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CHAPTER 2

THEORETICAL FOUNDATION

 

The theoretical foundation covers web inventory management principles, PHP POS

(Point of Sales), information systems concept, System Development Lifecycle and UML

Diagrams (Activity, Use Case, Data Flow and Entity Relationship Diagram).

2.1 Inventory Management

2.1.1 Inventory Concept

According Ristono [1] inventories can be defined as goods that are stored to be used

or sold in the period or future periods. Inventories consist of raw materials, supplies half

finished and finished goods inventory. Inventories of raw materials and semi-finished

materials are stored before being used or put into the production process, while inventories of

finished goods or merchandise are stored before sale or marketed. Thus, any company

conducting business generally have inventory.

[2]Companies that perform the activities of production (manufacturing industry)

would have three types of inventories, namely:

1. Inventories of raw materials and auxiliary.

2. Inventory semi-finished material.

3. Inventories of finished goods.

Every trading company have at least one type inventory, namely inventory

merchandise. The existence of various kinds of inventory requires employers to perform

different actions for each stock, and this will be strongly associated with other problems such

as the problem of forecasting demand and forecasting sales of raw materials or consumer

demand. When you make a mistake in determining the amount of stock it will have an impact

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to other problems, such non-fulfilment of consumer demand or even excessive inventories

that are not all sold, the expense for extra storage or order materials and so forth.

Inventory is a commonly used model for solve business problems associated with

control of raw materials and finished goods in a company's activities. [3]Characteristic of the

inventory model is the optimal solution is focused to ensure the supply with the lowest cost.

Technically, the inventory is a technique associated with the determination of the amount of

supplies that must be held to ensure smooth production operation activities, and establish a

schedule for procurement and the number of orders of goods that should be done by the

company. Determination of schedule and number of bookings must be booked a basic

statement that must be answered in inventory control.

[4]Control of supply need to be considered because it is directly related to the cost to

borne by the company due to lack of supplies. Therefore, existing inventory should be

balanced with the need, because inventories are too many will result in company bears the

risk of damage and high storage costs in addition to the large investment costs. But if there is

shortage of supply will result in disruption of fluency in the production process. Therefore, a

balance in supply is very important to note that costs can be reduced to a minimum and to the

smooth running of the production process.

1. Some understanding of stocks according to experts are as follows:

An activity to determine the level and composition of parts or parts, raw materials and

goods production, so the company can protect the smooth production and sales as well as

corporate spending needs effectively and efficiently.

2. A series of policies to control system that monitors inventory levels to be maintained

when inventories should be completed and how many orders to be done.

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Under the second definition above, it can be concluded that the definition of inventory

control is an attempt to monitor and determine the optimal level of material composition in

supporting fluency and effectiveness and efficiency in the activities of the company.

2.1.2 Determination Factors of Inventory

The problem for companies is how to determine the optimal inventory, therefore, need

to know the factors affecting the size of the inventory. Actually necessary to distinguish

between raw material and finished material, but is meant to supply in relation to the activities

of production is raw and auxiliary materials. [5]The size of inventories of raw materials and

auxiliary materials is influenced by factors:

1. Volume or amount needed, which is intended to maintain continuity (continuity)

production process. The greater the amount of raw materials required, then the greater the

level of raw material inventory.

2. Continuity of production is not halted, some minimum level of inventory material high

standard and vice versa.

3. The nature of raw materials, whether the fast is broken (perishable goods) or durable

goods.

As for the raw materials that have a durable nature, then there is no harm in retaining

it in large quantities. In order to maintain production continuity, the company should have a

so-called reserve inventory (safety stock). Inventory reserves or also called safety stock is

minimal inventories of raw materials that must be retained to maintain continuity of

production.

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2.1.3 Inventory Management Purposes

An inventory control which is run by a company of course has a particular purpose.

Inventory control run is to keep inventory levels at optimal levels in order to obtain savings-

savings to the inventory. This is very important because it can indicate the level of inventory

that suits your needs and to maintain continuity of production by the sacrifices or economical

expenses. From such understanding, [6] the purposes of inventory management are as

follows:

1. In order to meet consumers' needs or requests quickly and accurately (satisfying

consumers).

2. To maintain continuity of production or keep the company does not run out of supplies

that could lead to cessation of the production process, this is because of reasons:

The possibility of goods (raw materials) to be rare so it is difficult to obtain.

The possibility of delayed suppliers to deliver goods ordered.

3. To maintain and if possible increase sales and profits.

4. Keeping Safe in no large-scale emplacement, which can lead to large cost.

2.2 PHP POS

[7]A Point of Sale (POS) system is a system for managing the sales of retail goods. The term

is used to consign to the software and hardware associated with checkout stands, and all of

the bundled features which are included. Most retailers use a POS system at their check

stands or counters, and quite a lot of major manufacturers offer POS systems designed for

various types of businesses, ranging from grocery stores to retailers. Using a POS system

makes a business much more efficient, lowering the costs of running the business while

improving customer service and making the business more pleasant to work in.

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In the retail trade, the “point of sale” is the moment when a customer walks up to a counter

with items and prepares to pay for them. A POS system handles the transaction, whether it

takes the form of an adding machine and a hand written receipt pad, or a complex

computer system. Except in the case of tiny businesses, a current POS system usually takes

the form of a computer system.

[8]The most critical POS computer system is an electronic cash register. The clerk can get in

touch with goods in the cash register and produce a receipt/ proof of payment for the

customer. At the end of the day, a variety of cash register functions can be used to print out

daily reports which are used to settle the cash register and to prepare a deposit. More complex

cash registers are competent of extremely detailed reports, and they have memory functions

which permit users to research reports from the past, or generate monthly and annually

reports.

A more sophisticated POS system, however, includes various bundled features. Many POS

systems include inventory management capabilities, where each piece of stock is entered into

the system so that it can be tracked. Some systems also permit buyers to generate purchase

orders from inside the system, using data about sales and product reputation. Time clocks and

other accounting features such as credit card verification may be integrated into a POS

system as well. Staffs or Employees may keep personnel records within the system, in a

separate password protected area.

The hardware of a POS system is also typical and important. A usual system includes a

display screen for the clerk, customer display and cash drawer, credit card swiping system,

printer, and bar code scanner, along with the PC loaded with the POS software. Custom

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features may be added or removed, depending on the industry. A restaurant POS system, for

instance, may have a feature which prints order tickets directly in the kitchen, or a grocery

store involve Jewellery Store may have an integrated level for weighing goods.

2.3 Information Systems

[9]Information Systems in general is an integrated system that can provide useful

information for users or an integrated system or human-machine system, to provide

information to support the operation, management within an organization.

These systems utilize hardware and computer software, manual procedures, models and

database management.

2.3.1 System

According to Jerry FithGerald [10]; system is a network of procedures interconnected,

gathered together to perform an activity or accomplish a particular goal. It is also defined as a

collection of elements that interact to achieve a goal particular.

[11]Every system has a set of general components as follows:

1. System boundary. Boundary is an area that limits the system between a system with other

systems or with the environment outside. Boundary system allows a system viewed as a

whole.

2. The environment outside the system (environment). It is anything outside the limits of the

system that affect system operation.

3. Liaison system (interface). It is a media liaison between one with another subsystem.

4. Input system. Input can be either input treatment (predictive maintenance) and the input

signal (input signal).

5. Output system (Output) is the result of the energy processed by the system.

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6. Processing systems (Process) is part of that process the input to be output as desired.

Target system if the system does not have a target, then the operating system will not be

any good.

2.3.2 Information

[12]Data is the raw material for the information. Information is data that has been

processed into a form that has meaning for the recipient is also useful for the recipient. For

information to be meaningful and useful, it needs to satisfy at least three conditions, namely:

1. Accurate. It means information should be free from mistakes and not biased or

misleading.

2. Just in time. It means the information that came at the recipient should not be too late.

3. Relevant. It means that information should be entitled benefits to the wearer.

2.4 Systems Development Life Cycle

Systems Development Life Cycle (SDLC) provides a complete framework for

engineering activities and the development of formal information systems. There are some

steps involved in an SDLC:

2.4.1 Planning Information System.

[13]Planning information system will provide several benefits, including:

1. Defining the scope of information systems development.

2. The identification of potential problems.

3. Setting the task sequence information systems development.

4. Control.

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Figure 2.1 depicts the detailed stages of the information system planning-phase.

Figure 2.1 The Planning Phase

2.4.2 Analysis Information Systems

[14]Analysis of information systems is a review of the current system which aims to

designing a new system or improve the old system. Details purpose of

information system analysis phase is to:

1. Make a decision if the current system has problems or has been not function properly and

the results of analysis are used as initial conditions to repair the system.

2. Determine the scope of work that will be handled.

3. Understand the systems that are currently running.

4. Identify problems and seek solutions.

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Figure 2.2 depicts the detailed stages of the information system analysis-phase.

Figure 2.2 The Analysis Phase

2.4.3 Design Information Systems

[15]The design of information systems is the determination process and data

requirements of the new system. The design stage consists of the following activities:

include:

1. Preparation of Detail Design Systems.

Tools commonly used in this activity are:

For Data Modelling.

Entity Relationship Diagram.

Data Dictionary.

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For Process Modelling.

System Flowchart.

Program Flowchart.

Data Flow Diagram.

Structured English.

For Object Modelling.

Unified Modelling Language.

Object Relationship Model.

2. Identify Alternative System Configuration.

The purpose of this stage is exploring the differences of alternative systems in reducing

the distance (gap) between the current systems with a system ideally. The result of this

phase is an alternative system documents which serve to fix the system.

3. Evaluate Alternative System Configuration.

The purpose of this stage is to compare the alternatives existing systems using a

structured methodology.

4. Selecting the Best System Configuration.

5. Preparing Proposals Implementation.

6. Accept or Reject System Implementation.

2.4.4 Implementation Information Systems

[16]Implementation of information systems is the determination process and data

requirements of the new system. Figure2.3 shows the stages of implementation of

information systems. What should be noted is cutover old system by the new system should

be clear. The purpose of the cutover is to change the use of the old system to new system of

information system which is successfully constructed. A change in the system is the

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responsibility of the designer team to the user. A result of the cutover is a plan (schedule and

method) changes in the system.

Figure 2.3 depicts the detailed stages of the information system implementation-phase.

Figure 2.3 The Implementation Phase

2.4.5 Use of Information Systems

Finally, figure 2.4 shows the final phase in a Software Development Life Cycle which

is the use phase.

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Figure 2.4 The Use Phase

2.5 UML Diagram

[17]UML (Kimmel, 2005) is the official definition of the image language contained

common symbols and relations which have a general sense. The most commonly used UML

diagrams which will also be used in this thesis are:

2.5.1 Use Case Diagram

[18]Use Case Diagram is an illustration that shows a set of use cases and actors and

their relationships. Use cases represent system functionality, their requirements of the new

system from the user’s perspective.

[19]There are several relationships that cab be defined in Use Case Diagram:

1. Inclusion – Enable to reuse one use case’s steps inside another use case.

2. Extension – Allows creating a new use case by adding steps to existing use cases.

3. Generalization – Allows child use cases to inherit behaviour from parent use cases.

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Figure 2.5 and 2.6 show examples of Use Case diagram in different settings.

Figure 2.5 Use Case Diagram of a Library System

Figure 2.6 Use Case Diagram of Student Assessment Management System

2.5.2 Data Flow Diagram (DFD)

A data flow diagram is a logical models of the flow of data from side to side a system

that shows how the system’s boundaries, processes, and data entities are logically related.

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[20]A data flow diagram is an outstanding device for summarizing and organizing

detailed information regarding a system’s boundaries, processes, and data entities, providing

the analyst by a logical map of the system. Documenting the system’s boundaries by sketch a

context diagram helps the analyst, the user, and the responsible managers visualize alternative

high-level logical system designs. The elements of a data flow diagram lead directly into

physical design, with processes suggesting programs and procedures, data flows suggesting

composites, and data stores suggesting data entities, files, and databases.

[21]Creating a data flow diagram is a process driven task. Thus, it is relatively easy to

overlook key data elements and composites. Balancing a data flow diagram verifies the

model’s internal consistency, but does not necessarily reveal missing elements. Attempting to

balance a major logical model without suitable software (such as CASE software) is at best

difficult and can be misleading. Beginners and users often confuse with data flow diagrams

of process flowcharts.

Figure 2.7 The Data Flow Diagram

Each Process box in the Top Level diagram will itself be made up of a number of

processes, and will need to be decomposed as a second level diagram.

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2.5.3 Activity Diagram

[22]Activity diagram is used to describe business process, procedural logic, and work

flow. It will complement the Use Case Diagram in explaining the individual activities that

can be done by each actor by using graphical notation. Figure 2.8 shows an example of

debugging activity in a debugging process.

Figure 2.8 Example Activity Diagram of Debugging