Inventory System for Convenience Stores
Inventory System for Convenience Stores
Abstract
The total food waste constitutes a great portion of perishable goods and Kaya (2021) stated that inventory management
has been proven to be more challenging for perishable goods since these deteriorate over time and become obsolete.
This study will be significant for business owners in Convenience Store X in Marikina City and for future studies to
have an effective inventory management. The objective of this study is to create user-focused inventory management
system using a design thinking approach which is a five-stage process: Empathize, Define, Ideate, Prototype, Test.
With that, the researchers gathered data and determined the users’ pain points related to the inventory management
system for perishable goods in Convenience Store X. Then, the researchers came up with criteria and solutions for the
new inventory system with the use of Multi-Criteria Decision Analysis (MCDA), specifically Analytical Hierarchy
Process (AHP) and integrated with software developers in designing the three (3) user interfaces of a Software-as-a-
service (SaaS) inventory system namely: System X, System Y and System Z. Through the Pugh Selection and User
Acceptance Test, the researchers collected ratings from the users and concluded that System X is the most preferred
design based on the users’ pain points and preferences.
Keywords
Inventory Management System, Design Thinking Approach, Perishable Goods, Convenience Store/s, Multi-Criteria
Decision Analysis (MCDA)
1. Introduction
Perishable goods are a large component of retail sales, they represent up to 50% of all sales in the retail food industry.
However, 70% of the total food waste constitutes a great portion of perishable food products (Gardas et al. 2018). In
general, a problem is seen from perishable food spoilage and deterioration in the retail industry, wherein it results in
significant losses of profitability. With that, Kumar (2020) highlighted that a system perspective is needed to analyze
the complexities on the sustainability of perishable food supply chains.
With Convenience Store X located in Marikina City as the study site, the researchers gathered data recurring from
August to December 2021 and found significant reports of bad merchandise, or also known as products that may be
damaged, expired, or near their expiration dates. It was recorded that Convenience Store X had a significant financial
loss in just 5 months. Furthermore, based on the users’ experiences in the existing inventory management system of
Convenience Store X in Marikina City, the researchers have concluded that the owner, managers, and employees of
Convenience Store X need to have an inventory system with real-time updates of sales and stocks, and to have an
effective monitoring and tracking system for the inventory.
1.1 Objectives
This research aims to create a user-focused inventory management system for Convenience Store X located in
Marikina City. It is expected at the end of the study that the researchers will be able to fulfill the following objectives:
1. To determine the significant factors and current challenges of users related to the inventory management system
for perishable goods in Convenience Store X.
2. To translate the findings using a design thinking approach in designing a user- focused inventory
management system for Convenience Store X.
3. To test the user acceptance of the new inventory management system in Convenience Store X located in
Marikina City.
2. Literature Review
The Food Retail Industry has developed through time wherein food retailers used to be small corner stores in the urban
areas and villages in the United States of America and Europe. These stores were supplied by wholesalers in general
and were the foundation of food retailing until the mid-1800s. One of the biggest changes in the industry was the
emergence of the concept of self-service in the early 1900s wherein consumers casually walked into the stores and
chose the products that they would buy. Before this era, the clerks usually looked for the request of the consumers
behind the counters and handed it to them. This is where the notion of branding started, in which the food processors
had to make their products appealing for an increase in customer demand and sales. It was in the 1970s wherein
revenue for the retailers gradually increased in the food retail industry as consumers continue to resort to food retail
outlets. Progressing to the modernization era, technology has started to become a source of competitive advantage in
the food retail industry wherein the channels of distribution and operating system in the businesses have been enhanced
to more efficient and effective schemes (Stanton 2018).
In the Philippines, food consumption has fueled expansion in the food and beverage retail sector. According to the
United States Department of Agriculture (USDA), the Philippine food retail sector has risen by 25%, reaching almost
$50 billion in 2019. The Philippines' food retail industry is dominated by three supermarket chains, however they only
account for 20% of total sales because most purchases are still made through conventional retail outlets. The three
leading retail stores, according to USDA, are SM Markets, followed by PureGold, and Robinsons. However,
traditional retailers, such as convenience stores, saw the fastest rise in spending value per trip among Fast-Moving
Consumer Goods (FMCG) channels in the first quarter of 2021 (Key et al. 2021).
Since Convenience Stores saw the fastest rise in spending value per trip among Fast-Moving Consumer Goods
(FMCG) channels in the first quarter of 2021, the challenges in perishable food supply chains have also risen.
According to a study of Joshi & Visvanathan in 2019, the lack of awareness that food waste reduction is considered
as a problem in developing countries. It has been claimed that perishable food products represent 70% of the total
food waste (Gardas et al. 2018) in which Jonkman et al. (2019) also stated that it is essential to integrate perishability
in the design of food supply chains. Moreover, Deng et al. (2019) claimed that failure to include the food characteristics
and quality in supply chain design and planning may pose a significant challenge to sustainability in perishable food
supply chains. Thus, it can be observed that these challenges need to be addressed by understanding the factors to be
considered and by implementing sustainable practices in perishable food supply chains.
Inventory management is one of the most significant processes in supply and distribution management. While
inventory stock is an important asset for companies, specifically those in the manufacturing line. However, an out-of-
stock situation is a problem that disrupts a company's business processes. That is why the task of having effective
inventory management is to make sure that the quantities of inventories are sufficient to fill the demands of consumers
without overstocking. Bautista et al. (2022) cited that creating a re-ordering system template as the main tool can be
used to replenish the inventory, achieve the desired inventory level, and the truckload optimization.
In order to achieve a more optimized inventory management system, a new approach had to be used and one approach
which could make this feasible is the Design Thinking Approach. The Design Thinking was born from the questions
– “How is it that designers think?” and “How is design done?” (Baytas 2021). It is defined as an iterative process in
which creative thinkers try to understand the user, challenge assumptions, and reframe problems in order to find new
tactics and solutions that are not immediately obvious based on normal level of understanding. It is centered on an
ardent desire to learn more about the individuals for whom creative thinkers design products or services. Design
Thinking improves the observation and development of empathy with its target users. This aids in the process of
questioning: the problem, the assumptions, and the consequences. It is particularly beneficial when dealing with ill-
defined or complex problems, by re-framing the problem in a human-centric manner, brainstorming several ideas, and
prototyping & testing with a hands-on approach (Dam et al. 2021). This understanding isolates facts and methods to
apply knowledge gained across domains and creates a linear solution. This framework can be said to be effective in
fixing problems when applied, as solutions are typically within a known range. However, Traditional approaches to
problem solving may not be applicable to all real-life problems as it creates research questions that defy simple
explanations. The overall flow of design-thinking's framework consists of three major parts – 1) Understand. 2)
Explore. 3) Materialize. Under the major parts are the six phases of Design Thinking, the process of the approach:
empathize, define, ideate, prototype, test, and implement. A lot more industries have already shifted to the use of
Design Thinking and have already benefited from it. Some of these industries are the Fashion Industry, Entertainment
Industry, Banking Industry, Automotive Industry, and Tech Industry (Fabrica 2020). This explains the effectiveness
of the Design Thinking approach as it can be flexible and can adapt to various fields.
3. Methods
3.1 Research Design
The research design has evaluated the factors affecting the performance of existing inventory management systems
used for perishable goods. Based on the previous chapter, the literature review served as the basis to determine some
of the variables included in this study. Specifically, the independent variables that were considered are consumer
demand, product lifetime, control, operational cost, and user persona. The study used a design thinking approach to
evaluate how these aforementioned independent variables affect the dependent variable which is the overall
performance of the inventory management system. With that, the researchers underwent a comparative type of
research utilizing the design thinking approach to compare a set of criteria and solutions to identify the optimal solution
for the newly designed inventory management system. To bridge the gap between the wastage of perishable goods
and the challenges of the existing inventory systems, the researchers’ conceptual framework focused on redesigning
an inventory management system that is user-focused through a design thinking approach.
The researchers underwent a process based on the design thinking approach which is known for its five-stage process
– Empathize, Define, Ideate, Prototype and Test. This is for the researchers to evaluate the problems related to the
existing inventory system. Where observations were done for the researchers to familiarize themselves with the current
inventory system that will allow them to acquire enough data and responses to create an optimal solution based on the
users’ pain points. A system would then be selected and tested to see if that system would be able to meet the
requirements of the study and if it was able to address the concerns of the potential users which is shown in Figure 2.
4. Data Collection
Within the first two stages of the Design Thing Approach, Empathize and Define the Problem, the researchers
evaluated the problems related to the existing inventory systems for perishable goods that were previously mentioned
in the literature review. The researchers contacted the owners of the chosen convenience stores to ask for their
permission to use their store to gather data regarding the breakdown of sales to identify the number and total cost of
unsold items per month. Moreover, interviews have been conducted with the users of Convenience Store X regarding
the problem with their inventory and inventory management system. Moreover, Observations have been done for the
researchers to familiarize themselves with the current inventory management system of each store and identify the
problem/s of each system. The researchers have also analyzed the qualitative data through an empathy map, persona
development, and customer journey map.
Based on the users’ pain points regarding the existing inventory management system in Convenience Store X, the
researchers considered five (5) criteria to determine the optimal solution which comprises the following: Ease of Use,
Accuracy, Cost Efficiency, Forecasting Demand, and Data Storage Capacity. According to Tejesh et al. (2018), the
accuracy of a system must be high within a precise scope since it illustrates an overall excellence and quality of the
information. Moreover, Tejesh et al. (2018) mentioned that the system should be able to deliver a system that would
be convenient and easy to navigate for users and that cost must always be considered when implementing a system by
ensuring that it does not result in a higher cost. In addition to that, Kot et al. (2014) also stated that forecasting of
demand in an inventory system starts with its purpose to reduce inventory levels and that a system should have the
capacity to store enough data.
The potential users, namely the owner, manager, assistant manager, and an employee, performed the Analytical
Hierarchy Process (AHP) to compare the weight or relevance of each criterion. The obtained results guided the
researchers in identifying which among the criteria should be mostly taken into consideration when designing the
inventory management system. Table 1.1 shows that among the five (5) criteria, the Data Storage Capacity ranked
first with an average of 0.2750 or 27.50%.
To determine the optimal solution on the users’ pain points based on the personas, the researchers proposed four (4)
solutions in making an effective inventory management system, namely, Radio-frequency identification (RFID),
Barcoding system, Software-as-a-Service (SaaS), Smart Shelves. During the ideation process, the researchers focused
on the digital transformation with the industrial internet of things (IIOT) to come up with these solutions. The RFID
Technology can be used for managing inventory and tracking it in real-time through its tags, readers, and software.
The Barcoding system can be used for quick identification of certain products through barcode scanning for faster
reordering, tracking of inventory, and monitoring of the expiration dates of the products. On the other hand, Software-
as-a-Service (SaaS) is considered as a cloud computing software that can be used by several users to track the inventory
stocks, is more flexible, and cost-efficient since its inventory tracking features can be used from different locations.
Lastly, Smart Shelves are electronically connected shelves that are a combination of sensors, digital displays and RFID
tags that can be used to track inventory and gather real-time data.
Based on the result from Table 1.1, the researchers performed Analytical Hierarchy Process (AHP) to compare which
among the proposed solutions satisfies the criteria most. The results are presented in Table 1.2 wherein Software-as-
a-Service (SaaS) ranked first, having an average of 0.4379 or 43.79%.
Concept Screening
A criteria-based decision matrix commonly known as Pugh Concept Selection, which was developed by the Scottish
scientist, Dr. Stuart Pugh, was used in this study to select the best solution that meets the set of criteria. The Pugh
Concept Selection is a selection tool that is usually used in a decision-making process to determine which of the
alternative solutions should be selected (Pugh 1980). Based on the four criterions namely, ease of use, accuracy, cost
efficiency, forecasting demand, and data storage capacity, the researchers asked the users to compare the three (3)
developed user interface designs based on their chosen solution – Software-as-a Service system, to the current
inventory system of Convenience store X. With all the reference criteria being marked as 0, concepts or solutions that
meet the criteria are marked as + with a value of positive whereas if not, they are marked as - with a value of negative
1 (–1). The ranking of the solutions and knowing if they will proceed to the Concept Scoring will be determined by
adding up these values.
Table 2. Concept Screening
The researchers conducted a focus group discussion with the same end-user group to discuss the three (3) developed
Software-as-a-Service (SaaS) user interface designs. This will allow the researchers to determine which among the
designs is most desirable for the users based on the set criteria. The chosen design(s) will be the one(s) developed and
improved by the software developers.
Table 2 shows the summary of results from the concept screening conducted by the researchers. Results show that
System Z acquired the lowest net score of negative one (–1) therefore, it will not be included in concept scoring, and
will not be continued for further testing.
Concept Scoring
The researchers used the relative performance rating (See Table 3) for the end users to rate the current system and the
three (3) Software-as-a-Service (SaaS) user interfaces that were designed and further discussed in detail in section
4.6.2. The ratings from the users of Convenience Store X were multiplied by the corresponding weights of each
criterion, which were calculated in section 4.6.1 using the Analytical Hierarchy Process (AHP).
Very Unsatisfied 1
Unsatisfied 2
Neutral 3
Satisfied 4
Very Satisfied 5
Table 4 presents the tabular summary of results from concept scoring. This was conducted through a focus group
interview with the same users, asking them to score the current inventory management system of Convenience Store
X and the proposed Software-as-a-Service (SaaS) user interface designs in relation to the five (5) criteria provided.
The researchers computed the mean scores for each criterion and system to summarize the users’ scores. The table
shows that among the three, System X acquired the highest total score of 4.70, and is the best design for the proposed
Software-as-a-Service (SaaS) solution.
Based on the interview conducted by the researchers, an empathy map was constructed as shown in Figure 3. This
will provide researchers with deeper insights on the needs of the end users and be able to determine the users’ attitudes
and behaviors. The empathy map illustrated above is mainly focused on the pains and gains of the 5 interviewees
(owner, managers, and employees). Moreover, it includes the four elements particularly, see, hear, think & feel, and
say & do that would be interconnected to the persona development and customer journey map.
Persona Development
Table 5 shows the persona development of different characters regarding their characteristics and user story. Upon
analyzing and breaking down the information, one can clearly see that these users often encounter issues with
reordering stocks, tracking, replenishing, and automatic updates before the expiry dates of inventory. Difficulties in
the area of reordering and tracking are a prominent issue since there is no forecasting feature that could suggest this.
Replenishing and automatic updates before the expiry date are some of the dilemmas that users also face due to the
lack of features that the current system can offer. These factors would lead to not only the wastage of products but
could also majorly impact the sales of the said business.
Blair Knowledgeable and Detail- She is mainly concerned about the performance of the inventory management system of Site X. She hopes for a
oriented; Female Store more accurate inventory system that will serve as a guide in reordering stocks and in tracking inventory.
Owner in her 40s
Felix Punctual and Technology The errors that he experiences from the system have been consuming his precious time which is why he feels that
Illiterate; Male Manager in there is a need for improvement in the current process for replenishing inventory. He wishes that there is a feature
his 30s in the system that double checks the fast-moving items and effectively monitors stocks, especially the possible
expired products.
Tiana Humble and Diligent; Tiana does her best to provide excellent customer service. She fears forgetting to manually check the inventory
Female Employee in her 20s for expiring products that could eventually be sold to customers. This keeps her stressed out since she would not
want to face customers with complaints regarding this situation, which is why she wishes for a system that keeps
her updated with the products to be removed from the shelves before their expiration.
Table 6 shows the users’ experience in the existing inventory management system of Convenience Store X located in
Marikina City. This also includes the goals, expectations, opportunities, and ideas to improve one of each user persona.
Upon analyzation of the Customer Journey Map, it is observed that the three personas, Blair, Felix, and Tiana,
experience troubles and difficulties in Ordering, Sorting & Storing, and Monitoring with the existing inventory
management system used by Convenience Store X. Difficulties in ordering were experienced because of the inventory
management system lacks a forecasting system which could assist the users and prevent over/under stocking of goods.
For sorting and storing, users often get trouble tracking merchandise on shelves since the existing system does not
have this feature. This may lead to missed sales opportunities. Lastly is monitoring, users encounter difficulties in
monitoring of sales, stocks, and bad merchandises since the existing inventory management system does not record
these data in real time which results to manual checking of products and manual encoding of store data.
Table 7 shows the degree of importance (intensity) of each criterion. Potential users and researchers were
asked to certify the impact of each criterion on the other criteria, with respect to criterion 1, criterion 2, criterion 3,
etc., in order to determine the relative relevance of criteria and sub criteria. Additionally, each sub criterion's relative
weight in relation to each other sub criterion is supplied in order. Basic Saaty's scale with verbal terms of 1–9 was
used to assess the degree of preference between two elements, where extreme importance of one element (row cluster
in the matrix) compared to the other (column cluster in the matrix) is indicated by a score of 9 and equal importance
between two elements is represented by a score of 1.
Figure 4 shows the block diagram of the AHP Model in choosing the optimal solution for the inventory management
system. The block diagram consists of 3 levels, the goal, criteria, and solutions. The criteria include Ease of use,
Accuracy, Cost Efficiency, Forecasting Demand, and Data Storage Capacity. While the solutions include RFID,
Barcoding System, Software-as-a-Service, and Smart Shelves. As seen in Figure 4, the block diagram illustrates the
pairwise comparison of the goal to each criterion along with its weight or the relative relevance of the criteria and
solutions. By getting the overall weight and its total average, the block diagram shows that Data Storage Capacity had
the biggest weight among the criteria, having a total average of 0.2750 or 27.5%. In addition, the pairwise comparison
of each criterion to each sub criterion along with each solution’s weight is also illustrated in the block diagram. With
the same process done, the overall weight and total average of the solutions led to Software-as-a-Service being the
most relevant solution, having a total average of 0.4379 or 43.79%.
5.4 Validation
The User Acceptance Test (UAT) is the final stage of a software testing process that determines whether a product or
software system is appropriate for the intended use of the company, organization, and end-users (Tai 2020). The UAT
ensures that the system has the capability of reaching the requirements for real-world tasks and scenarios. The results
of the UAT determine whether a system is ready to be released in the market.
Table 8 presents the tabular summary of results from user acceptance testing. This was conducted by distributing the
test to the owner, manager, and employees who were the potential users of the said application. This table shows that
most users strongly agreed that System X is easy to use and cost-efficient while users somewhat agreed that System
X is accurate and has a large data storage capacity and users only agreed that System X can forecast demand.
6. Conclusion
Going back to the objectives of the study, the researchers were able to determine the significant factors and current
challenges of users related to the inventory management system for perishable goods in Convenience Store X.
Moreover, the researchers were able to translate the findings using a design thinking approach and the effectiveness
of the new inventory management system was tested by the users of Convenience Store X located in Marikina City.
The researchers came up with the problem statement that the owner, managers, and employees of Convenience Store
X located in Marikina City need to have an inventory system with real-time updates of sales and stocks based on the
users’ pain points. To have an effective inventory management system, the researchers came up with four (4) solutions:
RFID, Barcoding System, Software-as-a-service and Smart shelves. Moreover, the researchers decided to consider
five (5) criterions based on the users’ pain points to determine the optimal solution: Ease of use, Accuracy, Cost
Efficiency, Forecasting Demand and Data Storage Capacity. These criterions were gauged based on the Multi-Criteria
Decision Making specifically, the Analytical Hierarchy Process to see the importance of each criterion. With the use
of their respective priority weights, Software-as-a-service (SaaS) turned out to be the most preferred solution among
the four (4) digital technologies. Furthermore, the researchers integrated with software developers to create three (3)
user interfaces of a Software-as-a-Service inventory management system: System X, System Y and System Z. After
that, the software developers tested each system to ensure that there are no bugs when using these systems. The
researchers proceeded to concept screening and concept scoring to determine which among the three (3) prototype
designs is the most desirable for the end user. Based on the results of concept screening and scoring, the users
considered System X as the most preferred design. With that, to further test System X, beta testing was conducted to
provide trial use to potential users. User acceptance testing was also provided to the users to guide the researchers. As
a result, from all the tests that were conducted, the researchers were able to conclude that system X can tend to the
needs of the users.
Based on the results of the study, it shows the relevance of having a user-focused design of an inventory system as it
aims to meet the needs and preferences of the users and it promotes an effective interaction between the user and the
system. With a user-focused inventory management system, it allows users to track the products/items easily and
efficiently throughout the supply chain of an organization. Hence, it is revealed from this study that organizations,
particularly convenience stores, should focus on implementing a user-centered design of an inventory management
system.
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Biographies
Ann Kathryn T. Laping is a fourth-year college student taking up Bachelor of Science in Industrial Engineering at
the University of Santo Tomas. She took her primary and secondary education at Diliman Preparatory School, where
she was a consistent honor student and received multiple academic excellence awards. Her interests in the field of
Industrial Engineering include service engineering, supply chain management, and lean manufacturing. She was
formerly an executive associate of the Community Development Team of the University of Santo Tomas Industrial
Engineering Circle (2021-2022). She took up an internship in the operations department of Bewell Nutraceuticals
Corporation, a licensed and accredited manufacturer and distributor of pharmaceuticals and herbal supplements by
the Philippine Food and Drug Authority.
Charmaine Anne R. Mendoza is a fourth-year Bachelor of Science in Engineering student at the University of
Santo Tomas. She was a former Executive Associate for Creative Media and Design at UST Industrial Engineering
Circle and a former member at the UST - UNESCO Club and UST Hiraya. Currently, she is a member of the UST
Industrial Engineering Circle and Operations Research Society of the Philippines - UST Chapter (ORSP-UST). Her
interests in the Industrial Engineering field involve Supply Chain Management, Smart Manufacturing, and
Production Engineering. She took up an internship in the architecture field at the Hercar Builders Inc., and an
internship at the Philippine Seven Corporation in the office of the president under the data analytics team.
Keith Nathan L. Tiulentino is a fourth-year Bachelor of Science in Industrial Engineering student at the University
of Santo Tomas. He was formerly part of the Finance and Sponsorship team of the UST Industrial Engineering
Circle and Operations Research Society of the Philippines - UST Chapter (ORSP-UST). His interest in the field of
Industrial Engineering would involve Supply Chain Management, Production Engineering, and Smart
Manufacturing. He took up his internship at MotoItalia Philippines Inc. as part of the data analytics team that
manages Vespa motorcycles, considered as one of the most popular licensed Vespa dealers in the Philippines.
Ryan Mikael M. Villaraza is a fourth-year Bachelor of Science in Industrial Engineering student at the University
of Santo Tomas. He took his primary and secondary education in Marist School, which is found in Marikina City,
where he has taken multiple extracurricular activities mainly in sports and music. His interest in the Industrial
Engineering field involves Supply Chain Management, Smart Inventory Management, and Service Engineering. He
took up his internship at Philippine Seven Corporation as part of the data analytics team which managed trends of
multiple variables of stores across the country.
Gabriel C. Bucu is a graduate of Bachelor of Science in Industrial Engineering at the University of Santo Tomas
(UST) and a graduate of Master of Science in Industrial Engineering at De La Salle University-Manila. He served as
the Department Head and Supervisor from 2019-2022 of the Industrial Engineering Program and currently, he is an
Instructor at the UST Department of Industrial Engineering and is specializing in Service Engineering and
Management. He is a Certified Industrial Engineer (CIE) awarded by the Philippine Institute of Industrial Engineers
(PIIE) and an Associate Engineer (AAE) awarded by the ASEAN Federation of Engineering Organizations (AFEO).
He has presented in several conferences both locally and overseas, in countries including Indonesia, Taiwan, Japan
and South Korea. His research interests include Optimization and Simulation, Design Thinking, and Supply Chain
Engineering and Management.
Joehanna K. Ngo is an ASEAN Engineer, Professional Industrial Engineer (PIE), founding member of the
Philippine Institute of Industrial Engineers, associate professor, practitioner, and a former administrator. She
received her Master’s degree in Industrial engineering from the University of the Philippines – Diliman and Ph.D. in
Commerce at the University of Santo Tomas. She currently heads the Industrial Engineering Department of the
Faculty of Engineering of the University of Santo Tomas. It was during her term as the department chair that the
Commission for Higher Education & Development (CHED) accorded recognition to the department as a Center for
Development (COD) as well as earned for the Industrial Engineering Department an international accreditation by
the Accreditation Board for Engineering and Technology (ABET).