Literature Review Inventory

Review of Literature Ins nsta talllati ation of a proper inve nvento ntory contr ntrol system tem in any organizati organization on in developing developing countries countries like like India is of paramount paramount necessity. Inventory management is dened as a science based art of ensuring that just enough inventory stock is held by an orga organi niza zati tion on to meet meet dema demand nd (ol (olem eman an ! "# "### ##$$ %ay %ay & 'arr 'arry! y! "##). Inventory is the availability of any stock or resources used in an organization. *n inventory system is the set of policies that controls and monitor inventory level and determine what level shou sh ould ld be main maintai taine ned! d! how how larg large e orde orders rs sh shou ould ld be made made and and when stock should be replenished. Inventory control is the supervision of the storage! supply and acce access ssib ibil ilit ity y of item items s to ensu ensurre an ade+ ade+ua uate te su supp pply ly with withou outt e,cessive oversupply (-iller! "##). Inventory control means availability of materials whenever and where wherever ver re+u re+uir ired ed by stoc stocki king ng ade+ ade+ua uate te numb number er and kind kind of  stocks. /he sum total of those related activities essential for the procurement! storage! sales! disposal or use of material can be referred to as inventory management. Inventory managers have to stock0 stock0up up when when re+uir re+uired ed and utilize utilize availa available ble storag storage e sp space ace resourcefully! so that available storage space is not e,ceeded. -aintaining accountability of inventory assets is there responsibility. /hey have to meet the set budget and decide upon what to order! order! how how to order order and when to order order so that that stock stock is available on tim time and at the the opti optim mum cost ost ('ened nedict and argeridis!111). 2ence! Inventory management involves planning organizing and controlling the 3ow of materials from their initial purcha purchase se unit unit throug through h intern internal al operati operations ons to the servic service e point point through distribution (4maros! et al.! "##5). Inve Invent ntor ory y cons onstitu titute te one one of the the large argest st and and most ost tang tangiibl ble e inve in vest stm ment ent of any any retai etaile lerr or manu manufa fac cturi turing ng org organiz anizat atio ion. n. Intelli Intelligent gent invento inventory ry manage managemen mentt strateg strategies ies can not only only help help

boost prot but they can mean the di6erence between a business thriving or barely surviving. 2olding inventories at the lowest possible cost and giving the objectives to ensure uninterrupted supplies for on0going operations is the aim of inventory management. 7hen making decisions on inventory! management has to nd a compromise between the di6erent cost component! such as the cost of supplying inventory! inventory holding cost and cost resulting from su8cient inventories (9eterson and 4ilver! 11:$ ;ipkin! "###). *ccording to -iller ("##)! inventory control is the activity which organizes the availability of item to the customers. It coordinates the purchasing! manufacturing and distribution functions to meet the marketing needs. /his role include the supply of current sales items! new product! consumables! spare parts! obsolescent items and all other supplies. Inventory enables a company to support the customeroldsby! "##5). ?otler ("##")! posits that inventory management refers to all the activities involved in developing and managing the inventory levels of raw materials! semi0nished materials (working0progress) and nished good so that ade+uate supplies are available and the costs of over or under stocks are low. Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is re+uired at di6erent locations within a facility or within multiple locations of a supply network to protect the regular and planned course of 

production against the random disturbance of running out of  materials or goods. /he scope of inventory management also concerns the ne lines between replenishment lead time! carrying costs of inventory! asset management! inventory forecasting! inventory valuation! inventory visibility! future inventory price forecasting! physical inventory! available physical space for inventory! +uality management! replenishment! returns and defective goods and demand forecasting. 'alancing these competing re+uirements leads to optimal inventory levels! which is an on0going process as the business needs shift and react to the wider environment (>hosh and ?umar! "##5). Rosenblatt (1@@) saysA B/he cost of maintaining inventory is included in the nal price paid by the customer. >ood in inventory represent a cost to their owner$ the manufacturer has the e,pense of materials and labour. /he wholesaler also has funds tied up.C /herefore! the basic goal of the manufacturers is to maintain a level of inventory that will provide optimum stock at lowest cost. -orris (11D) stressed that inventory management in its broadest perspective is to keep the most economical amount of one kind of asset in order to facilitate an increase in the total value of all assets of the organization human and material resources. Egbo ("#) posits that the major objective of  inventory management and control is to inform managers how much of a good to re0order! when to reorder the good! how fre+uently orders should be placed and what the appropriate safety stock is! for minimizing stock0outs. /hus! the overall goal on inventory is to have what is needed! and to minimize the number of times one is out of stock. >hosh & ?umar ("##5) dened inventory as a stock of goods that is maintained by a business in anticipation of some future demand. /his denition was also supported by 'rag ("##D) who stressed that inventory management has an impact on all business functions! particularly operations! marketing!

accounting! and nance. 2e established that there are three motives for holding inventories! which are transaction! precautionary and speculative motives. /he transaction motive occurs when there is a need to hold stock to meet production and sales re+uirements. * rm might also decide to hold additional amount of stock to cover the possibility that it may have under estimated its future production and sales re+uirements. /his represents a precautionary motive! which applies only when future demand is uncertain. /he speculative motive for holding inventory might entice a rm to purchase a larger +uantity of  materials than normal in anticipation of making abnormal prots. *dvance purchase of raw materials in in3ationary times is one form of speculative behaviour.

 The Reasons for Stocking Inventory * rm would hold more inventory than is currently necessary to ensure the rms operations. Reasons for maintaining inventoriesA Femand * retailer stays in business when he has the product the customer wants on hand when the customer wants them. If not! the retailer will have to back order the product. If the customer can get the goods from some other source! he or she many chose to do so rather than wait than wait in order to allow the original customer to meet demand later (through back0order). 2ence! in some instances a sale is lost forever if goods are not in stock.

 Running Eperations In order to manufacture a product a manufacturer must have certain purchased items (raw materials component or subassemblies). ompleting the production of a nished goods can be prevented when a manufacturer is running out of only one item. Inventory between successive dependant operations also serves to decouple the dependency of the operations. * work0 centre often depends upon the previous operation to provide it with parts to work on. If work stops at a work0centre! all subse+uent centre
9urchase of large +uantities of goods often times attracts a price discount to the rms. /his also fre+uently results in inventory in e,cess of what is currently needed to meet demand. 2owever! the decision to buy in large +uantities is justiable if the discount is su8cient to o6set the e,tra holding cost incurred as a result of  the e,cess inventory. le,ibility Ef Inventory 4ervice le,ibility of inventory service provides an organization with the ability to keep inventory services to an agreed service level in a predictable fashion with acceptable risk and cost. /his capability can be tested and valued by customers. -anaging inventory to ensure high customer service level is critical in the supply chain. 2owever! to maintain asset is very costly. Re3ecting the level of  availability of inventory to the customers are in three categories namely! raw material inventory! work0in0progress inventory and nished goods inventory (Lieberman et al "##") G,cess in each side is wasteful! although there may be reasons for it! such as prevention of stock0outs! production runs! seasonality or improvement of customer
7hen resources and capability are heterogeneous! special! and di8cult to replicate$ when organizational o6erings create more value or capability for customers! then competitive advantage is achieved. /hus! di6erences in performance across rms result from variances in service capability! which is further! decided by the resource or competence portfolios. le,ibility  /he survival of an organization in the long run is critically the ability of the organization to adapt to change (Jpton!11=). In the short run! the competitive position of the rm is a6ected by the management 3e,ibility and may impact on its overall protability. le,ibility in supply chain management may well represent a potential source to improve a company
raw material inventory! work0in0process inventory! and nished goods inventory and reduce inventory waste simultaneously. En the other hand! inter0rm inventory management 3e,ibilities allow a rm to manage stock between supply chain participants.  /hese 3e,ibilities seek a reasonable inventory service chain level based on a high level of coordination! participation! and close communication. /hrough these joint e6orts! organizations along the supply chain can prevent running out of stock or overstocking. ;hang et al! ("##D) have argued that causal relationship e,ists between inventory management 3e,ibility and performance. /hey suggested that good inventory management 3e,ibility allows rms to leverage their managerial e,perience and intra0 and inter0 inventory management competences! and nally generate high levels of inventory service 3e,ibility. /hat is because 3e,ible competency! which is an internal management focus! provides the processes and infrastructure that enable a rm to achieve the desired levels of capability. /he outcome of an e8cient inventory service is Bdeveloping service capabilities as these investments will provide rms with access to di6erent market segments! hence! yield economic returns. 4o! the higher the level of  inventory 3e,ibility! the higher the performance of rms.  /herefore! the simultaneous development of inventory management 3e,ibility and service 3e,ibility will reinforce a rm
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oleman! '. ("###). Fetermining the orrect 4ervice Level  /arget. 9roduction and Inventory -anagement %ournal! =()A10@.

 %ay! 2.! & 'arry! R. ("##). 9rinciples of Eperations -anagement. th Gdition. ew %ersey$ 9earson 9rentice 2all! Gduation Inc. 'enedict! . & -argeridis! 2. (111).hain Reaction.harter! @#(")A==0=@1. 4maros 4.%.! Lehtonen! %.-. *ppel+uist! 9. & 2olmstrom! %. ("##5). /he Impact of Increasing Femand Kisibility on 9roduction and Inventory ontrol G8ciency International  %ournal of 9hysical Fistribution and Logistics! 55(=)A ==D0=D. 9eterson! R. & 4ilver! G. (11:). Fecisionsystems for Inventory -anagement and 9roduction 9lanning. ew MorkA  %ohn 7iley and 4ons. -iller! R. ("##). Inventors ontrolA /heory and 9ractice. ew  %erseyA 9rentice 2all. 9otilen! /. & >oldsby! /. ("##5). Kendor0-anaged Inventory and 4upplier0-anaged Inventory 9rogramsA 2ow Gconomic Kalue *dded can help sell the hange. International %ournal of 9hysical Fistribution and Logistics -anagement! 55(@)A :10@#@.  /ersine! R. %. (11=). 9rinciples of Inventory and -aterials -anagement! =th ed. ew MorkA Glsevier orth02olland. >hosh *.?. & ?umar 9. (eds.) ("##5). 9roduction -anagement. ew FelhiA *nmol 9ublication 9vt. Ltd. ?uku! >. ("##=). G6ectiveness of Kentor0-anaged Inventory in the Glectronics IndustryA Feterminants and Eutcomes. Information and -anagement! =(D)A5D0=@". Lieberman! -.'. 2elper! 4. and Femester! L. ("##")./he Gmpirical Feterminants of Inventory Level in 2igh Kolume

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