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UNIVERSITY OF THE PHILIPPINES VISAYAS

Tacloban College
DIVISION OF MANAGEMENT
Magsaysay Blvd., Tacloban City

JUST-IN-TIME AND
LEAN OPERATIONS

A Case Analysis on BM 240

Submitted by

JASON L. PADUL
MM-BM II

Submitted to

PROF. SHIRLEY N. MARAYA


Faculty, Division of Management

2nd Semester AY 2017-2018


SHOPIFY FASHION SALE AND BUSINESS EXHIBIT:
JUST-IN-TIME AND LEAN OPERATIONS

I. INTRODUCTION

SHOPIFY Fashion Sale and Business Exhibit was a retail garage sale and business fair
organized and implemented by a group of Business Management Graduate School
students of the University of the Philippine Visayas Tacloban College taking up BM 240
(Operations and Production Management). The activity was designed to complement
the Vegetable Production Project of the group and was geared to provide augmentation
funds for the students’ foreign educational trip to South Korea. The idea came upon
when the group was looking for a fund-raising activity that would entail minimal capital
funds and operating costs but would generate plausible revenues to support the
group’s objectives, hence a garage sale best fit the requirements.

The main concept of SHOPIFY is a garage sale to sell pre-loved items – clothes, shoes,
books, and appliances of the students. The products will be sourced from their
respective closets or through their network of colleagues. In addition to the garage
sale, the students agreed to use SHOPIFY as a venue for local businesses and
entrepreneurs to showcase their products and services. With this, SHOPIFY became
the materialization of the planned marketing activity the group had way back in 2017.

SHOPIFY Fashion Sale and Business Exhibit started its operation on April 13, 2018 and
ended on April 22, 2018, for a total of 10 operating days at the Community Center,
Tingog Sinirangan Headquarters, Sagkahan, Tacloban City. During its operation, the
activity earned a revenue of over Php 80,000.00 excluding the individual sales of its
10 local exhibitors.

II. JUST IN TIME AND LEAN OPERATIONS

As business organizations strive to maintain competitiveness in an ever-changing


global economy, there is a constant need to seek for new and better ways of operating
and changing from their traditional ways of operation. Among the popular trends is
just-in-time (JIT) or lean operations. A lean operation is a flexible system of operation
that uses considerably fewer resources (i.e., activities, people, inventory, and floor
space) than a traditional system to achieve greater productivity, lower costs, shorter
cycle times, and higher quality than non-lean systems (Stevenson, 2015).

Lean operations began as lean manufacturing in the mid-1900s. It was developed by


the Japanese automobile manufacturer Toyota influenced by the limited resources

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available at the time. Toyota’s approach came to be known as the Toyota Production
System (TPS), and it has served as a model for many implementations of lean systems,
particularly in manufacturing (Stevenson, 2015).

Lean is both a philosophy and a methodology that focuses on eliminating waste


(nonvalue-added activities) and streamlining operations by closely coordinating all
activities. Lean systems have three basic elements: They are demand driven, are
focused on waste reduction, and have a culture that is dedicated to excellence and
continuous improvement that seeks to (1) eliminate disruptions, (2) make the system
flexible, and (3) eliminate waste, especially excess inventory. (Stevenson, 2015).

III. LEAN OPERATIONS AND RETAILING

Retailing involves the process of selling consumer goods or services to customers


through multiple channels of distribution to earn a profit. Technically, all businesses
that sell goods and services to consumers fall under the umbrella of retailing – from
department stores, discount stores, specialty stores and even seasonal retailers. Due
to its nature, garage sales technically falls as a sector of the retailing industry
(www.investopedia.com).

A widely held view of JIT/lean production is that it is simply a system for scheduling
production that results in low levels of work-in-process and inventory. But in its truest
sense, JIT/lean production represents a philosophy that encompasses every aspect of
the process, from design to after the sale of a product. The philosophy is to pursue a
system that functions well with (1) minimal levels of inventories, (2) minimal waste, (3)
minimal space, and (4) minimal transactions (Stevenson, 2015).

Step by step, the lean movement has penetrated other industries, like retailing. Lean
Retailing is now a reality that has forced manufacturers to build standard products on
demand using build-to-order techniques. The retail markets are characterized by a
strong competition, short product life cycles, long product development lead times, and
highly volatile demand (Naruo and Toma, 2007).

Lean is a modern retail operating strategy which requires maximum efficiency coupled
with identification and elimination of waste. It requires simple workflow, eliminating the
loss of effort, time, materials and motifs. With acceptance of lean approach managers
are able to reduce activities that add no value, directly impact and help prevent the
potential problems, and improve global operational flow (Lukic, 2012).

Similar to the concept of lean manufacturing, the concept of lean retail is known by
many names and variations in the literature: lean logistics, lean distribution and lean
consumption. Attempt to apply lean concept in retail is recent - it dates from 90s of the

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last century. The core of lean retail is primarily a commitment to eliminating waste.
Similar to the manufacturing sector and following the model of lean approach, the main
types of waste in retail are: excess inventory, product defects, unnecessary motion,
redundant employees and a waste of time. Managers in retail can use similar tools and
principles for identifying all types of waste to improve their operational efficiency. Lean
techniques include: (1) simplifying the design of work (organization of individual work
process should be such as to provide a high degree of feasibility and possible control,
so that it has clear start and finish), (2) the use of withdrawal (pull) to create a
replenishment (provided that the supply of goods is fuelled with actual demand of
customers, as opposed to forecasts or anticipated demand, so to keep inventory levels
low and free space), (3) removing the bottlenecks through the supply chain (by
eliminating inefficiency with shorter delivery time, lower transport costs and defects,
and improving the flow of goods and operational performance) and (4) elimination of
waste of effort, time, materials and movement (by identifying the core business values,
with the elimination of excess movement, time, materials and labor used in the
process) (Lukic, 2012).

Lean retail encourages manufacturers to produce standard products in accordance


with the created (placed) orders from retailers pursuant to the demand of their
consumers. Characteristics of the retail market are: strong competition, shorter
product life cycle, longer product development time and high sensitivity of demand. In
order to be more competitive and profitable, today's retailers operate strategically
oriented to lower prices and gain exemption from holding unnecessary stocks. Lean
retail is an example of best practices of successful operational strategies which
management need to accept - to maximize the operating efficiency of the retail process
(Lukic, 2012).

IV. LEAN OPERATIONS AND SHOPIFY

Due to its nature, lean operations on SHOPIFY primarily focuses on its inventory
management practices – that is minimizing wastes due to excess inventory, defective
products, transport costs and unnecessary manpower.

INVENTORY MANAGEMENT

Inventory is, relatively speaking, illiquid meaning, it is more difficult to


convert into cash relative to cash, marketable securities, and accounts
receivable. Just-In-Time (JIT) inventory refers to an inventory management
method whereby the goal is to have inventory readily available to meet demand,
without having any excess quantities on hand. With this approach, merchants
can hold minimal stock supplies while ensuring stock-outs don’t happen during
peak selling periods. Balancing the goals of avoiding stock-outs while
minimizing inventory costs is at the heart of JIT in retailing.

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Due to the limited time available for manual checking and product review,
SHOPIFY accepted and displayed all received inventories from suppliers. This
resulted to a large volume of unsold inventory after SHOPIFY’s operations.
Majority of the unsold products were off-season and slightly-damaged items.

Due to the influx of inventory, consumers are overwhelmed with the variety and
volume of options to choose from. The large volume of items to choose from
may sound beneficial, however with the limited time of buyers to spend at the
shop, scanning through the racks creates a fast-paced motion wherein
consumers cannot thoroughly scan the items, thus hindering for majority of the
product to be noticed. This is particularly true with the clothing items for
women.

In contrast with women’s fashion items, there was relatively lower volume of
men’s fashion items to choose from. Although there was still a significant
volume of unsold men’s fashion items, inventory for summer-related wearables
were running low with some consumers asking for additional stock.

Perhaps the greatest shortcoming of SHOPIFY in its inventory management is


the lack of automation in its operation. Lean operations require automation in
majority of areas. Due to the manual inventory system and lack of centralized
inventory system, the group faced the dilemma of having to deal with lost price
tags, bargain prices and discounts as well as monitoring and tracking. Lost
price tags was a major problem as persons-in-charge cannot identify nor make
a decision as to the pricing of the item without the consent of the supplier.
Contacting the supplier thorough phone calls and text messaging was resorted
to however, immediate response from the supplier was rather difficult to
achieve due to the busy schedules in their respective workplaces. Moreover,
when consumers ask for discount and bargain price, making a decision proved
to be challenging when the supplier is not around or out of reach. These
instances either result to missed sales or lower sales. Tracking of inventory also
proved to be difficult without a centralized inventory system. It was hard to
report immediate cases of lost items and theft.

TRANSPORT COSTS

Because of the lack of centralization in the inventory management, transporting


supplies had been carried out by the suppliers individually. There was no harm
in this since transporting personal inventory was not factored in as going to the
venue is responsibility shared by each member but individually transporting
inventories created unexpected costs which could have been avoided had it
been the goods were transported to the venue as one.

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UNNECESSARY MANPOWER

This was not actually an issue as there was a lack of manpower due to the
unavailability of some members because of work-related concerns. However, if
during weekends, there is an influx manpower as majority of the group
members were present to man the shop. Had SHOPIFY observed lean
operations, the hired employees during the weekdays could have been offered
days off during the weekends meaning savings for the group in terms of labor
cost. However, due to some inevitable circumstances, having the hired
employees over the weekend proved to be beneficial for the group as members
had their personal engagements to settle during these days.

V. RECOMMENDATIONS

If ever the group decides to bring back SHOPIFY in the coming months, the main
recommendation to observe lean operations id to create a centralized inventory system
which sorts and identifies the proper inventory number and product classification to be
displayed and sold. Moreover, having a centralized inventory system would aid the
group to prevent the reoccurrence of the dilemmas faced the last time – lost price tags,
bargain price and discount issues, and lost and theft issues.

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REFERENCES

Printed Sources

Lukic, R. 2012. The Effects of Application of Lean Concept in Retail. " Economia. Seria
Management, Faculty of Management, Academy of Economic Studies,
Bucharest, Romania, vol. 15(1), pages 88-98, June.

Naruo, S., Toma, S. G. 2007. From Toyota Production System to Lean Retailing.
Lessons from Seven-Eleven Japan. University of Bucharest. Faculty of Business
and Administration.

Stevenson, W. J. 2015. Operations Management. 12th ed. McGraw-Hill Education.

Electronic Sources

www.investopedia.com/features/industryhandbook/retail.asp#ixzz5GbgbU2KW

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