mistakes incurred due to human error that I did not have enough time to check and I was not always available when staffs needed my advices Moreover, the consequences of these issues did not solve immediately because there was no written guideline for staffs to refer Therefore, a clear procedures and instructions related to inbound and outbound activities, organization chart, and some common mistakes can help me and my staffs work more effectively Unfortunately, I have never seen it before Interviewer: Is there any other causes of these problems you think about? Mr Long: No, I don’t have any additional idea Interviewer: Thanks for your sharing! 7.3.2 Transcript 2: Interview guide – Fashion deputy director – Mr Ho Ngoc Chung Part 1: Introduction Part 2: Main questions Interviewer: Have you ever heard about some problems in inventory management of fashion products? Mr Chung: Hm…., actual yes, but not frequently I saw that some problems were not significant as well as they are solved quickly by the coordination between warehouse keeper and accountant Interviewer: Can you share more problems that are raised to you? Mr Chung: Last year, Mr Long told me about some inventory items were stolen, some customers had complaints about wrong received goods or Mrs Tam responded that there were few differences between her record and warehouse’s record, but after that they found the solutions and said this was not significant Interviewer: You did not verify more reasons, did you? Mr Chung: Yes, I thought they could solve the problems together Interviewer: Based on the inspection of our internal control, there was some issues increased related to inventory activities include the miss-match in inventory record as you know, the confusion in doing tasks of employees due to unclear guideline as well as regulations or directions Do you think these problems are important to find the causes? Mr Chung: Well, I understand your finding about the confusion of our employee I think all activities related to inventory in our company mostly had verbal processes instead of written one such as sale, purchase, inbound and outbound logistic and this was a big problem Interviewer: You said that all activities are mostly conducted through verbal processes, you think this situation has potential risks toward stocks control? Mr Chung: Yes, I also think too In the fact that, the verbal processes are very risk for our activities because staffs not have guidelines and references to follow and managers will get trouble in observing staffs’ work done So, we need to improve this problem by compiling written processes as soon as possible Interviewer: You knew this problem before, why our company did not have any solution to solve this problem? Mr Chung: Because the company mainly focused on sale as following to the requirement of parent company and tried to ensure to complete tax liabilities as delegated annually, so internal activities were not be taken care comprehensively However, our company is in equitization period now, so I think this is the most suitable time to solve this problem immediately Interviewer: Thanks for your valuable sharing! 7.3.3 Transcript 4: Interview guide – Chief accountant – Mrs Nguyen Thanh Tam Part 1: Introduction Part 2: Main questions Interviewer: Do you have any comment about the current accounting system – An Linh that our company are using? Mrs Tam: Yes, recently, my staffs and I have had some issues with An Linh software there are some weaknesses in adding more product codes resulted from limited functions Interviewer: You know that accounting system and warehouse system are separated Can you share your idea about this? Mrs Tam: I agree that the problems that accountant cannot control will lead to some unexpected consequences as we saw in recent years Even we reconciled frequently but the mistakes still incur Therefore, if our company can equip a system that warehouse and accounting are linked together, the problems of inventory differences will be reduced, I think Interviewer: You mentioned that a new advanced system should be equipped, but it can take many times because we have to get the approval from BOD, or even parent company Thus, you think about other solutions to fixed problems of inconsistence in inventory tracking? Mrs Tam: Uhm…, may be any written direction or clearer procedure can help both of us We know how to work with each other, but until now, everything is determined according to our agreement without based on any documents Hence, mistakes still incurred Interview: Why did not you prepare the written processes or guideline for inventory control before? Mrs Tam: Managers did not require me to that and I did not have enough time to write it Interviewer: Thanks for your valuable sharing! 7.3.4 Transcript 5: Interview guide – IT manager – Mr Tran Nam Cuong Part 1: Introduction Part 2: Main questions Interviewer: Were you in-charge in building warehouse system? Mr Cuong: Yes, I was Interviewer: You know that warehouse system and accounting system is not linked together, you? Mr Cuong: Yes, of course An Linh is designed and installed first by outside party Interviewer: Why did not we require An Linh to create warehouse system in the past? Mr Cuong: Accounting system was set up before warehouse system As according to the requirement from higher level about designing a system for warehouse to observe stock, I was in-charge of this task I think that warehouse system is quite simple with few functions and not need to sync with accounting system, so we did not hire Seasoft Co to design it Moreover, to save the cost for our company BOD was not prefer hiring outside party to self-designing Interviewer: What you think about the quality of An Linh system? Mr Cuong: I have to work with An Linh frequently because accountant raised many complaints about this system like limited functions, wrong report extraction Interviewer: Can you share with me more information about this? Mr Cuong: In recent years, accountants get stuck in adding new details of goods into accounting system for their control Even I have required supplier to update and extend system for these details but they could not adapt to this requirement thoroughly An Linh system is quite outdated and seems not to be suitable to a variety of accounting requirements in a big company like Khatoco Moreover, the warehouse system was created by IT, so it could not be consistent with An Linh, warehouse staffs and accountants have to reconcile manual if they need 7.3.5 Transcript 6: Interview guide – Director – Mr Doan Huu Thanh Part 1: Introduction Part 2: Main questions Interviewer: Have you ever received any feedback of accounting department about the problems with current accounting system? Mr Thanh: Yes, I have I heard Mrs Tam and Mr Chung mentioned about this issue and I am considering which system can adapt to company’s requests and restricted budget Interviewer: Another aspect I would like to ask you, this is our culture There was the failure in inventory management and one of some reasons is that our departments did not connect to each other to control it such as inadequate reconciliation or ineffective communication and discussion about inventory problem So, you think this issue partly come from our miss-match culture? Mr Thanh: You know that our culture was built during a long-term period of business Thus, even the connection between many departments was not focused, culture can not change immediately As a member of BOD, I need more time to improve our culture day by day And I think, there will be another solution to make every related department be responsible for their general tasks like setting up a thoroughly procedure, this action will bind employees to standard framework Interviewer: Thanks for your valuable sharing! ...UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business PHAM THI PHUONG LINH FAILURE IN INVENTORY MANAGEMENT AT FASHION DEPARTMENT IN KHATOCO TRADING CO. , LTD MASTER... management in checking goods or recorded input number result from the failure in controlling inventory of Khatoco Trading Separated inventory tracking system and reconciliation is not correctly... 2 3,9 7 4,6 2 1,6 38 Total transportation cost 1,9 7 6,5 8 0,2 22 2,5 9 0,0 8 2,9 34 3,1 5 6,8 4 0,5 82 Transportation cost/Sale 1.08% 1.31% 1.48% 11.92% 12.82% 13.17% 3 2,7 23 3 5,7 28 3 5,9 86 7 2,4 94 8 7,7 24 Transportation cost/Selling