1
business, which would have costs incurred in storage and
A Study on Finished
Goods Inventory
Management of Ethan
Sneaker Lounge
Jason S. Garcia, Reianne Micah N. Lopez, Erjen P.
Nonato, and Shilley Babe P. Sta. Rosa
​ Ethan Cash Sneaker Lounge is a small shoe
Abstract—
cleaning shop with services ranging from cleaning, restoring, to
customization. Since its opening September last year, Ethan
Cash company continue to increase its sales. It has a total of
2,033 orders from February to March 2019. However, a lot of
orders are left unclaimed and are kept in their store. This
problem results to cramped space, difficulty of workers to
move around and small reception space for customers. The
problem in space is a scheduling/capacity problem. Work
Ahead Window release date, specification of customer lead
time, and the application of penalty for late claiming were
proposed to address the gap and solve the problem.
Index Terms— Finished Goods Inventory, Customer Lead
Time, Work Ahead Window.
I. INTRODUCTION
Maintaining high competitiveness plays a vital role in
business organizations especially in service industries. In
order to effectively meet the wants and needs of customers
relative to others that offer the same service, an organization
must plan and layout the strategies related to their goals.
Today, a lot of business models emerge to offer drop-off
and pick-up services. This type of service aims to provide
convenience and customer satisfaction to its identified target
market. This is evident among different service platforms
such as Transport Network Vehicle Service (TNVS​)​, food
and parcel delivery, laundry shops, and repairing services.
Many have adapted this model to their businesses as it
puts customer service at top priority, making sure that they
receive what they ordered on time. However, there are some
trade-offs in achieving this competitive advantage such as
delays in pick-ups or drop-offs from both customer and
1
Final Report submitted on May 04, 2019
J. S. Garcia is a Fourth Year student of the Department of Industrial
Engineering and Operations Research, University of the Philippines
Diliman, Quezon City Philippines 1Fi101 (e-mail: jsgarcia18@up.edu.ph).
R. N. Lopez is a Fourth Year student of the Department of Industrial
Engineering and Operations Research, University of the Philippines
Diliman, Quezon City Philippines 1101 (e-mail: rnlopez@up.edu.ph).
E. P. Nonato is a Fourth Year student of the Department of Industrial
Engineering and Operations Research, University of the Philippines
Diliman, Quezon City Philippines 1101 (e-mail: epnonato@up.edu.ph).
S. P. Sta. Rosa is a Fourth Year student of the Department of Industrial
Engineering and Operations Research, University of the Philippines
Diliman, Quezon City Philippines 1101 (e-mail:
sta.rosashilleybabe@gmail.com).
inventory. Proper scheduling of these orders would be
beneficial to the business organizations in maximizing the
potential of their services.
II. THE CLIENT ORGANIZATION
Ethan Cash Sneaker Lounge is a small shoe-cleaning
service provider with the main branch located in Bonifacio
High Street, Taguig City. Their services range from shoe
cleaning, shoe restoration, to shoe customization.
The general process of their services can be described as
customers leaving their shoes at the shop, the workers
cleaning the shoes and then, returning the clean shoes back
to the customers. Figure 1 shows the step by step production
process of the company.
Figure 1. Ethan Cash Production Process
It starts when the customer enters the shop and avail their
services. For cleaning services such as unyellowing and
deep stain removal, the company set the claiming date six
days after the order was placed. For customization and
restoration services, they set the claiming date one to two
months after the order was placed. At the end of the day, the
workers label and put all the orders together. The delivery
truck arrives in the morning the next day to load and
transport these orders to the warehouse in Pateros. In the
warehouse, the shoes are assigned to a worker to execute the
required work. Each worker has a quota to finish 10 pairs of
shoes each day. When the shoes are finished, they are loaded
again to the truck and transported back to the store in
Taguig. It will then be stored there until the customer arrives
to pick up their shoes.
The inputs to this main process are the materials and
resources needed to properly render service including
manpower. Currently, they have 22 employees, 5 of which
are for cleaning, 3 are for regluing, 2 are for customizing,
and the rest are clerks and managers. Inputs also include the
liquid cleaning solutions, shoe brushes, tissue papers, and
the space/ facilities required for cleaning, drying, and
storage of shoes. The choice of suppliers of their cleaning
materials are particularly based on price and reputation. The
processes results to outputs which includes the service itself,
along with customer satisfaction, for the part of customers,
and profitability for the part of the organization.
Having started only last September 2018, they are a fast
growing business as more and more customers avail their
services. Since the opening, they have already rendered
service to 7095 shoes as of March 30, 2019. Because of this,
they have opened their 2​nd branch in Alabang Town Center
to expand their market and accommodate more customers.
Currently, they are in the progress of opening 3 more
branches in SM North EDSA, SM MOA, and another in
Taguig.
managerial insight that a company using the WAW policy
for order release to the production system can save up to
97% of the FGI in comparison to releasing all orders directly
to the
production system
VI. SCOPE AND LIMITATION
The study will cover the number of unclaimed shoes under
cleaning service only, which comprises 93.17% of all the
services offered by the company.

III. THE PROBLEM Moreover, only the historical data of the sales, delivery
time and warehouse capacity from February to March 2019
Cleaned shoes are stored inside the shop and waits for the
will be used.
customer to pick them up. Historical data of the company
shows that there are a total of 2033 orders for the whole
months of February and March. Out of these orders, 30.89% VII. PROBLEM ANALYSIS AND PRESENTATION
or 628 shoes are still unclaimed and kept inside the store. OF DATA
This problem results to cramped space, difficulty of workers
to move around and small reception space for customers.
Upon the receipt of shoes at the BGC store, the clerk
informs the customer of the duration of service. A standard
of 6 days before pickup is implemented for general cleaning
IV. OBJECTIVES
services. Table 1 shows the breakdown of 6 days as basis for
The objective of this study is to decrease the number of the tracked time.
unclaimed cleaned shoes at the BGC store such that it
matches its effective capacity of 150 shoes through Work Table 1. Breakdown of activities during the 6-day service period.
Ahead Window release date.

Shoe Cleaning Cycle

V. REVIEW OF RELATED LITERATURE
Day 0 Receipt of shoes

Customer participation is required in some processes in Day 1 ● Transporting of shoes to

the service operation.. This participation may include the warehouse
physical appearance, such as claiming the final product. ● Assigning of shoes to the
However, a delayed customer contribution can cause cleaners
bottlenecks and capacity problem that can lead to an overall
Day 2 Cleaning of shoes
delay in delivering the service. Delayed customer
contribution are caused by misinformation - when the Day 3 Drying of shoes
customer does not know the details on where, when and how
to participate in the service process (Kellet et al., 1992). Day 4 ● Inspecting of shoes for
quality control
A customer study by Fram and McCarthy (1999) shows ● Transporting of cleaned
that free choice, personal negligence and unavoidable shoes back to the BGC
branch
circumstances are critical factors affecting consumer
perception of fairness of penalty. 60% of their respondents
Day 5 Time allowance
agreed that penalties are a factor in promoting positive
behavior and consumers are willing to accept responsibility Day 6
for their own negligence in not completing the terms of a
purchasing contract. Thus, penalty programs are likely to be
effective at achieving the objectives of consumer The company allots a time allowance of two days for a
compliance. final quality control by the branch manager. If the cleaned
shoes passes the final quality control, the customer is
Altendorfer and Jodlbauer (2011) created an analytical notified through text messaging that the shoes are ready for
model to calculate service level, finished goods inventory pickup ahead of the scheduled date.
(FGI) and tardiness for a make-to-order (MTO) production
system based on the production lead time, utilisation and However, out of the total orders of 2033 for the months of
work-in- process (WIP). They also introduced Work Ahead February and March, only 15% is claimed before the
Window (WAW) work release policy which enables the
scheduled pickup and 54.10% are claimed after the
discussion of reducing FGI. Their results show the
scheduled pickup dates as presented in Table 2.
 Table 2. Breakdown of orders into claimed on time, claimed late, VIII. THE PROPOSED SOLUTION
and unclaimed as of March 31, 2019.

February March

Claimed orders on or 208 97

before pickup date

Claimed orders after 726 374

the pickup date

Unclaimed orders (as 169 459

of March 31)

Total Orders 1103 930

The company has three designated shelves in the store to

be used for storage. The biggest shelf has a effective
capacity of 60 paper bags of shoes, the smaller shelf has an
effective capacity of 25 paper bags of shoes and the third
one which is a floating shelf has an effective capacity of 20
paper bags of shoes. In total, the store can only
accommodate up to 105 paperbags of shoes. However,
given that the actual number of unclaimed orders exceeds
this number it resulted to the usage of floor for extra space.

To manage the accumulation of unclaimed shoes in the

store, the company is currently implementing a policy that
all unclaimed shoes within a month are transported back to
the warehouse and limits the customers’ option of claiming
to either shipment of the shoes or claiming at the warehouse
themselves.

Figure 2. Proposed Solution Flowchart

When a customer arrives, he will determine the pickup

date of the shoes depending on the type of job order (rushed
or regular). A customer can claim the shoes in at least 6 days
if regular, at least 2 days if rushed. Rushed job orders will be
cleaned at the store itself. Meanwhile, the regular job orders
will be brought to the company’s commissary located in
Pateros and will be recorded in the job order list. Start of the
job is prompted when the specified required customer lead
time is less than or equal to the Work Ahead Window
(WAW) of 6 days. Once the job order is finished, it will be
stored in inventory, and will only be brought back to the
13 26
BGC store on the date specified by the customer. If the
customer arrives at the store on his specified date, the shoes
14 15
will immediately be released; else, he must first pay a
penalty set by Ethan Cash Sneaker Lounge.
15 36
IX. VALIDATION OF THE PROPOSED SOLUTION
16 28
The validity of the recommendation can be proven by
comparing the finished goods inventory of the 2-month
17 62
duration of the study to the resulting finished goods
inventory if the proposed solution will be utilized. It is
18 49
expected to have lower value for the FGI or unclaimed
orders after the implementation of the proposed solution.
19 46

X. SUMMARY, CONCLUSION & AREAS FOR 20 41

FURTHER STUDY
21 27
This study examines the lack of space in Ethan Cash
Sneaker Lounge BGC branch. Analysis of relevant historical
22 42
data showed that customers claimed their shoes beyond the
specified release date thus resulting in the accumulating
23 43
finished goods inventory in the said store. To address the
said problem, the use of Work Ahead Window release date,
24 69
the specification of customer required lead time, and the
application of penalty for late claiming were proposed. This
would result in the reduction of finished goods inventory by 25 53
up to 97%.
26 39
APPENDIX
27 17
Appendix A. Tally of cleaning orders daily on February
2019
28 32

February Orders Total: 1103

1 20
Appendix B. Tally of cleaning orders daily on March 2019
2 48 March Orders

3 45 1 33

4 51 2 67

5 48 3 59

6 34 4 37

7 39 5 22

8 29 6 29

9 47
7 20
10 49
8 22
11 68
9 46
12 0
10 44
 15% = (208+97)/2114
11 36
Annex 3. Computation of percentage for claimed cleaning
12 33 orders after the scheduled pick-up.

13 21 54.10% = (726+374)/2114

14 24
ACKNOWLEDGMENT
15 34 The authors would like to express their deepest gratitude
for the help and support these people have extended to
16 52 contribute to the completion of this study:

17 53 To Dr. Iris Ann G. Martinez, our research adviser, for

guiding us in the duration of the project. We have been
18 43 greatly benefited from her critical reviews and inspiration
throughout our work.
19 56
To Mr. Paul dela Fuente, owner of Ethan Cash Sneaker
20 0 Lounge, for his unfailing cooperation and sparing his
valuable time to assist us in our work.
21 51
To all the staff of Ethan Cash Sneaker Lounge, for
accommodating us during company visits and providing the
22 29
information we needed.
23 24
REFERENCES
24 58
[1] Altendorfer, K. & Jodlbauer, H. (2011). An analytical
25 37
model for service level and tardiness in a single
machine MTO production system. International Journal
Total: 930 of Production Research, 49:7, 1827-1850,
[2] Fram, E. H., & McCarthy, M. S. (1999). The true price
of penalties. Marketing Management, 8(3), 48-56.
Appendix C. Summary of all orders for the months of [3] Kelley, S.W., Skinner, S.J. & Donnelly, H. (1992).
February and March. Organizational socialization of service customers
J. Bus. Res., 25 (3), pp. 197-214.

Count Percentage

Cleaning 2033 93.1714024

Custom 96 4.39963336

Reglue 53 2.42896425

Total 2182

ANNEX
Annex 1. Computation of percentage for cleaning orders out
of all orders received.

93.17% = 2033/2182

Annex 2. Computation of percentage for claimed cleaning

orders on or before the scheduled pick-up.