1

CHAPTER 1

INTRODUCTION

Title: Study of the inventory shrinkage factor in the Hicom Honda (M) Sdn. Bhd.

1.0 Background Information

HONDA HICOM is being developed through a joint venture company or "JOINT

VENTURE" between HICOM, and BOON SIEW HONDA JAPAN CO., LTD. Hicom Honda
began incorporated to accelerate industrialization in Malaysia in 1983. The first release of this
company issued in October 1985, the C70 model, and Fame.

Now almost 30 years of its establishment, the company has managed to produce 13
different types of engines for Honda motorcycles in Malaysia. The company is supported by 12
departments in the management of jointly work together in achieving the mission and vision to
be achieved and has nearly 300 employees who always adopt policies that have been set.

Inventory management is one of an important role in manufacturing industries

especially in Hicom Honda (M) Sdn. Bhd. Inventory refers to stock of goods and
material used in an organization. Inventory shrinkage is related to carrying cost and
more item are recorded received than recorded in storage. There is differentiate occur
between actual stock and recorded stock detected while stock count or stock take.
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Inventory shrinkage have become an major problem in Honda Hicom (M) Sdn.
Bhd. Honda Hicom (M) Sdn. Bhd. was developed through a joint venture between
Hicom Bhd. and Boon Siew Honda Japan Co. Ltd. This company provides suite of
product and service through manufacturing, assembly and testing of motorcycle engine
and component.

1.1 Problem Statement

The differentiate between actual stock with the quantity recorded in the system
often occur in Hicom Honda (M) Sdn. Bhd. It is often detected when companies
carrying stock take. Inventory shrinkage was create a huge negative impact to a
manufacturer thats leads to reduction overall profitability. This problem can be proved
by the record that has been summarized from Stock Take Variation Report December
2012 given by Hicom Honda (M) Sdn. Bhd. The summarization is recorded through
Graph 1.1.1 and Table 1.1.1 below.

The Quantity of Recorded Stock and Actual

Stock
2,000,000
1,800,000
1,600,000
Stock Quantity

1,400,000
1,200,000
1,000,000
800,000 Recorded Stock
600,000 Actual Stock
400,000
200,000
0
CKD CKD Japan CKD Multi Local Part
Thailand Vietnam Source
Item Group

Graph 1.1.1 : The quantity of recorded stock and actual stock of Hicom Honda (M) Sdn.
Bhd. for December 2012.
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Item Group Recorded Stock Actual Stock Variance Variance Percent

CKD Thailand 1,318,832 1,121,535 -197,297 -15%
CKD Japan 760,197 650,259 -109,938 -14%
CKD Vietnam 1,609,674 1,230,967 -378,707 -24%
Multi Source 761,467 719,082 -42,385 -6%
Local Part 1,734,925 1,869,903 134,978 8%
(Source : Hicom Honda (M) Sdn. Bhd.)

Table 1.1.1: Shows the variance between recorded stock and actual stock of Hicom
Honda (M) Sdn. Bhd for December 2012.

The graph and the table above shows the record of stock take of Hicom Honda
(M) Sdn. Bhd for December 2012 that shows the variation between recorded stock and
actual stock. For CKD Thailand, the variation shows the actual stock is 197,797 units
less than recorded stock which is 15% less. For CKD Japan shows the actual stock is
109,938 units less than recorded stock which is 14% less in variation. While CKD
Vietnam shows the variation of actual stock is 378,707 units less than the recorded stock
which is the variation is 24% less. For Multi Source, it shows the actual stock is 42,385
units less than recorded stock which is 6% less. But, for Local Parts shows the actual
stock is 134,978 units more than recorded stock which is 8% variation. The variation
shows there is inventory shrinkage occur in Hicom Honda (M) Sdn. Bhd mostly for
CKD Vietnam which is 24% shortage.

Based on discussion and finding, we identify the factor that influence inventory
shrinkage in Hicom Honda (M) Sdn. Bhd. There are three factors that become main
objective of inventory shrinkage which is employee theft factor, administrative error
factor and vendor fraud factor.
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1.2 Research Objectives

The objectives of the research were identified:

1.2.1 To identify whether the factor of employee theft that influence inventory
shrinkage in Hicom Honda (M) Sdn. Bhd.
1.2.2 To identify whether the factor of administrative error that influence
inventory shrinkage in Hicom Honda (M) Sdn. Bhd.
1.2.3 To identify whether the factor of vendor fraud that influence inventory
shrinkage in Hicom Honda (M) Sdn. Bhd.

1.3 Research Questions

Research questions that can be raised from the research objectives were determined as
follows:

1.3.1 Did the factor of employee theft that influences inventory shrinkage in
Hicom Honda (M) Sdn. Bhd.
1.3.2 Did the factor of administrative error that influences inventory shrinkage
in Hicom Honda (M) Sdn. Bhd.
1.3.3 Did the factor of vendor fraud that influences inventory shrinkage in
Hicom Honda (M) Sdn. Bhd.

1.4 Importance of the Research

The importance of this research that can be determined as follows:

1.4.1 Importance to Hicom Honda (M) Sdn. Bhd.

Based on research that carried, this research can identify the factor of inventory
shrinkage that helps manufacturer especially Hicom Honda (M) Sdn. Bhd to find a
solution regards this problem. This research also helps this company to understand the
impact and suitable method to reduce or which is better to prevent inventory shrinkage.
 5

1.4.2 Importance to future researchers

This research can be a reference to future researcher where study in business or

logistic management to find the other factor of inventory shrinkage regarding to
shrinkage towards manufacturer such as employee embezzlement and vandalism.

1.5 Research Scope

This research is to study inventory shrinkage in Hicom Honda (M) Sdn. Bhd.
The objective that carried is to identify the factors, methods and impacts that can affect
firm through inventory shrinkage. Due to limitation of respondent, there are only 32
respondents will answer questionnaires. Respondents consist of individuals who were
involved directly and indirectly in the management of inventory in Hicom Honda (M)
Sdn. Bhd.

1.6 Operational Definition

This section explained terms that used where it requires a detailed definition:

Study of the inventory shrinkage in the Hicom Honda (M) Sdn. Bhd.

1.6.1 Inventory

According on Oxford Advanced Learners Dictionary, inventory is refer to

stock of goods and material that are maintained for many purpose the most common
being to satisfy normal demand patterns.

Based to research context, inventory is refer to stock or item that been holding
by the company as their asset for their production.
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1.6.2 Shrinkage

According to Oxford Advanced Learners Dictionary 8th Edition stated that

shrinkage is the amount of something becomes smaller.

According to Murphy and Woods (2008), shrinkage is refer to the fact that more
items are recorded entering than leaving warehousing facilities.

Based to research context, the differentiate amount of stock due to theft,

administrative error and vendor fraud.

1.6.3 Employee

According to business dictionary the employee who works part-time or full-time

a contract of employment, whether oral or written, express or implied, and has
recognized rights and duties. Also called worker.

An employee is a person who works in the service of another person under an

express or implied contract of hire, under which the employer has the right to control the
details of work performance (Black's Law Dictionary).

Based to research context, the inventory shrinkage caused by a dishonest

employee in carrying out duties that often steal.

1.6.4 Factor

According to the Kamus Dewan, means an element or cause factors that

contribute to a result.

Based to the research context, the factors are the reasons which drive to a study
that will be reviewed in accordance with the objectives that have been defined.
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CHAPTER 2

LITERATURE REVIEW

2.0 Introduction

This chapter will discuss on the literature review and research related to the topic of the
research. The discussion will be based on 6 section which:

i. Employee theft
ii. Administrative error
iii. Vendor fraud
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2.1 Employee Theft

Employee theft can be defined as employee that commits a crime by stealing any
of company assets they work for without owner permission. Stealing any asset from the
company such as component can lead to inventory shrinkage. According to Greenberg
and Barling (1990), employee theft is defined as any unauthorized distribute of company
property by employee whether for own use of for sale to another. Therefore, using any
company property for own use or for sale to other person which is not a customer can be
classified as employee theft.

Employee theft is one of the major factors that lead to inventory shrinkage. It is
happen whether it is a big company or small company. Employees can easily steal
because they are in the store on a regular basis. According to Hennessee (2003), stated
that 80 percent of loss are directly comes from employee. Therefore, most of the factor
of inventory shrinkage is caused by the employees that handle directly with component
and product.

There is another expression which is associated with inventory shrinkage such as

shortage and stock loss often associated with employee theft. This is caused by
employee theft that can be seen whether by employee even the management itself.
According to Steven, Jennifer, Remy and Barbara (2006), stated that inventory
shrinkage, spoilage, shortage, pilferage and defalcation are often used as replacement for
employee theft. Therefore, shrinkage commonly known that it is caused by employee
theft.

This problem will result in a loss to the company that does not aware and taking
any action towards this problem. The problem that is left too long time will become a
major problem to company profitability. According to Steven, Jennifer, Remy and
Barbara (2006), employee theft was result in a loss of approximately 200 billion dollars
in United States. Therefore, company need to take immediate action to overcome this
problem to reduce inventory shrinkage.
 9

Attitude of manager or the management that act like nothing happen or avoid
agreeing towards employee theft became one of the factors that caused employee theft.
According to Oliphant & Oliphant (2001), stated that managers often have an attitude of
denial towards employee theft and they try to avoid the image of criminal activity.
Therefore, the manager may try to cover this criminal activity due to sympathy or to
protect the image of their management.

The conclusion is, labor is one the internal resource in a firm but it is difficult to
control of the problem due to it is related to human behavior or habit. Every employee
has different behavior or self problem. Normally theft happen due to demand of product
in the market such as Hot Product or employee may involve in financial problem and
drug abuse that may influence an employee behavior.

2.2 Administrative Error

Administrative error can also often contribute to the variance between the
inventory system and the actual physical inventory. According to Hollinger and Davis
(2003), stated that inventory shrinkage was related to paperwork errors and
administrative errors. Very hard to do something difficult task without creating any
error. The more difficult the task the more prone to error. This is mainly due to small
errors may not be aware covers mistakes the employee as failing to compare the number
of new items in a shipment to the number listed on an invoice when checking in new
orders, or miscounting while assessing the number of items, a regular inventory check.

Usually due to an administrative error made by employees who mistakes

performing tasks entrusted to it. According to Fisher and Green (2004), loss can be
identifying by carelessness and mismanagement. These factors can usually be seen
happening among the workers themselves. According to Dhillon (1986), human error is
the failure to carry out a specific task that could lead to disruption of scheduled
operations or result in damage to property and equipment. Therefore, this also
contributed to the shrinkage of the inventory.
 10

There are several factors that contribute to the occurrence of an administrative

error between the attitudes of workers. According to Reason (1990), found that human
error occurs because human behavior is fallible and can be caused by lack of
concentration, not being motivated, and various psychological and physical factors. It
will result in carelessness, confusion, omission, or other missing blunder. Zikmund and
Babin, (2010). Carelessness and mismanagement by employee also rates a problem to
firm can that affect a firm profitability.

One of the main contributors to human error is personal mental and physical
distractions. Being stressed, tired or sick (among other things) reduces your performance
capabilities and offers a persistent distraction. Additionally there are physical issues that
may take the task beyond your capabilities to perform and human error occurs.
According Reason, (1990) humans tend to perform poorly under high stress and time
pressure. Enormous distractions or environmental conditions such extreme, heat, cold,
noise, vibration, and so on. This will enhance the opportunity for an individual to make
a mistake while on duty.

The conclusion is, administrative error can be caused by many reason such as
employee was given difficult task, psychological, physical factor and environment
conditions which can be cause to inventory shrinkage.

2.3 Vendor fraud

Vendor fraud may be happening in many forms and come from various sources,
such as inside and outside the organization. According to Cascarino (2013), in an
organization, fraud can be committed by any of the staff or management and out of
organization fraud can be done by the client or customer and vendor. The employee is
able to commit this type of fraud because they are in a trusted position and there are no
controls in place to stop them or they can manipulate the system or processes to get
things past the controls.
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Mistakes in delivery by vendor are something that rarely happen due to unskilled
or error from their employee. Sometimes, vendor may make a mistake or intentionally
make an incorrect shipment due to they know the weakness in the process. According to
Bhuptani and Moradpour (2005), stated that shrinkage problem caused by vendor
mistake or fraud such as incorrect shipment in delivery. So, a manufacturer need to
identify the quantity in delivery weather manually or using a system such as radio
frequency identification data (RFID) or barcode system.

Making a business with a dishonest vendor will be a problem to a firm. Bribery

is one of the problems that hard to be detected due to the deal happen secretly and not
many of people involved. Fraud can also take the form of bribery and corruption when
kickbacks, gifts, of gratuities are offered to government employees from vendor to
influence decisions of government agents or employees Cascarino (2013). Therefore, it
is not possible to happen bribery to a firm when the employee itself influenced their
decision by vendor.

Employees are sometimes convinced by dishonest vendors to collude with the

suppliers. Employee may plotted with the vendor due to together self benefit such as
intentionally make a fake record. The employee agreed to check the shipments and
indicate that all items on the packing slip are counted for when in reality so there is a
shortage Martinez-(2005). Therefore, firm need to observe the relationship of their
employee and vendor to ensuring their integrity.

Vendor frauds rarely happen but it may happen and cause unstable to inventory
level that is called inventory shrinkage. Management need to decisive towards vendor
activity in area in factory to ensure there is no unauthorized component and part flow
out from factory.
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CHAPTER 3

METHODOLOGY

3.0 Introduction

Methodology is a research method that used to acquiring data or information

through research process. The process of research in location of research must be
reviewed and the matters that related to the research must be planned carefully.
Research that planned carefully is important to ensure the research that carried succeed
to achieve the research objectives or aims.

There are various methods that will be discussed in this chapter such as research
design, data collection method, sample and population, research instrument, research
procedure and data analysis method.
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3.1 Research Design

Study design was chosen by the researcher in the research. Research design
provides an overall for the collection and analysis of data of a study (Churchill 1979).
Information and data collected by the researcher using the entry form containing the
survey questions. Importance of research design stems from its role as a critical link
between theory and argument that informed the research and the empirical data collected
(Nachmias and Nachmias 2008). A choice of research design reflects decisions about
the priority being given to range of dimensions of the research process (Bryman and
Bell 2007) and this of course will have considerably influence on lower level
methodological procedures such as sampling and statistical packages. Along with clear
research plan it provides, constraints and ethical issues that a study will inevitably
encounter must also be taken into account (Saudear at 2007).

Types of research that are used by the researchers were a survey and interview.
This study is research aimed to clarify things that are taking place where researchers will
receive more accurate information and authentic through questionnaires to the
respondents concerned. Purpose of this type of survey study done because this method
compatible receiver with a study done by scientist to determine the level of inventory
shrinkage in Hicom Honda (M) Sdn. Bhd.

3.2 Data Collection Method

It must be noted that the questionnaire survey was used main data collection
instrument of this study because the questionnaire survey enables researches to examine
and explain relationships between constructs, in particular cause and effect relationships
(Saunder et al. 2007). All data used in appraisals and market studies should be current,
relevant, reliable, accurate, and conceptually correct. Appraisals and market studies use
two types of data primary and secondary data. (Rabianski, Joseph S. 2003)
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3.2.1 Primary Data

(DeWalt & DeWalt, 2001) observations involve more than just hanging out. Plan
and self aware observers use observation systematically. Observation involved the
systematic nothing and recording of events, behaviours, and objects in social setting
chosen for study. Nicoll and Beyea (1999) Practitioners often think that all research
must be original and answer unique questions using primary data collection.

Primary data is the main sources used by the researcher to conduct this study.
The method used to obtain primary data is to distribute the questionnaires to 35
respondents taken from Hicom Honda (M) Sdn. Bhd. and through observation of work
carried out at Hicom Honda (M) Sdn. Bhd. Besides that, the study also made through
interviews held between the researcher and the supervisor and some of its employees.
Data obtained by the researcher will be collected for our study.

3.2.2 Secondary Data

Data was collected by someone else for some other purpose. The researcher
poses questions that are addressed through the analysis of a data set that they were not
involved in collecting. Boslaugh, S.(2007). Secondary data is additional data obtained
from the literature and observation approach that uses existing data and process analysis
is performed on the data. Between the methods is done by the researcher to obtain
secondary data is to do the reading and reference of the article, to a study conducted by
the experts and journals available on the internet, publications and reports from workers
at Hicom Honda (M) Sdn. Bhd.
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3.3 Samples and Population

Sampling is concerned with the selection of a subset of individual from within a

statistical population to estimate characteristic of whole population. According to the
research Majid Konting (2004:58), referring to a set of populations which show certain
observations or measurements on a group of individuals or objects. Meanwhile,
according to Abdul Ghafar (1999:37), the population is all the members in the group.
Therefore, a comprehensive representation needed to be a true representation of the
population may be obtained.

In this study, a population study involving all employees Hicom Honda (M) Sdn.
Bhd. from the highest to the lowest position in the inventory. Due to the limitation of
respondent, the researchers only 32 from 35 takers as respondents to this survey based
on Krejcie & Morgan (1970). To get a sample in this study, the researchers used a small
sample technique through the selection of 32 staff working in the Logistic Department
in Hicom Honda (M) Sdn. Bhd.

The sample size should be maximized in order to minimize sampling.

According to Gay (1992), stated that an acceptable sample size for a descriptive study
was 10% to 20% depending on the population size. Sampling is useful to determine and
present the whole population. In this research, a sample refers to 32 of staff in the
Logistic Department. Through interviews method, respondents will be asked in advance
about the existence of factors that occur in the inventory shrink in their department.
Questionnaires will be distributed to staff in Logistic Department. In this technique, the
researchers will obtain samples by distributing questionnaires to all staff working in the
Logistic Department in Hicom Honda (M) Sdn. Bhd.
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3.4 Research Instrument

For information about the study to be carried out, research using primary data
and secondary data. Research conducted in the form of questionnaires. The set of
questionnaires used for the purpose of obtaining information and data concerning the
respondents. Questionnaire was developed based on three main objectives that have
been set. Questionnaire technique used since it has the advantage. (Sekaran 1992),
argues that the study questionnaire to obtain data is the best way of gathering
information. There are many instruments created to measure attitudes. Respondents are
required to answer all questions be submitted in writing in accordance with instructions
included.

Through questionnaires, research should examine the standards and regulations

that studies conducted to meet the real purpose. Through questionnaires were also able
to avoid the elements of fraud. They process this questionnaire is a task that requires
researchers to read and know in advance about the required information from the
respondents, based on the data analysis of the information.
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3.4.1 Questionnaire Form

Questionnaire designed is divided into two parts:

1) A division consists of background respondents such as gender, age, race,

duration of employment, participate in the company and knowledge of the
inventory shrinkage.

No. Question Rational Form

responses
1 Gender To know the sex average of worker in the Scale Score
warehouse Hicom Honda
2 Age To know the ages worker in the warehouse Scale Score
Hicom Honda
3 Race To know the race of worker in the Scale Score
warehouse Hicom Honda
4 Duration of employments To know how long the worker have been Scale Score
with the Hicom Honda
5 Participate in the To know the worker at the position in the Scale Score
company Hicom Honda
6 Knowledge of the To examine the worker have awareness Scale Score
inventory shrinkage about inventory shrinkage problem

Table 3.4.1.1 : The Rational Questionnaire of Part A

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2) Part B - Consist of questions related to the objectives of the study on the factors
employee theft, administrative error and vendor fraud. Selected types of
questions are Likert Scale, it is a method where that scale of the question will
answer given by the respondent. This section, respondents indicate preference
scores based on their personal views and opinions of each questions submitted.

1- Strongly Disagree
2- Disagree
3- Agree
4- Strongly Agree

EMPLOYEE THEFT FACTOR

No. Question Rational Question References
1 Cases arising from the theft To examine respond view Steven, Jennifer
of the workers store regarding the theft happened Remy and Barbara
(2006)
2 Freedom of entry and exit by To study factor that can Hennessee (2003)
workers to the store in increase the inventory
contribute to theft cases shrinkage
3 Theft in the store is often To examine the excuses Oliphant &
hidden by out of stock reason often used when inventory Oliphant (2001)
shrinkage occur
4 Small size inventory stored To examine the structure of Greenberg (1990)
in the store are easily stolen goods stored in warehouse
5 Lack of monitoring in the To study the frequency of Oliphant &
store is one of the causes of supervisor monitoring the Oliphant (2001)
the theft worker in warehouse
6 Low level of security in the To examine the security Greenberg (1990)
store is the cause of theft level in the warehouse
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ADMINISTRATIVE ERROR FACTOR

No. Question Rational Question References
1 Administrative error in inventory To find out the existence of Hollinger &
management contributes to the an administrative error in an David
reduction in inventory in the store organization (2003)
2 Mistake in the calculation of the To find out the existence of Fisher &
current daily inventory the errors in the calculation of Green
inspections is an administrative daily inventory during the (2004)
error factor inspection of an administrative
error factor
3 Negligence and less motivated To find out the existence and Fisher &
when controlling flow transfer of less motivated when Green
goods at the store contributed to controlling flow transfers (2004)
administrative error goods at the store contributed
to administrative error
4 Mistake when recording in and To find out the existence of Fisher &
out of goods is more likely done errors made by the employee Green
by workers who are under high under high stress can (2004)
stress contributed to administrative
error
5 Working environment that is To find out the existence of Reason
uncomfortable due to noise, working environment that is (1990)
vibration, cold, and heat can uncomfortable can contribute
increase the changes of an to administrative error
individual to make mistake on the
job
6 Complicated task that requires To find out the existence of Dhilon
much care in recording quantities administrative error that (1986)
of stock in the system increase caused of tasks performed
the rate of error quite complicated
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VENDOR FRAUD FACTOR

No. Question Rational Question References
1 Vendor fraud is one of the To determine whether Fraud Prevention
factor of reduction in respondent realize about Handbook (2005)
inventory. vendor fraud effect.
2 Vendor frequency delivery To identify the frequency of Shari Waters
wrong a quantity of goods the vendors in the delivery (2011)
error
3 You know the inventory To study about the learning Gary Gossard
show there is vendor fraud rate for the report in the event (2003)
but did not report to of vendor fraud which occurred
management in a storage
4 Vendor fraud activity also To study of investigate the rate (Andy) Wilson
involves dishonest of fraud by the vendor due to (2004),
employee and contribute to the involvement of employees Cressey (1973),
inventory shrinkage in the company involved Fraud Prevention
handbook (2005)

5 The working procedure To study about of review Fraud Prevention

while receiving of goods procedures occur when during Handbook (2005)
needs to be improved in the reception of that fraud by
order to prevent vendor suppliers can be avoided.
fraud.
6 Company having too much To study of the trust company Fraud Prevention
trust to vendor towards in to relay items vendor in handbook (2005)
and out activity while activities that can lead to the
delivering goods causes belief that the abuser has been
vendors to abuse the trust given by the company
Table 3.4.1.2 : The Rational Questionnaire Part B
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3.5 Research Procedure

Procedure for review is a process to go through in conducting research on Study of the

Inventory Shrinkage Factor in the Hicom Honda (M) Sdn Bhd.

Step 1: Create a discussion with the supervisor to set the appropriate project title

Step 2: Search for additional reading for researchers to enhance their

understanding of the selected topic.

Step 3: prepare a set of draft proposals and show the contents of the importance
and objectives of the study.

Step 4: The design and construction of the questionnaire related to the objective.

Step 5: Distribute the questionnaires to the respondents.

Step 6: Perform data analysis.

Step 7: Make a decision or conclusion based on the data that is analyzed.

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3.6 Data Analysis Method

Data can be analysis through 3 methods which is:

3.6.1 Data Analysis

The finding of the study computed using the Statistical Package for the Social
Sciences (SPSS) version 13. The data analysis was included descriptive statistics to
describe the study sample via mean, median, range, and frequency of data SPSS. All
data are analyzed and summarized in a readable and easily interpretable form and the
results. Pilot test will be performed in order to know the question reliability between
each factor of inventory shrinkage based on Cronbach Alpha.

3.6.2 Descriptive Analysis

Descriptive analysis is undertaken in organizations to learn about and describe

the characteristics of a group of employees. The aim of the descriptive analysis is to
offer the researcher a profile, or to describe relevant aspects of the phenomenon of
interest from individual, organizational, industry-oriented or other perspectives. By
using descriptive statistic the researcher will discuss about 32 respondents such as
gender, age, race, experience, section and awareness. Descriptive statistic analysis is the
mean and standard deviation of each question in each section being calculated. The
highest mean will represent that questions have greater influence. Frequency table are
generated to provide frequency details and percentages of demographic characteristics
of the respondent.
 23

CHAPTER 4

FINDINGS

4.0 Introduction

In this chapter will focus on the analysis of data obtained from the feedback of
respondents were employees from the logistics department Hicom Honda (M) Sdn. Bhd.
Sungai Petani, Kedah who are directly involved in inventory management. The findings
obtained through the analysis of data will be presented using tables and graphs in order
to provide a clearer picture. The analysis will be divided into two sections comprising
Part A and Part B and the two parts are analyzed by percentage. Part A will provide
background information about the respondents such as gender, age, race, years of
service, section work in the company and knowledge of inventory shrinkage in Hicom
Honda (M) Sdn. Bhd. Part B will provide information about the factors that affect
inventory shrinkage in Hicom Honda (M) Sdn. Bhd. in terms of employee theft,
administrative error and vendor fraud. Data obtained from the questionnaires were
analyzed using software (SPSS v.13.0).
 24

The findings and analysis will be made to find out whether the objective of the study is
achieved, namely:

4.0.1 To identify whether the factor of employee theft that influence inventory
shrinkage in Hicom Honda (M) Sdn. Bhd.
4.0.2 To identify whether the factor of administrative error that influence
inventory shrinkage in Hicom Honda (M) Sdn. Bhd.
4.0.3 To identify whether the factor of vendor fraud that influence inventory
shrinkage in Hicom Honda (M) Sdn. Bhd.

A total of 32 selected respondents were given questionnaires and all respondents

have answered the question. Therefore, the findings are based on data available at 32 of
the 35 questionnaires were selected (Krejcie and Morgan 1970) that were returned by
the respondents.
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4.1 Pilot Test Analysis

In the procedure of research, before the researcher distributed set of

questionnaires, researchers have done a pilot test of 20 respondents.

Purpose of the analysis performed to examine the validity of the questions

contained in the questionnaire.

Cronbachs Number of Number of

Alpha questions question reject
Question of employee
theft is a factor of 0.837 6 0
inventory shrinkage.
Question of administrative
errors is
0.753 6 0
a factor of inventory
shrinkage.
Question of vendor
fraud is a factor of 0.634 6 1
inventory shrinkage.
Table 4.1.1 Analysis of Data Reliability Table

Based on the table 4.1.1 above, it was found the Cronbach's Alpha is above a
predetermined benchmark. According Nurnally (1978), if the value of Alpha is more
than 0.6, then the scale is sufficiently reliable to measure a research. Cronbach's Alpha if
the value of 0.59, then the test is not successful pilot study and the questions in the
questionnaire needed to be improved and updated This means that the questions in the
questionnaire has proven the validity and understood by the respondent through
Cronbachs Alpha value for the question factor of 0.837 employee theft, factor questions
of administrative error is 0.753 and Cronbachs Alpha value of 0.634 on the question of
fraud vendors factor.
 26

4.2 Section A : Respondents Background

This section discusses the personal information of respondents who work in

Hicom Honda (M) Sdn. Bhd. Respondents should state all the information needed by
the researchers that conducted the survey questionnaire is divided gender, age, race,
years of service, job section in the company and knowledge of inventory shrinkage in
Hicom Honda (M) Sdn. Bhd. Tables 4.2.1 to 4.2.7 show the analysis of the background
of the respondents.

4.2.1 Gender

Gender Number of Gender Percent %

Male 23 person 71.9%
Female 9 person 28.1%
Total 32 person 100.0%
Table 4.2.1: Number and Percentage of Sample by Gender

28.1%

Male
Female
71.9%

Chart 4.2.1: Gender Percentage

Table and chart 4.2.1 shows the percentage of respondents gender randomly
selected 71.9% of male workers and 28.1% percent are female workers. This shows that
more men working in the stock section in Hicom Honda (M) Sdn. Bhd. against the
women.
 27

4.2.2 Age

Age Number of Person Percent (%)

18 25 years old 10 31.3 %
26 31 years old 8 25.0 %
32 37 years old 7 21.9 %
38 43 years old 5 15.6 %
44 years old and above 2 6.3 %
Total 32 100 %
Table 4.2.2: Number and Percentage of Sample by Gender

6.3%

15.6% 31.3% 18 - 25 years old

26 - 31 years old
32 - 37 years old
38 - 43 years old
21.9% 44 years old and above

25.0%

Chart 4.2.2: Age Percentage

The above table and graph shows the percentage of respondents age by working
in Hicom Honda (M) Sdn. Bhd. About 31.3% of respondents aged 18 to 25 years, while
25.0% of respondents aged 26 to 31 years, 21.9% of respondents 32 to 37 years, for
respondents aged 38 to 43 years are 15.6% and only 6.3% of respondents aged 44 years
and above. The research results show that the respondents aged 18 to 25 years more than
others.
 28

4.2.3 Race

Race Numbers of Person Percent %

Malay 31 96.9%
Chinese 1 3.1%
Indian 0 0%
Others 0 0%
Total 32 100%
Table 4.2.3: Number and Percentage of Sample by Race

3.1%

Malay
Chinese

96.9%

Chart 4.2.3: Race Percentage

The above table and graph shows the percentage of respondents' race involved in
this study 96.9% are Malays and 3.1% for Chinese. This shows that the majority of
people who work in Hicom Honda (M) Sdn. Bhd. Limited are Malay when compared
with other races.
 29

4.2.4 Length of Services

Length of service Number of Persons Percent (%)

Less than 6 months 1 3.1 %
Less than 2 years 13 40.6 %
Less than 5 years 12 37.5 %
More than 5 years 6 18.8 %
Total 32 100 %
Table 4.2.4: Number and percentage of the sample according to length of service

Length of services
3.1%

18.8%

Less than 6 months

40.6% Less than 2 years
Less than 5 years
More than 5 years

37.5%

Chart 4.2.4: Length of Services Percentage

Schedule and figure above showed percent period serve by respondent that work
in Hicom Honda (M) Sdn. Bhd. As many as 40.6% from respondents that serve less than
2 year, 37.5% respondent serve less than 5 year, 18.8% from respondents serve more
than 5 year and only 3.1% respondent worked less from 6 month. Result research
showed that respondent that serves less than 2 year many more compared period
servicing others.
 30

4.2.5 Working Section

Working section Number of Person Percent (%)

Receiving 3 9.4%
Storage (LPT, MCS, CKD,
10 31.3 %
Painted)
Unpacking 4 12.5 %
Supply 4 12.5 %
Delivery 3 9.4%
Management 8 25.0 %
Total 32 100 %
Table 4.2.5: Number and percentage of the sample according to working section

9.4%
Receiving
25.0%
Storage (LPT, MCS, CKD, Painted)
31.3% Unpacking
9.4%
Supply
12.5%
12.5% Delivery
Management

Chart 4.2.5: Working Section Percentage

The above table and graph shows the percentage of respondents working parts
that work in Hicom Honda (M) Sdn. Bhd. Table shows 9.4% of respondents who work
the inner receiving and sending, 12.5% workers is working in unpacking and supply
section, 25.0% respondent are working at the management and, finally, 31.3% of
respondents are working the inner storage. The research results show that respondents
who work more than the inner storage of other parts.
 31

4.2.6 Knowledge about Inventory Shrinkage

Knowledge about Numbers of Person Percent (%)

inventory shrinkage.
Yes 28 87.5 %
No 4 12.5 %
Total 32 100 %
Table 4.2.6: Number and percentage of the sample according to knowledge about
inventory shrinkage

12.5%

Yes
No

87.5%

Chart 4.2.6: Knowledge about Inventory Shrinkage Percentage

The above table and graph shows the percentage of inventory shrinkage
existence while working at Hicom Honda (M) Sdn. Bhd. A total of 87.5% of
respondents say their employees aware of inventory shrinkage in their workplace. While
12.5% say that their employees are not aware of inventory shrinkage in Hicom Honda
(M) Sdn. Bhd. The study reveals that the majority of respondents have heard about
inventory shrinkage while the smallest part says otherwise.
 32

4.3 Section B: Inventory Shrinkage Factor in Hicom Honda (M) Sdn. Bhd.

This section will discuss the result of the feedback given by the respondents on
the factors studied. The query will be analyzed according to study objectives which were
factor of employee theft, administrative error and vendor fraud.

Results of this study are shown in percentage and mean score. Higher mean
score for each question is 4.0. While the lowest mean score was 1.0 on scale of 1
representing strongly disagree, scale of 2 representing disagree, scale 3 representing
agree and scale of 4 representing strongly agree.

Mean score calculation formula is as follows:

Mean Score = Total Score of Each Respondent

Item Number of Question for Each Question

Findings from the analysis are summarized the result based on the level of measurement
adapted from Lendel in Edora Ismail (1998) as shown in the following table:

Mean Score Level

1.0 to 2.0 Low
2.1 to 3.0 Medium
3.1 to 4.0 High
(Reference: Lendel)

Table 4.3: Scale of Mean Score

 33

4.3.1 Analysis of Questions Related to Identifying Factors of Employee theft

Influencing Inventory Shrinkage at Hicom Honda (M) Sdn. Bhd.

Num Question Percentages (%) Mean

. SD D A SA Score Level

1 Cases arising from the theft of the 12.5 28.1 40.6 18.8 2.66 Medium
workers store.
2 Freedom of entry and exit by 9.4 25.0 40.6 25.0 2.81 Medium
workers to the store is contributed to
theft cases.
3 Theft in the store is often hidden by 9.4 25.0 56.3 9.4 2.66 Medium
out of stock reason.
4 Small size inventory stored in the 6.3 15.6 56.6 21.9 2.94 Medium
store are easily stolen.
5 Lack of monitoring in the store is 3.1 18.8 46.9 31.3 3.06 High
one the causes of the theft.
6 Low level of security in the is the 6.3 15.6 50.0 28.1 3.00 High
cause of theft.
Mean average 2.37 Medium
Table 4.3.1: Employee Theft Factor

Table 4.3.1 shows the mean and the percentage of the employee theft factor that
influence of inventory shrinkage at Hicom Honda (M) Sdn. Bhd. There are have six
items presented in this section. The first item that shows 40.6 % of respondent agreed
that the cases arising from the theft of the workers store in Hicom Honda (M) Sdn. Bhd.
The second item shows 40.6 % of respondent agreed to freedom of entry and exit by
workers to the store is contribute to theft cases at the Hicom Honda (M) Sdn. Bhd.
 34

The third item shows 56.3 % of respondent agreed that theft at the Hicom Honda
(M) Sdn. Bhd. store is often hidden by out of stock reason. Fourth item shows 56.6 % of
respondent agreed that the small size inventory stored in the store of Hicom Honda (M)
Sdn. Bhd. are easily stolen. Fifth item shows 46.9 % of respondent agreed that the lack
of monitoring at the store Hicom Honda is one of the causes of the theft.

Sixth item shows 50.0 % of respondent agreed that the low level of security at
the store Hicom Honda (M) Sdn. Bhd. is the cause of the theft. Fifth item leads to the
highest mean value of 3.06. While the first and the third item shows the lowest total
mean of 2.66. Mean average for employee theft factor is 2.37 and is measured as the
medium level.
 35

4.3.2 Analysis Of Questions Related To Identifying Factors Of Administrative

Error Influencing Inventory Shrinkage At Hicom Honda (M) Sdn. Bhd.

Num. Question Percentages (%) Mean

SD D A SA Score Level
1 Administrative error in inventory 0 3.1 84.4 12.5 3.10 High
management contributes to the
reduction in inventory in the store.
2 Mistake in the calculation of the 3.1 9.4 68.8 18.8 3.03 High
current daily inventory inspection
as administrative error factor.
3 Negligence and less motivated 0 21.9 62.5 15.6 2.94 Medium
when controlling flow transfer of
goods at the store contributes to
administrative error.
4 Mistake when recording in and out 0 25.0 46.9 28.1 3.03 High
of goods is more likely done by
workers who are under high stress.
5 Working environment that is 0 28.1 46.9 25.0 2.97 Medium
uncomfortable due to noise,
vibration, cold and heat can
increase the chance of an
individual to make mistake on the
job.
6 Complicated task that requires 0 21.9 53.1 25.0 3.03 High
much care in recording quantities
of stock in the system increase the
rate of the error.
Mean average 3.01 High
Table 4.3.2: Administrative Error Factor
 36

Table 4.3.2 shows the mean and the percentage of the administrative error factor
that influence of inventory shrinkage in Hicom Honda (M) Sdn. Bhd. There are have six
items presented in this section. The first item that shows 84.4 % of respondent agreed
that the administrative error in inventory management contributes to the reduction in
inventory at the Hicom Honda (M) Sdn. Bhd. The second item shows 68.8 % of
respondent agreed that the mistake in the calculation of the current daily inventory
inspection is administrative error factor at the Hicom Honda (M) Sdn. Bhd.

The third item shows 62.5 % of respondent agreed that the negligence and less
motivated when controlling flow transfer of goods at the store contributes to
administrative error at the Hicom Honda (M) Sdn. Bhd. Fourth item shows 46.9 % of
respondent agreed that the mistake when recording in and out of goods is more likely
done by workers at the Hicom Honda (M) Sdn. Bhd. who are under high stress. Fifth
item shows 46.9 % of respondent agreed that the working environment that is
uncomfortable due to noise, vibration, cold and heat can increase the chances of an
individual at the Hicom Honda (M) Sdn. Bhd. to make mistake on the job.

Sixth item shows 53.1 % of respondent agreed that the complicated task at the
Hicom Honda (M) Sdn. Bhd. that requires much care in recording quantities of stock in
the system increase the rate of error. First item leads to the highest mean value of 3.10.
While the third item shows the lowest total mean value of 2.94. The mean average for
administrative error factor is 3.01 and is measured as the high level.
 37

4.3.3 Analysis Of Questions Related To Identifying Factors Of Vendor Fraud

Influencing Inventory Shrinkage At Hicom Honda (M) Sdn. Bhd.

Num. Question Percentages (%) Mean

SD D A SA Score Level
1 Vendor frequently delivery 0 28.1 56.3 15.6 2.90 Medium
wrong quantities
2 You know the inventory show 15.5 37.5 46.0 0 2.30 Medium
there is vendor fraud but did not
report to the management
3 Vendor fraud activity also 0 34.4 59.4 6.3 2.70 Medium
involves dishonest employee and
contributed to inventory
shrinkage
4 The working procedure while 0 6.3 65.9 28.1 3.20 High
receiving of goods needs to be
improved in order to prevent
vendor fraud
5 Company having too much trust 6.3 28.1 46.9 18.8 2.80 Medium
to vendor towards in and out
activity while delivering goods
causes vendors to abuse the trust
Mean average 2.78 Medium
Table 4.3.3: Vendor Fraud Factor

Table 4.3.3 shows the mean and the percentage of the vendor fraud factor that influence
of inventory shrinkage at Hicom Honda (M) Sdn. Bhd. There are have five items
presented in this section. The first item that shows 56.3 % of respondent agreed that the
vendor frequently delivery wrong quantities at Hicom Honda (M) Sdn. Bhd. The
second item shows 46 % of respondent agreed that they know about vendor fraud but
did not report to the management.
 38

The third item shows 59.4 % of respondent agreed that vendor fraud activity also
involves dishonest employee and contribute to inventory shrinkage. Fourth item shows
65.9 % of respondent agreed that the working procedure while receiving of goods needs
to be improved in order to prevent vendor fraud. Fifth item shows 46.9 % of respondent
agreed that having too much trust to vendor towards in and out activity while delivering
goods causes vendors to abuse the trust.

Fourth item leads to the highest mean value of 3.20. While the second item
shows the lowest total mean of 2.30. Mean average for vendor fraud factor is 2.78 and is
measured as the medium level.
 39

CHAPTER 5

DISCUSSION, SUGGESTION AND CONCLUSION

5.0 Introduction

After finding the result of the study on the factors and followed by several factors
involved in influencing inventory shrinkage in the Hicom Honda (M) Sdn. Bhd. The
researcher will continue with this last chapter going to discuss the recommendations of
the factors involved in the study and conclusions or closing from the result that have
been completed. This suggestion is also provided for the purpose of improving the
management of Hicom Honda (M) Sdn. Bhd. Recommendations provided are based on
the feedback from the respondent in the study through the distribution of questionnaires
that have been carried out. Conclusions were made by touching every aspect examined
in subsequent chapters. Overall conclusion of the study to ensure the study was
successfully carried out by continuing the main factors that cause inventory shrinkage.

Information to be obtained from some feedback suggestions from respondent and the
results of comments or suggestions. In addition, these suggestions will be awarded and
presented to our panel and Hicom Honda (M) Sdn. Bhd.
 40

5.1 Discussion
5.1.1 Employee Theft Factor

From the result value of mean average for entire this factor was 2.37 that are on
level medium. In number of item five of the questions about lead to mean value that is
highest is a 3.06 which is 46.9 % respondent. This clears that management Hicom
Honda (M) Sdn Bhd less doing frequently monitoring on the stock pile product property
Hicom Honda (M) Sdn Bhd. Refer to Oliphant & Oliphant (2001), theft rate occur
perhaps is due to storage factor monitoring on storage space. This is proves that
inventory shrinkage in stock is due to frequently and periodic lack monitoring.

The lowers value of mean is 2.66 for item question one and three with the same
of value mean. For item one, the 40.6% respondent agree that factor theft happen by the
staff and out freedom of enter to storage that is cause factor of inventory shrinkage at
Hicom Honda (M) Sdn Bhd. Allowing employee enter to store will increase the chance
theft by employee occur. According to Hennessee (2003) stated that 80 percent of loss
are directly comes from employee.

For item three, the 56.3% respondents agree that theft in the store is often hidden
by out of stock reason. This is caused when leader keep to hide the theft due to
sympathy. According to Oliphant & Oliphant (2001) stated that managers often have an
attitude of denial towards employee theft and they try to avoid the image of criminal
activity.
 41

5.1.2 Administrative Error Factor

Items 1 leads to the highest mean value of 3.10 and 84.4% of the respondent
agree administrative errors in inventory management contributed to the reduction in
inventory in stores in Hicom Honda (M) Sdn. This clearly shows that there is a
reduction of inventory caused by administrative errors at the plant. These results are
supported by the opinion Hollinger and David, (2003) which states that inventory
shrinkage related paperwork errors and administrative errors.

Findings mean the lowest was in item 3 that is 2.94 and a medium level of 62.5
respondents agree negligence and less motivated when the control flow transfer of goods
in shops contribute to administrative errors. While another 21.9% of respondents said
negligence and less motivated when the control flow transfer of goods in shops
contribute to administrative errors. According to Reason (1990) found that human errors
occur because human behaviour is fallible and can be caused by lack of concentration,
no motivation, and various psychological factors and physical. It will lead to
carelessness, confusion, omission, or other error disappeared while working.

5.1.3 Vendor Fraud Factor

5 questions presented in this section, the average mean for the overall vendor
fraud factor is 2.78 which is at medium level. Item 4 brought the highest mean value of
3.20 and 65.9 % of the respondents agree that the vendor fraud activity also involves
dishonest employee and contributes to inventory shrinkage. This show that a few store
worker in Hicom Honda does not responsible of the job given. It just not can affect the
reputation of the company but it is also a major contributor of inventory shrinkage in
Hicom Honda.
 42

Findings to the lowest mean was at the item 2 of 2.70 which is at medium level
and 46.0 % agreed that there was the inventory show there is reduction or theft but did
not report to the management. While 37.5 % of the respondent disagree that inventory
show there is reduction or theft but did not report to the management. According to
Cascarino (2013), in an organization, fraud can be committed by any of the staff or
management and out of organization; fraud can be done by the client or customer and
vendor. Employees are able to commit fraud because they were trusted and there was no
barrier to them doing things that are not ethical.

5.2 Suggestion
5.2.1 Suggestion to Hicom Honda (M) Sdn. Bhd.
5.2.1.1. Employee Theft Aspect

Thefts are something that must not be compromise to any who are guilty. The
presence of CCTV may be reducing the change the employee to steal any asset of
company. It is because employee surely will not dare to steal when he know the
presence of CCTV. The presence of CCTV in Hicom Honda (M) Sdn. Bhd is inadequate
which only 2 CCTV is present. There is 1 at receiving gate and 1 at delivery gate.
Therefore, researcher suggest they need to increase the number of CCTV by placing it at
least 2 at store which is potentially occur theft such as component and spare part store
that cause inventory shrinkage.

The movements of employee in and out of store are contributing to employee

theft potential. This occur when there is no trace or record who in and out of store and
this will cause to loss control. Therefore, researcher suggest to Hicom Honda (M) Sdn.
Bhd to improve the secure level in store by allowing certain person that given authority
to enter the store area such as section leader or operator mostly production. So, if any
inventory shrinkage occurs, investigation scope will be smaller to responsible person.
 43

Factory gate is the final security level which is determines whether the steal part
or components are detected or not. It is because it is the only way to enter into the
factory and out from the factory. Guard are doing their well job by checking every
employee that wanted to out from factory but is it ineffective to prevent theft by
employee that cause inventory shrinkage. Researcher recommend to improve the
security level by provide security enhancement such as metal detector. Sometimes,
small part like screw, nut weld, hinge or any small part maybe hard to trace because it
can be hide at their body which is hard to be seen.

Researchers also suggest Hicom Honda (M) to place heat detector in their store
which is to detect presence of employee inside the store mostly at midnight where the
end of work shift. This is important to prevent employee from take advantage from this
situation due to dark environment which is hard to be seen.

5.2.1.2. Administrative Error Aspect

Efficiency in the management of inventory activities should be emphasized.

Simple mistakes such as inaccurate record or calculating quantities incorrectly can result
in variance of quantities item between data system and existing stock. Without realizing
it, it can contribute loss of hundreds of thousands of dollars to the firm and be a great
loss for the company. Therefore, the researchers recommend to management Hicom
Honda (M) Sdn Bhd, to provide more frequent motivational talks to employees.
Intended to raise awareness about the importance of inventory management to the firm.

Management is also required to expose the result of stock take activities that
have been done to the employees. Through these activities, employees can see the
values that are incurred by the company due to the mistakes of their done. This can
because they realize that mistakes will not be repeated.

Understand that the work environment can greatly affect of morale. For example,
a work environment that is hot, dusty, poor lighting and ventilation as well as others. In
addition, colour also can cause depression and lack of motivation. The use of colour can
 44

also affect a person includes eliminate stress at work. The researchers suggested that the
management needs to bring more life to the store with the colours fit in places where
such as floors, large shelves and walls of the store.

In addition to the use of vibrant colour labelling can increase employee morale
as well as improve lighting and ventilation so that the store in a comfortable. With the
existence of this comfortable, administrative errors will be reduced as moral
improvement work by employees who will contribute to the reduction of inventory
shrinkage in Hicom Honda (M) Sdn. Limited.

Build a culture of employee appreciation or sense of belonging to the firm an

important issue that has always been use for granted by the employer to the employees.
It is important to make employees feel appreciated. It is a simple concept that employees
feel appreciated, and they will work harder and be more loyal. Therefore, the study
recommended management provide some recognition of an achievement is as a cash
bonus, the celebration of success on a small scale, and besides that, the supervisor
should take some short-term booster spirit, such as recognition of good work with
greetings and a smile, or ideas to share, and so.

In addition, the activities celebrating the achievement of child labour should be

celebrated and birth day of collecting all employees and have all the birthdays of the
month while standing, and around the office singing to their conduction of activities that
can be practiced in keeping employees happy at work while improving their working
morale. With the establishment of this firm patriotism, administrative errors can be
minimized, reducing the percentage of inventory shrinkage.

5.2.1.3. Vendor Fraud Aspect

Control the movement of the vendors in the factory can reduce the occurrence of
losses. These factors will lead to a reduction in inventory shrinkage due to vendor fraud.
Therefore, the researcher suggests to the Hicom Honda (M) Sdn Bhd to limit vendors
movement in the factory that made a special room in the factory for meeting vendors.
 45

By making a special space for vendors, vendor movement is limited. Therefore, the
fraudulent vendors can be reduced.

The researchers found that the vendors frequently make the same delivery
repeatedly. Where vendors often gives reasoned that a lot of goods to be loaded into the
truck. Repeated delivery can cause insufficient of goods as fraud by vendors. Therefore,
the researcher suggests to the Hicom Honda (M) Sdn Bhd in order not to allow suppliers
to send goods repeatedly. Therefore, the manufacturer can check the quantity of goods
transmitted through the delivery order carefully.

The Hicom Honda (M) Sdn Bhd have to do a rotate of duties for employees who
are directly involved with the supplier in receiving goods. Where the receiving
department must appoint an employee to deal with vendors on a rotational basis. This is
because, if one person involved in the dealings with suppliers, this can create a close
relationship between the workers and suppliers. Therefore, these factors can contribute
to vendor fraud such as take advantage of relationship between suppliers and workers
for example gifts from vendor to the workers in appreciation for help to make the
activity vendor fraud.

5.2.2 Suggestion to future researcher

To ensuring that the results of research are more accurate and reliable, several
proposals have been submitted to the parties who wish to study in the future. To
research in the future, the scope of the study should be expanded where it covers more
number of respondents and made various locations on bigger firms.

For a future study as well, the research methods used not only focuses on the
questionnaires but also use other methods such as interviews and observations for
feedback and survey results will be more accurate. To research in the future as well,
researchers can disseminate research objectives through other factors that cause
inventory shrinkage as embezzlement by employees, vandalism and inaccuracies in the
stock count of inventory and paperwork.
 46

5.3 Conclusion

The conclusion is, inventory shrinkage factor in Hicom Honda (M) Sdn. Bhd.
was successfully carried. Researcher was identify the administrative error factor that
have been discussed is the most influence towards compared to employee theft factor
and vendor fraud factor. Administrative factor become the most influence inventory
shrinkage because it is involved human error which is something that hard to be prevent
fully. Even only the small error or mistake occurs may cause huge differentiate between
recorded stock and actual stock.

Vendor fraud is the second influence and employee theft is the third factor that
influences inventory shrinkage. Criminal act such as theft and fraud are something that
cause of lost of stock that create variance between recorded stock and actual stock.
Every factor that has been studied proved it influence inventory shrinkage in Hicom
Hinda (M) Sdn. Bhd.

Finally, this research hopefully can grant benefit towards Hicom Honda (M)
Sdn. Bhd. and for future researcher through this research so it can be continuously
improved and enhanced any weakness occur and advancing the business of Hicom
Honda (M) Sdn. Bhd.
 47

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