System Analysis and Design: Inventory Management System Project

This project provides a comprehensive analysis of an Inventory Management System (IMS). It begins with an overview of the IMS, highlighting its role in tracking inventory levels, orders, and sales. The project delves into the key features of IMS, including inventory management, financial management, and customer management. It then explores the limitations of both periodic and perpetual systems, such as the risk of stock shortages in periodic systems and the reliance on human entry in perpetual systems, which can lead to data entry errors and inaccuracies. The project also includes a context diagram to illustrate the system's boundaries and interactions. This project aims to identify problems and suggest improvements related to the functionality of IMS, providing valuable insights into its design and implementation.

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Running Head: SYSTEM ANALYSIS AND DESIGN
System Analysis and Design
Student’s Name
Institution

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System Analysis and Design
Project description
Business systems are vital IT assets for any company that seeks to gain leverage over its rivals.
Many businesses rely on business systems to enhance their operational efficiency which has a
significant influence on the quality of their services as well as revenue generated. Inventory
management system is a vital business system that helps businesses to track inventory levels,
orders, and sales made (Stevenson, 2007). Various firms such as e-commerce companies,
retailers, and suppliers use this system to manage their inventory. This ensures the inventory is
maintained at the appropriate levels. Thus, firms can align their inventory levels with the market
demand. Through inventory management systems (IMS), businesses that operate in dynamic
markets such as e-commerce firms can adapt to the changing demand without incurring a lot of
costs (Jacobs, 2011). In this project, we’ll explore on the functionality of the IMS including its
key features and functions. We’ll also discuss problems encountered when using the system.
Inventory Management System
IMS is a system used to track inventory levels as well as orders and sales made. It is used in
various industries including manufacturing industries to monitor product stock to prevent
overstock or outages. IMS organizes inventory data which was previously stored in spreadsheets.
The system tracks products and parts as they are moved from a vendor to a distributor and a
retailer or customer (Binti, 2016). IMS helps businesses to maintain stock balance by aligning
the inventory levels with the market demand. The system not only tracks inventory as it is
transported between locations but also receives items into a warehouse. Firms use the system
when picking, packing, or shipping items from a warehouse. Retailers leverage the system to

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track product sales made and current inventory levels. The system is instrumental in managing
stock to reduce product spoilage and avoid missing out on sales due to low stock levels.
Features
IMS has various features which are designed to provide capabilities that enable a business to
manage its stock. Key features include inventory management, financial management, and
customer management. Inventory management feature offers businesses the capability to track
changing customer demand and monitor input costs to improve production (Vora, 2010). This is
critical in improving purchasing efficiency as well as reducing delays in the inventory. This
feature gives employees reliable information on inventory available hence a firm can achieve
inventory control. Financial management feature allows a firm to update, track, and establish
specific pricing structures in different locations for various products. This helps in tracking
accounts and performing banking functions. Customer management feature allows businesses to

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track customer orders with ease, update customer profile information, and record sales made. By
improving transactions and offering updated inventory information, IMS enhances productivity
and customer satisfaction as well as increase sales and revenue in the long-term.
Problem Statement
The main IMS are periodic and perpetual systems. Perpetual system changes inventory levels
after a transaction such as a sale or purchase occur. On the other hand, periodic system changes
the inventory levels at the end of a specific period leaving the balance static during the period.
The two systems have various limitations which constraint their functionality. The limitation of
the periodic system is that does not know inventory levels during a specific period and is
vulnerable to the risk of stock shortage (Nenes, 2010). A firm knows the inventory level in a
periodic system at the end of a specific period. Throughout the period, a firm takes orders

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without knowing the inventory level or whether there are enough items to meet demand. Without
detailed information on stock, large businesses with many orders such as e-commerce firms may
be adversely affected especially when they run out of stock.
The limitation of perpetual IMS is its reliance on human entry. While the system is updated each
time a transaction occurs, it may lack critical information about stolen or damaged stock units
(Rajeev, 2008). A firm may remain unaware of theft of items also known as shrinkage until it
physically assesses the stock. Without regular physical count of the inventory, theft or data entry
errors may not be discovered. Thus, a firm may end up having shortages despite the system
indicating balanced inventory levels. Another limitation is that employees might enter incorrect
data which may give an inaccurate view of the inventory and can adversely affect a firm’s
decision-making process. While perpetual IMS can give updated information on the inventory
levels, this may incur costs. Such a system requires investment in scanners and computers which
capture data at a point of sales to update the inventory.

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Context Diagram

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References
Binti, D. F. (2016). Inventory Management System (Doctoral dissertation, East West University).
Jacobs, F. R., Chase, R. B., & Lummus, R. R. (2011). Operations and supply chain
management (Vol. 567). McGraw-Hill Irwin.
Nenes, G., Panagiotidou, S., & Tagaras, G. (2010). Inventory management of multiple items with
irregular demand: A case study. European Journal of Operational Research, 205(2), 313-
324.
Rajeev, N. (2008). Inventory management in small and medium enterprises: A study of machine
tool enterprises in Bangalore. Management Research News, 31(9), 659-669.
Stevenson, W. J., & Hojati, M. (2007). Operations management (Vol. 8). Boston:
McGraw-Hill/Irwin.
Vora, K. B. (2010). Inventory management system.