International Journal of Engineering Applied Sciences and Technology, 2019

Vol. 4, Issue 6, ISSN No. 2455-2143, Pages 121-126

Published Online October 2019 in IJEAST (http://www.ijeast.com)

A REVIEW ON INVENTORY MANAGEMENT

SYSTEM AT MANUFACTURING
ORGANIZATION
Priti Singh Tarun Kumar Yadav
Department of Mechanical Engineering Department of Mechanical Engineering
Babulal Tarabai Institute of Research and Technology Babulal Tarabai Institute of Research and Technology
Sironja, Sagar, Madhya Pradesh, India Sironja, Sagar, Madhya Pradesh, India

Abstract— Now a day inventory of material is most competition. Thus managing inventory into an optimum level
important part of any organization. Inventory is all the more important which result in cost reduction,
management system is a system for tracking inventory efficient use of working capital and improved earnings.
levels, order, sales and deliveries. Inventory control means
In today’s Industrial climate, multinational corporations are
the availability of right materials of right quantities. It is a
entering into all fields of Business that too, in auto industries.
tool for organizing inventory data that before was
This Situation leads to heavy Competition among the
generally stored in hard copy form or in spreadsheets.
Industries in the same field.
Every component of inventory is significant and it is
essential to manage the inventories. Inventory “Uncontrolled Inventory Is the Industry’s Cancer” is the well-
management system is made up of several key components known slogan. If the inventories are not controlled effectively
such as – Reorder Point, Asset tracking, service it will create many problems in the industry. So there is a need
management, Product identification and Inventory for every company to control its inventory in all stages.
optimization. The manufacturing company is having
CONCEPTS OF INVENTORY- Inventory can be broadly
definite policies for control and supervision of the
defined as the stock of goods, commodities or other economic
inventory, but it requires a throughout study of their
resources that are stored or reserved at any given period for
guiding principles and systems to a great extent to be
future production or for meeting future demands.
acquainted with the inventory management. The
manufacturing organizations often use inventory A. NEED FOR INVENTORY CONTROL
management system to reduce their carrying costs. This
facilitates the manufacturing process by helping (i). Effect of Control at Raw Material
manufacturers efficiently assemble the tools and parts they (ii). Effect of Control at Finished Goods
need to perform specific tasks. In this paper we study the (iii). Effect of Uncontrolled of Other Inventories
different researcher’s papers and find out the best B. CLASSIFICATION OF INVENTORY
methods and process to control the inventory of
manufacturing organization to reduce the carrying costs (i). Direct Inventories
and variable costs of products. a) Raw Material Inventories
(a) b) Work in Process Inventories
Keywords— Inventory, Inventory Control, ABC analysis, (b) c) Finished Goods Inventories
Economic Order Quantity, Reorder Point, Carrying Cost (ii). Indirect Inventories
I. INTRODUCTION Inventory Control
In the today scenario non availability of a single material,
which contributes production, not even 1% will create critical
situation, which may stop the production or finished goods
movement in any industry. The financial point of view
inventory is the single largest asset in the balance sheet in
many manufacturing companies. it is absolutely necessary
rather a must, to control the inventory for not only effective
management of working capital but also for smooth
production and to cut the cost of interest so as to sustain and
survive in business especially in today’s era of cutthroat

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 International Journal of Engineering Applied Sciences and Technology, 2019
Vol. 4, Issue 6, ISSN No. 2455-2143, Pages 121-126
Published Online October 2019 in IJEAST (http://www.ijeast.com)

key part in composing significant updates of several sections,

such as those on supply-chain management, multiechelon
stocks, just in time, and ERP (enterprise source planning). In
addition, the writers have included worksheet applications for
each section as additional components to improve the
audience and usefulness for learners in business applications,
and for experts.
[3] Jackson and Duncan (2004) as per the author, “Trade
Beam and Global exchange Services Partner to Provide
Collaborative Inventory Management and Interoperability for
Automotive Industry”, in Business Wire says that Trade Beam
is a Global Trade Management software and services company
providing solutions that streamline global trading processes
Figure 1. Inventory Control for enterprises and their partners. Trade Beam's solutions
II. OBJECTIVE OF STUDY provide import and export compliance, inventory
management, shipment tracking, supply chain event
A. PRIMARY OBJECTIVE management and global trade finance solutions such as open
account and letter of credit management. Trade Beam has over
Overall, the Primary Objective is to minimize the investment
3000 customers with users in over 100 countries worldwide.
in inventories by excising selective inventory control
techniques. [4] Krishna et. al. (2009) in their article “Web Integrated
Decision Support System for Machine Scheduling and
B. SECONDARY OBJECTIVE
Inventory Management”, was published in IUP Journal of
1. To study and analyze the performance of inventory Operations Management tells about stock management
management of manufacturing origination. symbolizes the process of managing stocks of completed
products, semi-finished products and raw elements by a
2. To review the system of inventory model and reorder level
company so as to reduce the total stock cost. The first level
of raw material.
contains the development of a organizing program with make
2. To find out the economic order quantity for cutting tools span minimization as the primary objective. The second level
and consumables. contains the development of the stock management program
and creating it with the organizing program. The third level
4. To determine the optimum level of safety stock for cutting contains creating the program web permitted, so that it
tools and Consumables and to fix reorder point
provides the flexibility of assigned creating choices to your
selection makers.
III. EFFORTS BY VARIOUS RESEARCHERS
[5] Snehalgavi (2010) According to her article titled “It
Outsourcing in Indian Automobile Industry” in Business &
[1] Lieberman et. al. (1999) in his article titled “Inventory Economy says Outsourcing is the act of delegating an
reduction and productivity growth: Linkages in the Japanese organization’s internal activities and to some extent the right
automotive industry” published in Management Science has to decisions to the third party (service vendors) as per
said that JIT production suggests a causal link between work- specified in the contract. Outsourcing is a tool, in which the
in-progress inventory and manufacturing productivity. Such a vendor is responsible for certain jobs outsourced by a
connection has been described in numerous case studies but company, in return of a price for the goods or service provided
never tested statistically. Historical data for 52 Japanese by it. This option is exercised majorly because to cut operation
automotive companies are used to evaluate the inventory- costs of a company and focus on its core competencies. It is
productivity relationship. It is found that firms increased their basically a contract between two companies or concern in
productivity rank during periods of substantial inventory which one is getting its business process outsourced from
reduction. More detailed tests suggest that inventory another company offering such services.
reductions stimulated gains in productivity.
[6] Martin and Benjamin Robert (2010) in his article titled
[2] Moon and Ilkyeong (2001) The authors Moon & Ilkyeong “Findlay Automotive group selects first look for pre- owned
published their paper in Interfaces titled “Inventory inventory management needs”, in PR Newswire With 15
Management and Production Planning and Scheduling” which brands including Toyota, Honda, Chevrolet, Cadillac, Saturn,
is the third version of Decision Techniques for Stock Control Land Rover, Saab and Volkswagen, Findlay will utilize the
and Manufacturing Preparing released in 1979 and 1985. First Look product suite to guarantee the right balance
Bobpyke became a coauthor for this version and performed a

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 International Journal of Engineering Applied Sciences and Technology, 2019
Vol. 4, Issue 6, ISSN No. 2455-2143, Pages 121-126
Published Online October 2019 in IJEAST (http://www.ijeast.com)

between pre-owned inventory and demand, and ensure that published in Supply Chain Management speaks that Purpose -
trades are given the best appraisals. The purpose of this paper is to provide insight into the major
supply chain issues of the automotive manufacturing industry
In addition to the inventory management tool, and trade
in the southern USA. Design/methodology/approach - This
analyzer, Findlay will use the First Look Search Engine to
paper is based on the results of a survey of automotive
allow its dealers to instantly search more than 30 online
suppliers in Tennessee and Alabama. The survey focused on
marketplaces to identify the best vehicles that meet that
supply chain issues and demographics, specifically on 20 JIT-
dealerships pre-owned inventory needs.
related problems and 100 company characteristics. Findings -
[7] Koumanakos and Dimitrios P. (2008) in Business Wire Identifies the extent of JIT implementation in Tennessee's and
titled “Hitachi Automotive Improves Efficiency and Inventory Alabama's growing automotive industry and the general
Control with Geac's System 21” says that Hitachi America, characteristics of the companies that use JIT.
Ltd. has streamlined production, reduced accounting costs and
improved supply chain management using Geac's System21 IV. PROPOSED METHODOLOGY
software solution. Hitachi Automotive implemented three
This chapter deals with the methodology adopted for the
System21 modules in 1998 - financials, manufacturing, and
project. Both primary and secondary data were used for the
customer service and logistics - across its three locations in
preparation of project.
Kentucky, Detroit and Los Angeles. In September 2002,the
There are three basic types of inventory: raw materials, work-
company will renew its maintenance contract with Geac(R)
in-progress and finished goods. Raw materials are the items
for three years.
purchased by firms for use in production of finished product.
[8] Cachon et. al. (2010), “Drivers of Finished-Goods Work-in-progress consists of all items currently in the process
Inventory in the U.S. Automobile Industry”, in Management of production. These are actually partly manufactured
Science says Automobile manufacturers in the U.S. supply products. Finished goods are goods that have completed the
chain exhibit significant differences in their days of supply of manufacturing process but have not yet been sold or
finished vehicles. The objective in this research is to measure distributed to the end user. Inventory constitutes one of the
for this industry the effect of several factors on inventory important items of current assets, which permits smooth
holdings. We find that two factors, the number of dealerships operation of production and sale process of a firm. Inventory
in a manufacturer's distribution network and a manufacturer's management is that aspect of current assets management,
production flexibility, explain essentially all of the difference which is concerned with maintaining optimum investment in
in finished-goods inventory between Toyota and three other inventory and applying effective control system so as to
manufacturers: Chrysler, Ford, and General Motors. minimize the total inventory cost.
A. Research Variables
[9] Moozakis and Chuck (2001), “Honda Automates Web
(i) To find out the cost involved in the entire inventory
Financing -- Network will let dealers apply for funds online
management process.
and will eventually support inventory management” in Internet
(ii) To ensure that the supply of raw material & finished
Week says that financing unit of American Honda Motor Co.
goods will remain continuous so that production process
next month will begin rolling out its Dealer Financial
is not halted and demands of customers are duly met.
Information Network (DFIN),a Web system that will help its
(iii) To minimize carrying cost of inventory.
3,000 dealers obtain financing for inventory in real time.
(iv) To keep investment in inventory at optimum level.
Currently,dealers purchasing inventory from Honda need to
(v) To reduce the losses of theft, obsolescence & wastage etc.
apply for financing through American Honda Finance Corp. or
(vi) To minimize inventory ordering costs.
another bank. Typically, approvals take several days.
[10] Borade et. al. (2010) in this paper authors says that, the B. General Problems of Inventory
global economy, vendor-managed inventory (VMI) is (i) To maintain only a minimum possible inventory because
gradually becoming an important element of supply chain of inventory holding cost and opportunity cost of funds
management strategy of organizations. Recently, Indian invested in inventory.
industries, both large and small, have started adopting VMI for (ii) Control investment in inventories and keep it at the
their supply chains. The purpose of this paper is to investigate optimum level.
apparent differences among large and small industries in terms (iii) To maintain a large size inventories for efficient and
of objectives, drivers, obstacles and impacts of VMI in Indian smooth production and sales operation.
context. A survey was conducted to examine organizational
objectives, strategic drivers, obstacles and affected operations C. Collection of primary data
pursuant to VMI adoption. The researcher approaches various functional heads in charge
of materials, production, finance and marketing and collected
[11] Matson et. al. (2007), in “Just-in-time implementation related information for the study. The data was collected by
issues among automotive suppliers in the southern USA”

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 International Journal of Engineering Applied Sciences and Technology, 2019
Vol. 4, Issue 6, ISSN No. 2455-2143, Pages 121-126
Published Online October 2019 in IJEAST (http://www.ijeast.com)

the researcher based on observation technique personally. The Linkages in the Japanese automotive industry”,
researcher has done physical inspection of stores and stock Management Science (45.4).
levels. [2]. Moon, Ilkyeong (2001), “Inventory Management and
Production Planning and Scheduling”, Interfaces (
D. Collection of secondary data 31.6), Pg.-125-127.
1. Data for the previous year was obtained from the records of [3]. Jackson, Duncan (2004), “TradeBeam and Global
the company. eXchange Services Partner to Provide Collaborative
2. The stores of Manufacturing organization consists various Inventory Management and Interoperability for
inventories of raw materials, consumables, spares packing Automotive Industry”, Business Wire.
material etc. the range of inventories are vide and consists [4]. Krishna, L Sivarama; Janardhan, G Ranga; Rao, C S
about more than thousand items. Hence, the focus was turned P (2009), “Web Integrated Decision Support System
mainly to consumables and raw materials. The elements were for Machine Scheduling and Inventory
selected after considering its usage value, importance and Management”, IUP Journal of Operations
contribution towards production. Management (8.1), Pg.- 35-52.
[5]. Snehalgavi (2010), “It Outsourcing in Indian
V. TOOL FOR ANALYSIS Automobile Industry”, Business & Economy.
1. RATIO ANALYSIS [6]. Martin, Benjamin Robert (2010), “Findlay
Automotive group selects first look for pre- owned
2. Operating Cycle Analysis inventory management needs”, PR Newswire
3. ABC Analysis [7]. Koumanakos, Dimitrios P. (2008), “Hitachi
Automotive Improves Efficiency and Inventory
Graphical representations like bar chart, trend chart, pie chart Control with Geac's System21”, Business Wire.
were used for simple understanding.[2] [8]. Cachon, Gérard P; Olivares, Marcelo (2010),
“Drivers of Finished-Goods Inventory in the U.S.
Automobile Industry”, Management Science.
VI. PROPOSED WORK [9]. Moozakis, Chuck (2001), “Honda Automates Web
From the above discussions it seems that it has now become Financing -- Network will let dealers apply for funds
necessary to apply the Inventory Management for material online and will eventually support inventory
control in SME’s. The proposed research work aims at careful management”, Internet Week 850.
study and development of existing technique using the [10]. Borade, Atul B; Bansod, Satish V. (2010), “Study of
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industries”, Journal of Manufacturing Technology
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 International Journal of Engineering Applied Sciences and Technology, 2019
Vol. 4, Issue 6, ISSN No. 2455-2143, Pages 121-126
Published Online October 2019 in IJEAST (http://www.ijeast.com)

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