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Literature review

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1. Lohmann, Steffen, Lodding Hermann (Feb2012) Inventory based capacity control (INCAP) is a very simple method that allows inventory levels to be effectively controlled by using short-term capacity flexibility in make-to-stock settings. Moreover, INCAP can be used for finished goods inventories as well as for semi-finished goods inventories. The basic idea is to define upper and lower inventory limits and to adjust capacities if the inventory level reaches either limit. Should the inventory fall below the lower limit, capacity is increased to prevent stock-outs. Similarly, in order to avoid excess inventories the capacity is decreased should the inventory rise above the upper limit. INCAP is thus able to control inventory levels within a defined inventory range. In order to do so, it applies short term measures like over-time or extra shifts to increase capacities and cancels work hours or shifts to decrease capacities. Simulation experiments based on data from the automotive industry show that INCAP is able to improve the performance of a manufacturing system in that it significantly reduces the inventory levels necessary for guaranteeing a satisfactory service level. Overall, INCAP is found to be a straightforward but powerful method, able to cope both with uncertainties in production output as well as with varying demand. However, some restrictions do apply: INCAP depends not only on a minimum level of short-term capacity flexibility, but also in the standard set-up presented here it is limited to make-to-stock environments with similar products. 2. Swaminathan, A.M.(2001) In India, observed that on the basis of ratios in inventory management techniques, over investment still seems to prevail. Besides, the results of partial adjustment approach show that finished goods inventory and raw materials as a component of inventory, adjust faster to the desired level, than the inventory as a whole, for the selected industries under private limited companies in India. The study in its analysis on the effects of structural reforms on management of inventories in selected public and private sector industries. 3. Narayanapillai, Rajeev (2010) Inventory management (IM) plays a decisive role in the enhancement of efficiency and competitiveness of manufacturing enterprises. Therefore, major manufacturing enterprises are following IM practices as a strategy to improve their efficiency and achieve competitiveness. However, the spread of IM culture among small and medium enterprises (SMEs) is limited due to lack of initiative and expertise as well as financial limitations in developed countries, let alone developing countries. Against this

R. B. Parkar. increasing profitability and productivity.backdrop. Ronda R(2000) Presents observations in the implementation of enterprise resource planning (ERP) system in a state prison industries manufacturing system.Douglas. Issues on labor.M. A reversal of inventory management objectives in a developing country environment is brought to light where the efficiency objective is given more significance than the cost objective.K.Clinton. The paper brings out the fact that formal IM practices have a positive impact on the inventory cost and therefore. While practitioners and researchers are aiming at minimum possible cost of inventory. many small business owners in . India.Prasad. but also unidirectional movement of optimal value and some of the imported inventories with the extent of the diversification of the economy. 6.Farooquie.Nasir Khan. the main conclusion of the study is that the management of the import-related inventories is a basic ingredient for the success of the ongoing structural reforms for the globalisation of the economy. Lalith(1990) This paper examines the industrialisation policies adopted by developing countries and assesses its impact on inventory management.N. Empirical results for 1990-91 reveal not only the trade-off between optimal value added and imported inventories of the above-mentioned concerns. protection against stock-outs. however. inventory management and accountability. SwaminathanA. Goonatilake. The paper examines the impact of optimal use of imported inventories for public enterprises.Parveen. Differences between institutional and private-sector manufacturing. and improving customer service levels have been the major benefits of holding inventory. 7. an undesirable phenomenon.G(1996) The importance of inventory management for improving overall performance and foreign exchange savings at sectoral as well as economy levels have been widely emphasised. Maintaining inventory levels beyond a certain limit is. Factors influencing inventory demand are identified and the interaction between production planning and control and inventory control is considered as a key parameter. Given the concern for 'high cost of imported inputs'. 5. Recommendations. The relationship between IM practices and inventory cost is probed based on primary data gathered from 91 SMEs. public limited companies and private limited companies on optimisation of value added in multiple-objective dynamic input-output framework for 1986-87 and 1990-91 for the Indian economy. the IM performance of SMEs. this paper makes an attempt to ascertain the role and importance of IM practices and performance of SMEs in the machine tool industry in the city of Bangalore.M (2001) Achieving uninterrupted production. 4.

India still fail to appreciate fully the true costs of carrying inventory. Practical implications . are either unaware of even the fundamental techniques of inventory management or do not practice them for one reason or the other. At the same time. bar diagrams and correlation analysis provide a more accurate assessment of this industry sector. K. which reflect the current state of IM in machine tool enterprises. The study confirmed the need for managers in the machine tool sector to alter drastically their approach to IM. Originality/value . Research limitations/implications . (2008) Purpose . and low computer use as well as a low importance given to purchasing and variable leadtime.This study of 40 SMEs in Bangalore should be extended using a larger sample representative of Indian SMEs in order to arrive at findings that are more generalizable across the machine tool sector in India. by-and-large.The purpose of this paper is to provide guidelines for entrepreneurs for implementing effective inventory management (IM) practices and presents the results of a survey of machine tool enterprises in Bangalore. P. There is profound scope for improving the operations and performance of SMEs through the application of quality practices in IM. A review of the policy framework concerned with SMEs suggests that policymakers do not consider critically the role of IM and related issues.The study identified several major problems in the context of IM in machine tool enterprises including the use of rule-of-thumb for IM. random ordering of materials.Considering the lack of studies about IM in the context of Indian small and medium sized enterprises (SMEs). The case attempts to illustrate how SMEs can reduce their inventory costs. . In this context the present study examines a case of the lock manufacturing industry in the Aligarh district of the state Uttar Pradesh. Design/methodology/approach . this paper helps fill a gap in the literature. low levels of training and development. The investigations reveal that lock manufacturing units. and hence improve profitability. It is significant to note that there is no exclusive reference to improvement in IM within the policy documents.The managers of SMEs should consider seriously IM as a strategic concept simply because effective IM positively influences productivity. a low importance given to forecasting. percentages. Findings . 8. In addition. the literature review suggests that effective approaches to IM can improve the productivity and competitiveness of SMEs. Gupta.A descriptive analysis is used to present aspects of the findings. India. through the application of basic models of inventory management.

C.Tewari P. Therefore. a firm can reduce the levels of inventories to a considerable degree e. it was found that the size of inventory directly affects working capital and it's management. which is one of the important elements of current assets. this study explores the dissimilarities among various sectors of SMEs adopting VMI. Hence.Pradeep(2008) The working capital management refers to the management of working capital. inventories. the working capital management refers to the management of the levels of all these individual current assets. Size of the inventory and working capital of Indian Farmers Fertilizer Cooperative Limited (IFFCO) is properly managed and controlled compared to National Fertilizer Ltd. Viyat Varun. studies related to the implementation of VMI in Indian SMEs are very limited. A firm. it is found that organizational issues and unwillingness to share information are the major barriers. This paper tries to evaluate the effect of the size of inventory and the impact on working capital through inventory ratios. inventory. will have to face serious problems relating to long-term profitability and may fail to survive. or precisely to the management of current assets. inventory is a vital factor in business operations. Therefore. and liquidity ranking. which neglects the management of inventories. With the help of better inventory management.g. Shen Lixin. Upadhyay. However.. 10 to 20% without any adverse effect on production and sales. It is quite evident from the literature that vendor managed inventory (VMI) has been successfully implemented in small and medium enterprises (SMEs). A firm's working capital consists of its investments in current assets. reflects the investment of a firm's fund. The paper evaluates the benefits. Thus. which in turn generates variation in demand that gives rise to many managerial problems such as planning. the major influencing variables are improved efficiency and improved channel relations. computation of inventory and working capital. which includes short-term assets-cash and bank balance. this study presents an empirical investigation of VMI practices in Indian SMEs using survey methodology. Singh. and it requires a variety in products. Furthermore. (NFL) 10. In terms of benefits. On the other hand. and effects of adopting VMI in Indian SMEs. working capital ratios. and also investigates the IT tools and software used for VMI adoption. Finally.Gupta Amit(2013) Today the market is moving toward multiformity. .9. forecasting. barriers. trends. receivable and marketable securities. Based on the proposed methodology. Atul. 11. it is necessary to efficiently manage inventories in order to avoid unnecessary investments.B(2013) Vendor managed inventory has proven to be an effective tool for improving the supply chain performance by decreasing inventory-related costs and increasing customer service.

Noland. 13.production. It promises certain benefits to the organization in terms of (a) Reduced inventories (b) Faster. He stresses . accurate dissemination of information which will provide a sound base of information for planners. Inventory performance directly connects to the success of supply chain management. Snyder. the whole process should undergo innovative and revolutionary changes. pilferage and deterioration of the cars are mentioned.S. He states that the reason behind aged-inventory problem is caused by the manager's lack of understanding of inventory control. This study attempts to find various Vendor Managed Inventory (VMI) elements which are important to both the customer and the manufacturer (vendor) in the Indian context. The study also identifies the VMI elements which are most important and easy to implement in the manufacturing industries 12. procurement specialists and of course to all stake holders. Dennis (2007) The article discusses the significance of proper stocking of usedcar inventory for car dealers in the U. This paper presents the relative importance and difficulties in the implementation of VMI elements in the manufacturing sector and the results are subjected to Analysis of Variance (ANOVA). Organizations must emphasize on gaining competitive advantage by managing their supply chains in the most effective manner. 15.S. Various positive and negative effects of large inventories including low interest rates resulting in minimum expenses. automobile industry. This study is indented to provide information on how six auto companies are benefiting from the system and what are the benefits which are yet to be achieved and to what extent are gaps existing. It states that automobile companies are focusing on a lean manufacturing system to control inventory based on the sales of automobiles and mentions that following the global financial crises of 2008-2009. policy of various automobile dealers as per which before sending for auction or disposing. 14. from raw materials to final customers. an automobile will not be kept for 45 to 60 in the stock. Iyer V. Rao P. if any.S. To minimize the level of risk due to variation in demand. H(2011) ERP or Enterprise Resource Planning systems comes with a huge price tag and recurring expenditure depending upon the number of users in the organization. Tony(2013) The article discusses the management of inventories in automobile industry. inventory management. manufacturers are focusing on matching their production to demand. Also. and timely distribution.Gregg. Jesse (2012) The article focuses on present trend in inventories management in the U.

Schimpel. Moreover.200 of them are using. covering monthly observations from January 1985 to December 1994. Andre Varella (2007) The article focuses on a study that examines inventory control in automobile industry in Japan.P.R(2007) The work described in the literature on inventory and supply chain management has advanced greatly over the last few decades and now covers many aspects and challenges of applied supply chain management. and the stability of the optimization result over time. the decision whether or not to stock a product. Further. 18. several storage zones. Brian(2008) The article provides information on the Retail Inventory Management (RIM) program of General Motors Corp. Our approach has been implemented successfully in an automotive spare parts planning environment. Mollick.S. and customer service. Korevaar. There exist two related optimization problems: One is to maximize the system-wide service level under the constraint of a given budget. Boedi. the SAP Enterprise Resource Planning system. reconditioning expenses and number of cars sold to avoid aging inventory. and APO 4.U. The most important requirements and constraints considered are a detailed cost structure. The basic problem is a single-echelon inventory problem with a system-wide service-level requirement and the possibility of issuing emergency orders. 16. In this paper we describe an approach that combines many of these academic aspects in a practical way to manage the spare parts logistics at a German automobile manufacturer. it stresses most of the company dealerships have signed the program. The complete solution package integrates into the mySAP ERP®. highly sporadic demands. . capacity constraints. which reinforces the conjecture that movements in aggregate inventory numbers may give a misleading picture of changes in inventory management. different packaging sizes.0. stochastic lead times. across large cars. it notes that the program uses parts data from dealerships and natural averages to generate purchase orders. the other is to minimize the budget for a given system-wide service level. inventory turns. He adds that a good inventory management requires focus and attention. Actual inventories to sales ratio of large cars differ with large buses and small trucks. Researchers employ physical data in vehicle industry. the SAP Advanced Planning and Optimization system. in which 5. in the U.Albright. large buses and small trucks.several information including year-to-date access on retail sales dollar amounts. A detailed description of the model is given and results are presented 17. It states that the company offers the program for its dealers to improve parts availability.

Kilkenny.A. Ronnqvist. McGill. It says that the end-to-end thinking of extended supply chain is important to manage industrial inventory efficiently.Hemachandra. 23.D.S. It is further demonstrated that knowledge of the underlying statistical pattern of supply and demand variations can significantly improve forecasting and impact the appropriate the levels of safety stock inventory in a variety of industries. It notes the need for businesses to treat extended supply chain as a sole unit to develop competitive advantage and promote industrial efficiency. the service level and average cost are affected by the control parameters as well as the smoothing factor in demand forecasting.Venkateswaran.J(2007) Inventory holding cost (IHC) and safety stock inventory (SSI) are critical to the effective management of inventory. Effect of JIT on process and product quality.Epps. JIT accounting. CarlssonD. under stable settings of the control parameters. 21. Adoption of PartsWatch distributor management system in the operation of Icarz.W(1995) Discusses the implementation of just-in-time (JIT) inventory management systems. The classical automatic pipeline variable inventory and order-based production control system has been modified by explicitly modelling safety stock to help achieve higher services levels in the face of random demand.E. Introduction of the concept of `zero inventories' to the American manufacturing industry.B.Bijulal.e. Henry. 22. However. This article puts forward five propositions which give light to . Actions and conditions that can spell success for JIT programs. The stability of the system is affected by the control parameters: fractional rates of adjustment of work-in-process and inventory. This study demonstrates the necessity of accurately measuring and monitoring IHC. 20.19. and their quantification has impact at the highest levels of many manufacturing and service industries.N(2011)Production-inventory control system models have been analysed in the literature either in terms of their stability against demand fluctuations or in terms of their service level and cost performance under uncertain demand. order fill rate) and average system costs.Ruth.J. Holsenback. Benefits derived from the PartsWatch system by Henschel & Sons Automotive Warehouse.Anne Marie (2012) The article reports on the effective management of inventory by manufacturing industries in Great Britain.M(2005) Focuses on the inventory management system adopted by several automobile parts distributors to meet customer expectations and product availability in the U. This article analyses the production-inventory system performance in terms of service level (i. Citation of major suppliers of inventory management systems. FlisbergP.

The current study aims at filling this gap through a comprehensive inventory trend analysis in the Indian automotive industry during the 14 year period 1992-2005 with an objective to determine the inventory trends and identify the influencing factors.general system performance based on the parameters selection. the principles of lean manufacturing have permeated across many industries. which can be used for a definitely non stationary demand whose rate evolves both in mean and in variance. Roberto. with all three inventory components. To test the model. Braglia. viz. The managerial insights which can assist proper tuning of systems to help achieve the desired performances have been discussed. Specifically. However. work-in-process and finished goods inventory contributing to this decline. Marcello. Anecdotal evidence suggests that. Japanese companies such as Toyota pioneered lean manufacturing. The Japanese influence on the Indian manufacturing industry began with the entry of Suzuki into the Indian automobile industry in mid eighties. 24. Haritha Saranga. there is scant empirical research in the literature that documents the inventory trends and the determining factors in India. Intensive simulation experiments have also been carried out to reveal the performance variations within the stable region.. The study finds that average inventory has been steadily declining. which emphasizes on the need to maintain low inventory levels across the supply chain through practices like JIT. raw material. Arnab Mukherji & Janat Shah (2007) Inventory Management has emerged as one of the important tools to improve operational efficiency over the last 30-40 years across the globe. Kanban and vendor managed inventory etc.(2013) This paper proposes a dynamic approach for inventory management. The results suggest that the efficient working capital management . leading to further insights on the system behaviour. The knowledge of these distributions makes it possible to manage the inventory in a dynamical way and to keep the safety stock to a minimum level. We use advanced econometric models to study the impact of various factors. the stock consumption is modelled as a Markov process with a slow diffusion term and the Fokker Planck equation is used to derive the probability distribution of the stock consumption and that of the reorder time. export and import intensity on inventory levels. especially the automotive sector in India. Since then.Zammori. inventory levels in general have been falling in the Indian manufacturing industries too in the recent past. 25. tier. such as the firm’s cluster.Gabbrielli. some typical demand patterns are used: results demonstrate its ability to capture both the evolution of the mean and that of the variance of the demand.

Nelson.S. and production management. It is generally recognized that effective implementation of just-intime will result in a significant reduction of inventories. In a JIT environment. culling those who are unable to achieve certification and . Anil B. Delivery of the item should be direct to the point of use in the manufacturing plant. These benefits are derived from features such as frequent deliveries in small quantities. A blanket purchase order or other suitable form of a basic agreement should cover the terms and conditions for procurement. Batoul(1987) This article examines the potential benefits of justin-time (JIT) purchasing for manufacturing industries in the U. During the 1980s. Just-intime will change our conventional thinking concerning the management of inventories and streamline our methods for inventory control. Henry.Jambekar.A Modarress. Operations management literature suggests that the benefits of JIT purchasing are substantial as compared to the benefits of traditional U. existence of quality-related data and studies. Vendor certification was used to insure that material could be shipped directly to the factory floor just in time for use without an incoming quality inspection.(1990) The article discusses inventory management under just-in-time (JIT) manufacturing systems. One feature of certification is that the OEM reduces the number of vendors it does business with. Certification was commonly based on lot rejection history. many original equipment manufacturers (OEMs) in the U. As a matter of fact. 26. Even under the most ideal JIT conditions of minimum lead times and minimum setup or ordering costs. 27. Paul A. shortening delivery lead times and significantly reducing inventory investment. inventory investment is an important factor which must be considered by the inventory manager. raw materials and other purchased items should be delivered by the supplier when they are needed. under which materials are purchased in very small quantities with frequent deliveries to the plant just in time for use. any double handling of material should be avoided.H(1988) The article discusses how to handle inventory management in just-in-time (JIT) systems. 28.S. inventory control. moved toward JIT manufacturing techniques. long-term relationships with single sources of supply. inventory levels are key indicators for measuring JIT performance. The JIT system is a combination of purchasing. Jordon. Ansari. and avoidance of annual rebidding. Proper selection and implementation of these methods will yield substantial benefits by improving customer ser vice. purchasing practices. and performance of statistical process control.and the quality improvement efforts of Tier 1 firms have been one of the major contributions to the decline in average inventory levels in the Indian auto industry.S.

QR is a general term that describes the criteria used to determine the order quantity in several well-known rapid-replenishment inventory management methods such as just-in-time or continuous replenishment. 30. the importance of present performance versus the capability to achieve superior technological sophistication in the future.) might discover a lack of agreement on quality criteria. Development of a model to determine the optimal delivery frequency.Minghui (2012) We consider a setting in which inventory plays both promotional and service roles.Kailash. Problems were often encountered by OEMs as they attempted to design and implement vendor certification programs. and responsibility for communication with the vendor and for administration of the certification program. Use of available delivery receiving capacity for minimization of time inventory costs.F(1991) Focuses on the management of inventories in just-in-time environment in the United States. We investigate the multiperiod model with normal and expediting orders in each period. quality. that is. Walter Charnes. For the cases without and with fixed order . Joshi. balances the cost of ordering an item with the inventory holding cost for that item. The EOQ method. Given a known level of annual demand. etc.Campbell James. higher inventories not only improve service levels but also stimulate demand by serving as a promotional tool (e. John. the QR method considers only the inventory holding cost and ignores the ordering cost. in order to propose a set of rules by which managers can select the most appropriate method to use under various circumstances. Dependence of optimal delivery frequency on total delivery receiving capacity and annual consumption. purchasing. 31. Such a model takes the lost sales model as a special case.M. Specifically. production. any shortage will be met through emergency replenishment. as the result of advertising effect by the enhanced product visibility).(2005) This article compares the Economic Order Quantity (EOQ) and Quick Response (QR) methods of determining order quantity. Chen. introduced by Ford W.g. that is. In contrast. we study the periodic-review inventory systems in which the demand in each period is uncertain but increases with the inventory level. Youhua (Frank). against the cost of making a smaller number of larger-quantity purchases to minimize ordering cost.developing closer relationships with those who become certified. Harris.. the relative importance of price and delivery performance versus quality. Various functions (design. a firm must balance the cost of ordering smaller quantities more frequently to minimize holding cost. 29.Zinn.

2012 32. Kumar. which is the sum of the vendor’s and the buyer’s total costs. Simone. The cost effectiveness of implementing the proposed inventory policy also becomes more significant as any one of the three key factors increase with respect to energy cost. Mohit Ganguli.Mazzoldi. Zanoni. The total cost includes the set-up and order costs. Some numerical examples are carried out. for some values of given parameters. the role of teamwork and communication becomes important in the . The paper assumes a single product that flows along a two-level supply chain system. An analysis of the model reveals three production environment characteristics in which inventory policies are most significantly affected by changes in energy cost: heavy product weight. Results show that the performance of the system is better when it is operated under a VMI with CS agreement. the optimal inventory replenishment policy is shown to be of the base-stock type and of the ( s. with a single vendor and a single buyer. and (3) the production rate that minimises the total cost of the supply chain. Naval Research Logistics.costs. (2) the number of shipments sent by the vendor to the buyer in a cycle. A mathematical model is proposed to determine: (1) the vendor’s production lot size quantity. Bono Kara. James (2014) The inventory model in this paper is targeted to production systems with constant production rates but underlying possibilities for undesirable circumstances to threaten the production schedule. which is capable of reducing the traditional inventory holding costs and. then changes of the inventory decisions or related logistics costs become more significant. The results are compared to a traditional inventory policy that does not consider the direct impact of energy cost. 33.Jaber. Laura.Jang Wooseung Noble. If any one of the three key factors increases. greenhouse gases (GHG) emissions tax and penalty costs. 34. Shirshendu(2009) As technology is influencing the field of project management. The inventory policy proposed explicitly considers energy cost when determining optimal size for order quantity. high regular product demand or high emergency product demand. Inc.S) type. inventory holding costs. the GHG emissions tax and penalty costs. Mohamad Y(2014)This paper presents a joint economic lot size (JELS) model for coordinated inventory replenishment decisions under the vendor-managed inventory (VMI) with consignment stock (CS) agreement and an emissiontrading scheme. safety stock and inventory cycle length such that the total expected cost per unit time is minimised. as well as comparisons with the traditional JELS model for a classic two-level supply chain. © 2012 Wiley Periodicals. respectively. The total cost of the system is the performance measure.

By improving the inventory management. faster. 35. against the expected benefits which the inventory reduction can bring to the company. VMI applications are a form of information and communication technology (ICT) that allow business enterprises to develop new competencies for successful competition. Monitoring inventory is important for executives to determine if the investment is progressing as expected. a company can determine the most efficient and cost effective ways to deliver. In this paper. cleaner and higher quality products to its customers. Accuracy and completeness are important in inventory management to allow an organization to make informed investment decisions. effectively controlled.modern business scenario. Other topics include improved inventory management. Inventory management is being influenced by all these management factors. examining the successful implementation of VMI applications and the associated benefits for the companies that utilize them. after carefully collecting all inventory reduction costs. PETER CHENGALUR-SMITH. . the case study based approach is used by collecting data related to inventory management in a reputed American manufacturing company and then a model of efficient inventory management is put forward using recommendations which are based on the inventory problems. the organization can evaluate the return on investment and determine the amount of profit that was generated due to the efforts. companies connected by one database. And. and therefore. and the electronic integration of supply chain data. INDUS The article discusses interorganizational vendor managed inventory (VMI) applications. DUCHESSI. tracked. the authors state. The cost of inventory in a company is not being fully identified.