Thesis submitted to Jharkhand Rai University For the award of the degree of Doctor of Philosophy In Management Under the Supervision of Research Supervisor Research Supervisor Dr.
Angad Tiwary Dr. Ashfaque Alam Submitted by Neha Gupta SHAPE MERGEFORMAT Jharkhand Rai University, Ranchi May, 2018 DECLARATION I hereby declare that the thesis entitled A Study of Inventory Management in Indian Manufacturing Industry-A Case study of Bearing Industry of Tapered Roller Manufacture to be submitted for Registration into the Doctor of Philosophy Program in Management of Jharkhand Rai University is my original work and where the works of other persons have been used or referred to, such sources have been duly acknowledged. The same has not formed the basis for the award of any degree, diploma, associate ship or fellowship of similar other titles. It has not been submitted to any other University or Institution for registration and award of any degree or diploma. Place Jamshedpur Date 21.
05 .2018 Signature of the candidate Neha Gupta CERTIFICATE-I This is to certify that the thesis entitled A Study of Inventory Management in Indian Manufacturing Industry-A Case study of Bearing Industry of Tapered Roller Manufacture submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy is a genuine and bona fide research work carried out by Ms Neha Gupta under my supervision and no part of the thesis has been submitted for any other degree. All assistance and help received during the course of this Research work have been acknowledged.
Signature of Research Supervisor Jharkhand Rai University, Ranchi May, 2018 PREFACE First and foremost, the authors would like to express their thanks to our supervisor Dr. Angad Tiwary for his support and guidelines throughout this research work. Our other thanks go to all friends and loved ones, who helped to make this work possible. Finally, the authors would like to thank the respondents and the management of Timken India Limited of Jamshedpur for their support. Neha Gupta, Research Scholar, Deptt.
Of Management, Jharkhand Rai University, Ranchi ACKNOWLEDGEMENT This work would not have been possible without the help and support of many individuals. I take this opportunity first to thank and acknowledge the contribution of Dr. Angad Tiwary my Supervisor Dr.
Ashfaq Alam my internal guide for their tremendous guidance and critique, which added substance to the work. Also, I extend my appreciation to Ms. Anusha Priya Dr. Bhupesh Kumar Mahatha, PhD Co-coordinator of Jharkhand Rai University, for assisting with relevant materials but also a great mentor to me throughout my study.
I express my gratitude to the Timken India Limited, Jamshedpur which took part in this research. Also, I am thankful to the XLRI library and Jain Management Institute library where I have spent most of my time for studying and writing my thesis. Finally, I thank all those who in one way or the other, have contributed to the successful completion of this work. Neha Gupta, Research Scholar, Deptt.
Of Management, Jharkhand Rai University, Ranchi TABLE OF CONTENTS Title page – – – – – – – – – i Abstract- – – – – – – – -ii Declaration – – – – – – – – – -iii Certificate-I—————– iv Preface———————v Acknowledgement – – – – – – – – vi Table of contents – – – – – – – -vii CHAPTER ONE ——————————————-(1-61) 1.0 Introduction 1.1 Significance (Statement of problem) 1.2 Objectives of Inventory management study 1.
3 Functions of Inventory management 1.4 Secondary functions 1.4.
1 Standardization and simplification 1.4.2 Design and development of the product 1.4.3 Make and buy decision 1.4.
4 Coding and classification of inventory 1.4.5 Forecasting and Planning 1.5 Importance of inventory management 1.6 Benefits of inventory management 1.
7 Functional areas of inventory management 1.8 Scope 1.9 Problem Discussion 1.10 Aim of the study 1.11 Purpose 1.
12 Definition of terms CHAPTER TWO ——————————(61-62-81)IMPORTANCE OF PROPOSED TOPIC 2.0 Significance of study 2.1 Review of literature 2.2 Lead Time 2.
3 Supplier Demand 2.4 Inventory management system 2.5 Inventory cost 2.6 Use of inventory in companies 2.7 Significance of inventory management 2.8 Quality control stores in organization 2.
9 Vendors management inventory 2.10 Functions of inventory 2.11 Factors influenced the inventory stocking system 2.12 Factors to hold inventory 2.13 Factors influenced not to hold inventory 2.
14 Policies of inventory management CHAPTER THREE —————————-(82-96)PROCEDURE 3.0 Inventory control System 3.1 ABC Analysis 3.2 Fixation of norms of inventory holdings 3.
3 Minimum level of inventory 3.4 Maximum level of inventory 3.5 Ordering system of inventories 3.6 Reordering system periodically 3.7 Part delivery system and single order 3.8 Evaluation of inventory management performance 3.
9 Effects cost control of inventory in bearing manufacturing 3.10 Inventory control techniques 3.11 Benefits of research CHAPTER FOUR ————————————-(97-125)DATA PRESENTATION AND ANALYSIS 4.
0 Research Methodology 4.1 Research Model 4.2 Techniques of data analysis 4.3 Critical evaluation of inventory practices 4.4 Methods of data collection 4.
5 Observation 4.6 Administrative approach 4.7 Hypothesis of the study Inventory model (EOQ) 4.8 Fixed order quantity approach 4.9 Economic production quantity 4.
10 ABC analysis 4.11 Reorder point 4.12 Inventory order cycle 4.13 Just in Time (JIT) 4.14 Supply chain management 4.
15 Master production schedule (MPS) 4.16 Master requirement planning (MRP) 4.17 Master scheduling process 4.18 Capacity requirement planning CHAPTER FIVE —————————————(126-177)SUMMARY AND CONCLUSION 5.1 Case Study 5.1.
2 Introduction 5.2 Overview 5.3 Industry Overview 5.
4 Global Collaboration 5.5 Recommendation 5.6 Summary 5.7 Conclusion 5.8 Definition of terms 5.
9 Questionnaire References – – – – – – – – – – (178-190) Other References – – – – – – – – (191-202) Synopsis – – – – – – – – – – – – – – Annexure I Journal Published — – – – – – – – Annexure-II Conference Certificate – – – – – – – – – – Annexure-III CHAPTER-1 INTRODUCTION Before we venture further, we need to know what does inventory mean. Inventory is actually money, which is available in the shape of materials i.e. (raw materials, in-process and finished products), equipment, storage space, work-time etc. Inventory management is critical to the overall performance of any manufacturing industry concern.
Besides demand and other forces like competitors actions and general price index, inventory situation in terms of efficient management and effective planning determines the activity level, the turnover and the ultimate profit in any company. Inventory management is essential to all manufacturing industry because time and economic delivery is necessary to maintain efficient continuous production. The cost of supplies i.e. raw material and purchased parts, partially completed goods (work in process), finished goods, inventories constitutes the highest single expenditure of industry to engage in basic manufacturing or production, (Dobler et al., 19961998) 1.
Therefore extreme care required to ensure that the materials and parts purchased meet quality specification at the lowest possible total cost of procurement, (Jones et al., 200495) 2. The fundamental objective is to provide the correct assortment of materials and parts at the desired location when needed and in an economic manner. In earlier times inventory management is known for excess inventory or shortage of inventory. Inventory problem has increased as the technology increases through which organizations produce goods faster with different designs and greater quality (Letinkaya and Lee, 2000)3.
During 1980s inventory management, production planning and scheduling is important for strategic benefit (Larrson et al., 1995)4. Currently the level of supply chain management is improved.
As there is more coordination with other firms in their supply chain. Now they share the information so that the variability and demand they observe is need to lower (Colling, 1990)5 . In western countries the productivity is improved due to by reducing the manufacturing expenses cost as per unit of output.
This is true because in manufacturing industry the cost expenses increase due to labor, so if the labor expense is reduced then automatically the ratio of unit due to labor will decrease. In large manufacturing firms the purchasing ratio is up to 60 of the total value of product which implies that the management of raw material in an area will show productivity improvement. In recent times the main aim of any business to make mass production along with its improved customer satisfaction.
In early 1930s a system designed by Harvard University for the check of system is punch card which is directly showing the catalog items which is in use. By this the punch card is read by the computer and then it passes the information to the stock room which bring the item to the waiting customer. By this automated system machine also generated the billing records manage the inventory. As the system is highly expensive but in some of the stores it is still in use where cards are placed with product information by supplies on shelf for customers to select and finally to purchase. This is only applicable when the product is expensive and large and can be controlled or countable such as medicine.
During 1940s and early 1950s the researcher created the bar code system because they understand the suppliers need. In this new system UV light sensitive ink and reader are used to mark the item of sale but the system is lacked for its computing power to make it work. In 1960s the new concept made which is laser technology. Lasers are smaller faster and cheaper readers or scanners. In early 1970s the Universal Product Code (UPC) or modern bar code was developed and introduced. Its computing power is better and also helps to track and manage inventory.
Then the supplies started implementing the new technology into their warehouse advance in computer and software technology during the mid late 1990s. The system works in circular way starting from purchasing till tracking to inventory and re-ordering. The system is being used by the stores, warehouse and factories. Another system has generated for product information such as type manufacture serial no. are transmitted by RFID by using microchip to a scanner or other data collection device to which a superior bar code in many ways (Agha, 2010)6. Stock should be maintained to meet the production demand and able to provide right materials at right time in right quantities and at competitive prices.
Inventory is nothing but money which is available in the shape of materials (raw materials, in process and finished goods), equipment, storage space, work time etc. Basic Inventory model is given below Diagram-1 Two important objectives of inventory control as follows Minimizing the investment in inventory Maximizing the service levels to customers and its operating departments In any business organization inventory I the most important resource. The need to inventory use for improving the performance of manufacturing industries. It can be defined as business current asset by including property owned, work in process and finally work completed but not sold as it classified as a current asset because it can be turned into liquid cash within a short period of time. Inventory play as important role in the profit of the manufacturing industry. Operations also one of the important part of manufacturing industry.
Raw material is the integral part of the manufacturing firm for the source of supply the product. In day to day operations, if the stocks are available then the delivery of the item is not affected if the inventory control is not there then the non-availability of stock inaccurate checks balances. So, for the success or failure of business control manage of inventory is very important. For example if the stock is little then might be possible that the company have stock out which will disrupt the production cycle in manufacturing industry but if there is too much of stock then company hold money in material form which result company can face financial issues. Inadequate inventory management cab be a serial challenge to the productive capacity of a manufacturing organization it also include raw materials, finished goods, assets, property inventories of work in progress, office supplies, business firm general operation supplies.
Inventories play most significant part of current assets of large companies. Public limited companies can hold around 60 of current assets. If large amount of money is hold as stocks of raw material, work in process finished goods then these stock should manage efficiently effectively to avoid any financial crisis in company.
So the manufacturing firm needs to maintain the optimum level of inventory. The optimum level lies between the inadequate inventories the excessive inventories. Its aim to maintain optimum level that will be carried at the least cost. Inventory control is to supply the goods or materials at right time, right place with right quality.
It is a reliable means through which company can manage their customer needs demands to satisfy them with minimum losses. Inventory is also a link between the production and sale of the production which large amount of stock is involved affects the cost of production. Most important and expensive asset for any company. Inventories are viewed as an idle resource held for the purpose of future production/ sale. For better management of inventories then need to release the capital for use anywhere productively (Ghosh and Kumar, 2003)7. In coordination of materials accessibility controlling utilization producing of materials.
The purpose of getting the right inventory in the right place at right time with right quantity which is directly linked to production function of any manufacturing company. The productivity of any organization directly or indirectly affect by inventory management system (Miller, 2010)8. Inventory of goods is important as there is demand occurs then the company needs to deliver the product on time but in that case company should be financially and economically sound. Without stock at hand customers have to wait for long period before deliver. Inventory management through which materials stored and used in a company with objective to provide what, where, when is required to get minimum residual tock and incur least cost (Agha, 2010)6. Many organizations combine the inventory system with their production so to reduce the idle time in inventory.
Inventory is a stock and also called an enterprise idle resource. Those items which are either placed for sale or in process or raw material which are need to form as product is called inventories. Production input like raw materials, manpower, and financial equipment are included in the industry inventory. Different forms of inventory are partially finished goods, work in process and spare parts. Inventory is kept to meet reliability of operations, flexibility in production scheduling, change in raw material, delivery time and change in economic purchase order size (Inyama, 2006)9. An inventory system which helps to maintain the organizational structure and controlling goods to be stocked.
For the proper inventory management system requires good way of making decisions about how much to order, what to order and when to order and also to keep track of items in inventory. Decision on inventory in any company depends on how the stock level is managed, demand information with respect to the forecasted quantity and lead time variation, inventory holding costs, ordering cost and storage cost. This information helps the manager to control inventory to meet the demand according to the market needs. (Jossop ,1986)10. Inventory management is important in any manufacturing industry.
Its aim to control the materials or goods and stored for later use. It also important to keep the balance between the economies and the production schedule according to the demand. In production if there is shortage of material then it leads to delay in supply as a result it affect the business. If an item is not available when the customer needs it then, the retailer looses a customer not only on that item but also on many other items in the future. The conclusion is that effective inventory management can make an important contribution to a companys profit as well as increase its return on total assets.
The reason for more effort in inventory management is that this figure for many firms is the largest item appearing on the asset side of the balance sheet. Inventory management involves planning and control. The planning involves what quality of items to order and how often need to be order to maintain the overall stocking in an efficient way.
The control aspect involves the following procedure, to setup at the planning stage to achieve their objectives. It also include stock levels check periodically or continuously and deciding what to do so the basis of information that is gathered and adequately processed. Efforts are made by the management of any company put an optimum investment in inventory as it costs much money to tie down capital in excess inventory.
In present times the focused made on the development of suitable mathematical tools and approaches designed to aid the decision maker in setting optimum inventory levels. Economic order quantity model (EOQ) has thus been developed which evolve from traditional methods of inventory control and valuation to some extent to prove useful in optimizing resources and thus minimizing associated cost. Financial analyst also confirmed that for the long run of profit and continuity in business, company should manage their unused inventory well. Any business organization who is not taking their inventory as an important part of their economy then they risk their production of having stock out problem and also unable to maintain the minimum investment which requires to maximized profit. The inventories that are inefficiently managed may apart from affecting sales create an irreparable loss in market for companies operating in highly competitive industry.
So, company need to make a balance in keeping the inventory to avoid any fund crisis as well as not to maintain too low inventories so as to meet production and sales demand as and when required. Hence, ineffective inventory management affects the business objectives with this type of research work. Inventory management was known as a cost center, since purchasing department was spending money on inventory while stores was holding huge stock of inventory, blocking money and space (Ramakrishna,2005)11.
The process of liberalization and opening up of global economy, there has been a drastic change in the business environment resulting in manufacturing organization exposed to intense competition in the market place. Service industry worldwide has been working on various strategies to face the challenges and to cut down manufacturing costs to remain competitive. Supply chain management is the process of efficiently integrating supplies manufacturers warehouses and stores so that product is produced and distributed in right quantities to the right locations and at the right time in order to minimize costs and satisfying service levels requirements. In the retail environment this process is well known and has been in use for a long time (Fawcett et al.
, 2009)12. Some companies like Walmart and Dell have managed to streamline their supply chain networks to become industry leaders. The term supply chain management is divided into two parts inventory management and distribution. These two areas there are many other decisions critical to streamlining the process such as warehouse location material procurement and adapting to changes in the environment (Rajeev 2008)13.
There are tremendous cost savings and potential revenue is generated with the enhanced management of distribution and inventory. It was estimated that a company could reduce its total expenses by at two percent through better inventory management and distribution of finished goods. This represents a percentage of total expenses just the amount providers spend on supplies. To keep the investment in stocks and equipment optimum level, proper inventory management policy must be in place.
In any manufacturing industry, there must be inventory of raw materials, work in process, and finished products which are maintained to keep the factory running and effective management of the inventories in crucial for growth and survival of such industry (Godwin and Onwurah, 2013a,b)14,15. According to (Stevenson, 2009)16, (Adeyemi and Salami, 2010)17 and (Onwurah, 2012)18 inventory management is what is needed and to minimize the number of times one is out of stock. Efficient inventory management, to keep the supply chain smooth and give benefits.
The concepts of Bullwhip effect and the rigorous measures being taken to reduce the Bullwhip effect across the supply chain management from this understanding (Cachon and fisher, 2000)19, (Croson, R. and Donohue,K., 2006)20. There have been many studies, both empirical and case based, focused on automobile industries from the developed economies such a US, Europe, and Japan (Womack et al., 1990)21, (Lieberman and Asaba, 1997)22, (Liberman and Demeester, 1999)23 they explore the casual relationship between inventory and performance at firm level. According to (Arnold (1998, 221)24, argued that inventories are very important to manufacturing companies and on the balance sheet for example, they usually represent from 20 to 60 of total assets. So, improvement in inventory management throughout the supply chain with well qualified personnel will enhance cost effectiveness in the organization, (Zenz 199415)25. Also (Stevenson.J.W, 2006484)26 argued that manufacturing companies about 30 of its current assets and 90 of its working capital invested in inventory. Inventory management has a very great role to play in the profitability of the organization either public or private. Therefore, rather unfortunate that many organizations do not attached importance to the department. There are the organizations where the buying departments do not have responsibility for the stores or even the stock control function. The role of buying is still linked with both functions. All organizations have some stocks which are cared for, because they represent money. In a manufacturing organization where large unit items are produced daily for instance, large quantities of materials and component parts have to provide daily as well. This means a lot of money and it is therefore to organize store function so that investment cost is kept to the specific standard systems of stores control, which can be universally recommended or applied, but in the course of time. Certain principles and practices of more or less general application have been evolved. The inventory function is assumed to be organized and operated on an integrated basis and is presumed to be responsible for material forecasting, planning, inventory control, scrap control and disposal, providing management information regarding purchases and inventories within the framework of the financial policies and norms. Inventory management being the coordination of efforts (Planning, Controlling, Organizing, and Directing) towards achieving efficiency in the procurement, transportation, stocking and utilization of inputs of a manufacturing organization is therefore central to production activities and management. Effective inventory management is very important to market success. Important objectives of inventory control are to determine and maintain an optimum level of investment in the inventory. Inventory is the largest asset for any companys balance sheet. There are lots of management emphases on keeping inventories down so they do not consume too much cash. Inventory reduction and minimizing are more easily accomplished with modern inventory management processes that are working effectively. Many manufacturing companies suffer from higher cost and excessive inventories. Inventory control problems are usually the result of using poor processes, practices and antiquated support system. Many companies the inventory control department is taken as clerical function. The approach to inventory control is lots of material shortages, excessive inventories, high costs and poor customer services. Inventory investment is necessary and useful but too much of it is dangerous. Some companies where resources are limited money that is used for inventories is also needed for plant improvement for paying dividends to stock holders for developing new products and for all other uses a vigorous business has four capital excess inventory serves no purpose and simply ties up capital uselessly (Plossl, 1985)27. Inventory management covers effective management in all its aspects including market planning, programming and purchasing, inventory control receiving, warehousing and store keeping, materials handling and disposal of scrap surplus stores. The importance of the efficient and effective use of materials particularly in the present time of credit squeeze and unstable market conditions. Inventories play a significant portion of the current assets of any industry. Inaccuracies in an inventory creates problems including loss of productivity, the manufacturing of unwanted items a reduction in the levels of customer commitment, the accumulation of costly physical inventories and frustration. The cost of inaccuracies can cause different issues in production so improved practices in inventory management (Sprague and Wacker, 1996)28. The management of inventory influences a companys financial strength and competitive position because the approach taken to inventory management directly affects working capital, production and customer (Vergin, 1998)29. Role of inventory is important for the survival of the company. Inventory management is not much in use in many SMEs. Inventory management is not generally treated as a critical or strategic activity (Sprague and Wacker,1996)28. SMEs in India and inventory management practices they adopt are very few studies deal in depth with this issue. So, this paper begins to bridge this gap by investigating the status of inventory management in Indian manufacturing Industry. When the company grows, two kinds of inventory issue raise. First a wider variety of items are maintained in inventory making it difficult for manager to keep track of the inventory. So for keeping record system have made as quantities in inventory grow, more space is required to do business and more capital is invested in inventory. The transition from little or no record keeping to a formal inventory system that includes ordering policies and a formalized inventory record file. Increasing local and global competition a company must survive in this competitive world with effective management of its inventory (Azizul and Anton, 2009)30, (Scott, 2007)31. Issue of survival and global competition any effective management of any business to take a decision on if to continue with manual system of inventory control or use a computerized system that is more efficient in inventory management. Due to the global evolution of the information technology, the use of computer for effective and efficient inventory management has become common. Almost every field in any business is using computer application for keeping the inventory records. In a manufacturing organization where large units items are produced daily, large quantities of material and components parts have to be provided daily as well. Lot of money involved for keeping the stock in any manufacturing industry as a result most of the money invested in stock. Materials are also known as inventory or stock. Material stock is a current asset represented by goods owned by the business at a particular point of time and helps the purpose of future sale or the manufacturing of goods for sale. Inventory management is concerned with planning and control of materials. Inventory control is a process by which events are made to conform to a plan. Therefore to control materials there must be a store where to buy, when to buy and how much to buy. The suppliers to be selected will be influenced by factors such as the ability of the supplier to supply the quantity of the right quality of goods at the right time and at the right price. Continuous stock checking is required so there is no stock out problem raised by the inventory team. Function of inventory is too organized and operated on an integrated basis and is presumed to be responsible for material forecasting, planning, inventory control and disposal. Inventory management influenced by the number of circumstances like when to order, how much to order and how much stock to keep as safety stock. Inventory control is important to any type of industry. Balance should be maintaining in inventory with the minimum financial impact on the customer. Its activities to stock keeping items at desired levels. In manufacturing its focus on physical product, inventory control and material control. Inventory means physical stock of goods, which is kept in hands for smooth and efficient running of an organization at the minimum cost of funds blocked in inventories. The fundamental reasons for carrying inventory is that it is physically impossible and economically impractical for each stock item to arrive exactly where it is needed, exactly when it is needed. Inventory management is the integrated functioning of an organization dealing with supply of materials and allied activities in order to achieve the maximum coordination and optimum expenditure on materials. Inventory control is the most important functions of inventory management and it forms the nerve center in any inventory management organization. An inventory management system is an essential element in an organization. Inventory management involves a set of decisions that aim at matching existing demand with the supply of products and materials over space and time in order to achieve specified cost and service level objectives, observing products, operation and demand characteristics. The classification of items on three criteria lead time, price and consumption level which under which the development of eight different inventory management models. It further reclassifying spare parts into five categories smooth, erratic, low turnover, slightly sporadic and strongly sporadic. It classifies items into four quadrants, divided by two axes the average demand interval and the squared co-efficient of demand variation. Inventory plays a very significant part of the current assets of manufacturing organizations. In manufacturing industry to manage the inventory efficiently and effectively to avoid the idle resource and ensure the production continuity. Due to Inefficient management of inventory cannot use the resource properly as a result loss of profit. The under utilization of capacity can aggravate the unemployment problem in any economy. Efficient management of inventory in manufacturing company is important for economic growth of any country. It is found that inventory management practices is one of the ways to acquire competition among others (Sprague Walker, 1996)28. To survive on the competitive environment manufacturing industry combine the inventory management and capacity utilization to achieve quality and cost reduction (Ricklavely, 1996)32. (Zeng and Hayya, 1999)33 describes the functions of inventory to support and provide necessary inputs for manufacturing and protect companies against uncertainties that arise from such cases as discrepancy between demand and production, machine deterioration and human errors among others. They further said that inventory cost (ordering and holding expenses) and inventory turnover (a measure of how efficiently inventories are being managed) are very important in deciding the inventory management strategies of company. Inventory management has played an important role in an inventory intensive manufacturing industry because effective inventory management help company to minimize inventory cost and avoid the issue of lack of materials. So, the excess of inventory and shortage of materials are the two issues mainly raised in manufacturing industry regarding inventory (Eloranta Raisanen, 1988)34. Economy depends on raw materials which means for any organization raw material is the backbone and play a very important role in any manufacturing industry. It is important to understand the unpredictable fluctuation in price and quality due to supply of raw materials. It is important in the control of inventories which is for production. According to (S.L.Adeyemi and A.O.Salami, 2010)17 the aim of inventory management involves to balance the conflicting economies of not holding too much stock. Inventory management helps to managing the inventory levels of raw materials, semi finished materials (work in process) and finished goods so that adequate supplies are available and the cost of over or under stock are low. It is vital to the management of manufacturing industry to improve the quality of inventory management system effectively and will benefit the management of manufacturing industry to employ efficient, competent personnel in proper inventory management. The arrangement and capabilities of machines determines how production control should operate. The machines are not specified only for one task and the different tools need to be set up every time when the work changes. According to some research (Arnold et al., 2008)24, they mentioned about the four main manufacturing strategies that were using in manufacturing such as make to stock, deliver from stock, make to order and assemble to order. All the strategies are supposed to optimize the total production cost of inventory control system. Effective inventory management is at the core of supply chain management. Management of multiple types of inventories including not only finished goods but raw materials, work in process, partner inventories and more, truly sits at the intersection of demand and supply. Most companies did cut inventories sharply in the deep recession year of 2009. Now coming out of the recession, companies are again facing a number of issues that are adding to their supply chain network complexity. They are as follows Challenges resulting from multi channel go to market strategies. Shrinking product life cycles not only in well organized area. Increased global scope and to reach that have to be managed. Significant network changes resulting from mergers and acquisition. Increasing virtualization and resulting loss of visibility and control. Apart from effective inventory management there are other problems and challenges must be tackled, considering strategies and tools that can fame the growing network inventory while maintaining or even improving customer service levels. Many argued that the focus point of successful supply chain management is inventories and inventory control. Customer service is competitive differentiation point for companies focused on value creation for end consumers. In such an environment company hold inventory for two main reasons to reduce cost and to improve customer service. The motivation of each differs as firms balance the problem of having too much inventory (which lead to high costs) verses having too little inventory (which lead to lost sales). Supply chain management leads to cost savings largely through reductions in inventory. To develop the most effective logistical strategy, company must understand the nature of product demand, inventory costs and supply chain capabilities. Company use one of the three main approaches to manage inventory. 1) Retailers used an inventory control approach monitoring inventory levels by item. 2) Manufactures are more concerned with production scheduling and use flow management to manage inventories. 3) Number of Business organization do not actively manage inventory. Inventory management has emerged as one of the important tool to improve operational efficiency over the last 30-40 years across the globe. Japanese companies such as Toyata pioneered lean manufacturing which emphasizes on the need to maintain low inventory levels across the supply chain through practices like JIT, Kanban and vendor managed inventory etc. The Japanese influenced on Indian manufacturing industry began with the entry of Suzuki into the Indian automobile industry in mid eighties. Then the principles of lean manufacturing have permeated across many industries, especially the automobile sector in India. The current study aims at filling this gap through inventory trend analysis in the Indian automobile industry, with an objective to determine the inventory trends and identify the influencing factors such as the firms cluster, tier export and import intensity on inventory levels. The study finds that average inventory has been steadily declining with all three inventory components e.g. Raw materials work in process, and finished goods inventory contributing to this decline. The result suggest that the efficient working capital management and the quality improvement efforts have been one of the major contribution to the decline in average inventory levels in the Indian auto industry. Supply chain management addresses the management of materials and information throughout the entire chain from suppliers to producers, distributors, retailers and customers. Organization performs production and marketing activities independently, so that it is difficult to make an optimal plan for the whole chain. Company recognized that each of them serve as a part of supply chain to others. The information technology has continuously developed, it is possible to coordinate all organization and all functions involved in the whole chain. Research on supply chain management has been mainly focused on three major issues one is the behavior of information flow through a supply chain (Lee et al.,1997)1. The second issue deals with inventory management which regards a supply chain as a multi-echelon inventory system (Zipkin, 2000)35,36. The third issue is oriented to planning and operations management of a supply chain based on queuing systems (Raghavan and Viswanadham, 2001)37, (Song and Yao, 2002)38. There is a Chinese proverb saying if you want to defeat an army, frustrate the chief first. It is also suitable for business fight. Research scholars gave much attention about the impact of inventory on supply chain management (SCM). Researcher shown inventory cost account for 30 of the total capital cost. Successful inventory management is mark of competition victory and a well run organization. Inventory plays most important part of current assets of a large majority of companies because of the large size of inventories maintained by the companys amount of funds is required to be allowed to them. It is therefore manage inventories effectively and efficiently in order to avoid unnecessary investment. A company neglecting the management of inventories its long run profitability and may fail ultimately. To manage inventory properly need for inventory management required. Inventory management is determined with optimal level of investment and the inventory as a whole. The efficient use of the components and the operations of an effective control and review mechanism. The management of inventory requires careful planning so that both the excess of inventory w.r.t to the operational requirement of an undertaking may be avoided. It is essential to have sufficient level of investment in inventories. Those activities which are necessary for the acquisition storage sale and disposal, source of material, D. Scholl Lawrence and W. Haley Charles observe Managing the level of investment in inventory is like maintaining the level of water in a bath tub with an open drain. The water is flowing out continuously. If the water is let in too slowly, the tub soon gets empty, if the water is let in too fast, the tub overflows like the water in the tub the particular items of the inventories keep on changing but the level may remain the same. The proper level of investment in inventories and to decide how much inventory required each period to maintain the level. (L.R. Howard)39 observes the smooth management and control of inventory not only solves the problems of liquidity but also increases the annual profits and causes reduction in the working capital of the company. Senior management influences the decision of planning in inventory management. It is a matter of concern to those dealing with production, sales, forecasting, inventory planning, marketing, material handling, finance, product designing etc. Inventory management helps to manage stock in such a way that there should not be excess of inventory or inadequate inventory and a sufficient inventory is maintained for the smooth production and sales operation. Manufacturer always faces cost reduction and efficiency challenges in their operations. Industries required improvement in production lead times, costs and customer service level to survive because now company is more focused on customer. Thats why companies making effort to improve their efficiency. Industries upset more capital and resources to improve their productivity, so to optimize their capital time and working environment. Companies need improved tools to optimize its process and get the result. Many improvement techniques and tools were developed and adapted by companies to work in different type of business. Now companies are focusing more on production with higher efficiency in lead time, mainly on customer satisfaction with increase in competitive environment. Manufacturers have to understand the conventional system has to connect with the lean tools and techniques. Lean manufacturing system was developed by Toyota Japan. Problem in operations due to raw material is very common in manufacturing organizations. The importance of raw material to efficient operation of a manufacturing organization cannot be over emphasized. The availability of the raw material in the right quality and quantity will determine to a reasonable extent. Raw material management is crucial for overall performance of any manufacturing industry. Demand and other forces like competitors action and general price index raw material situation in terms of efficient management and effective planning determine the activity level to turn over and the ultimate profit in a given company. The determination of economic order quantity (EOQ), re-order level and minimum/ maximum stock levels is important in raw material management in any manufacturing output. The material function is organized and operated on the basis material forecasting, planning, inventory control, scrap control and disposal providing management information regarding purchase and inventories within the framework of the financial policies. Inventory management has the coordinated efforts of (planning, controlling, Organizing, directing) towards achieving efficiency in the procurement, transportation stocking and utilization of inputs of a manufacturing organization. Effective and efficient functioning of the material management has direct bearing on the total performance of the organization. The management of raw material in a manufacturing organization is important for uninterrupted production runs and enhances performance in operations. Right stock level improves the level of the available working capital which will profitably employ in other areas. The objectives of inventory management functions by combining planning, procurement and inventory control. Companies produce upgraded raw materials for applications and products upstream in a supply chain, so proper management of raw materials is a key concern for many industries. Material input directly impact on output products. The importance of raw materials as the critical input and the increasing challenges related to raw materials supply, a systematic and effective approach to the management of raw materials is critical to any firm in the process industries. The meaning of Inventory is a detailed list of goods, furniture etc. Many understand the word Inventory as a stock of goods but the generally accepted meaning of the word goods in the accounting language is the stock of finished goods only. In a manufacturing organization the stock of finished goods there will be a stock of partially finished goods raw materials and stores. The collective name of all three items is inventory. The asset which companies stores as inventory are raw materials, work in process (semi finished goods), finished goods. The raw material inventory means the items which are purchased by the company from other party and convert it into finished goods through the manufacturing process. The work in process inventory consists of items currently being used in the production process. Finished goods mean final or completed products which are available for sale. The inventory of such goods are produced but are yet to be sold to expand the definition of inventory to fit manufacturing companies it is said that inventory means the aggregate of those items of tangible personal property which are Held for the ordinary course of business In process of production for such sales They are to be currently consumed in the production of goods being manufactured for sale by the business that are ready goods. Materials such as raw materials, semi finished products or finished products which the company convert into the finished products. Supplies means item which is consumed by the company in its operations but will not the part of product. Inventory means the materials which are either in market or usable directly or indirectly in the manufacturing process and it also includes the items which are ready for making finished products by some other processes or by comparing them either by the concern itself and /or by outside parties. The term inventory means the materials having any one of the following characteristics it may be Saleable in the market Ready to send it to the outside parties for making usable or saleable product out of it. Directly usable in the manufacturing process of the undertaking. Usable indirectly in the manufacturing process of the undertaking and Raw materials, stores and spare parts, finished goods and work in process have been included in the inventories. Inventory is also called as the graveyard of business because the cause of the failure of many organization. It constitutes the most important part of current assets of a large majority of companies due to its large size of inventories maintained by the company. Hence to manage inventories effectively and efficiently in order to avoid unnecessary investment. In order to manage the inventory properly a need for inventory management required. Inventory management is connected with the level of investment for each component of inventory and the inventory as a whole, the efficient use of the components and the operation of an effective control and review mechanism. The management of inventory requires careful planning so that both the excess and scarcity of inventory in relation to the operational requirement to be avoided. Hence it is essential to have a sufficient level of investment in inventories. Inventory management is defined as the sum total of those activities, which are necessary for the acquisition storage sale and disposal, source of material. (L.R. Howard)39 observes The proper management control of inventory not only solves the acute problems of liquidity but also increases the annual profits and causes substantial reduction in the working capital of the firm. The objective of inventory management is to determine by the optimum level of inventory and comprised of four basic activities I. Introducing materials into the organization II. Sourcing and obtaining material III. Anticipating material requirement IV. Monitoring the status of material as a current asset Functions performed by inventory management including purchasing or procurement, inventory control of raw materials, receiving, warehousing, production scheduling transportation (Federgruen, 1984 b)40. 1.1 SIGNIFICANCE (STATEMENT OF PROBLEM) This research focuses on the application of inventory management to achieve optimal use of resources and overall efficiency in manufacturing industry. Inventory management is to optimize the resources and increase the capacity utilization improved performance. Efficiency in production operation has made improvement in the performance of companies and their managers. Optimal use of resources reduction of cost and adequate working capital will undoubtedly influence improved capacity utilization, improved profit, high competitiveness, waste reduction and customer satisfaction. The research has made in the fields of entrepreneurship inventory management and production management. Industries utilize production processes through which material produce upgraded raw material for subsequent use in the variety of application areas upstream in a supply chain. Company use the raw material to manufacture the items by production where these raw materials are processed and transformed in a continuous flow / or in a batches (Lager, Blanco Frishammar,2013)41. Input material put heavy constraints on output products. Important input for any manufacturing industry is raw material and the challenge is to get the raw materials supply in systematic and effective way to manage the inventory and meet the production needs as and when required. The way companies deal with the raw material challenges affect both short term operations as well as long term business opportunities. For short term perspective when the supply of raw materials is smooth, operations may progress favorably but when it is interrupted the impact of business is often immediate or severe. For a long term perspective changes initiated by the company or forced upon them by others could have both constraining and retaining effects on the value propositions of the company. Raw material quality that the process firms deliver to the market. Regulations also dictate what handling process and waste treatment to be used for different kinds of materials. Finished product would qualify the standards set by the regulatory authorities. For manufacturing industry raw material management is very complex task because raw materials clearly affect many areas. So, there is a need for some level of coordination of activities and processes that industry uses to handle and manage its raw materials. Raw materials management is the activities that go into e.g. acquiring, purchasing, refining, developing and delivering a sufficient amount of raw materials at a sufficient quality to ensure that the strategic and operational objectives of the firm is achieved. Raw material management implies exchanges with the external environment as well as company internal material conversion issues. Effective raw material management means performing all these activities proficiently i.e. faster with higher quality, lower risk and with fewer defects. Every Manufacturing process leaves waste but assistant professor Deishin Lee believes that these left over material which was discarded by the manufacturing industry can be utilized into productive and profitable use. Few concepts include The concept of by product synergy consists of taking the waste from one production process and using it to make a new product. Properly using the waste instead of throwing it can cut cost by reducing the disposal fees and added the money through by product sales. When a company widens its scope to think strategically to consider waste processing as a joint production process. In some cases, maximizing profit mean paradoxically creating more waste by Michael Blanding. Its being said that One man trash is another man treasure Deishin Lee, In her recent working paper Turning waste into by product by showing how its possible for companies to turn their trash into their own treasure this is The concept of by product. A company holds more inventory than is currently necessary to ensure the companys operations. Reasons for maintaining inventories are as follows a) DEMAND- If the customer raise demand for the product and if that product is not available to the retailer then it may affect the companys business. Might be possible that either customer will wait till the product available with the retailer or the customer will get the product from some other source. If this will happen then the sale is lost forever and the company lost one customer due to unavailability of stock. b) PRODUCTION- For manufacturing any item the manufacturer must have certain purchased items (raw materials, components or sub-assemblies) completing the production of finished goods can be prevented when a manufacturer is running out only one item. Each machine maintain its operation for a limited time, until operations resume at the original center if a supply of work in progress inventory is kept between each work center (Kuku, 2004)42. c) LEAD TIME- It is the time between when order is placed (either a production order issued to the factory floor or a purchased order) and actual time goods order are received. If the company is unable to supply the goods on demand then the retailer should keep the inventory of needed goods when required. The larger the quantity of goods the firm must carry in inventory depends on the longer the lead time. d) HEDGE- Inventory can also be used as a hedge against price increases and inflation. Before a price increases goes into effect, salesman person routinely call purchasing agents. By this way buyer get a chance to purchase material in excess of current need at a price that is lower than it would be if the buyer waited until after the price increase occur (Kuku, 2004)42 e) QUANTITY DISCOUNT- Purchase of large quantities of goods gives the price discount to the companies. By this it may cause excess in inventory of what is currently needed to meet demand. Hence the decision to buy in large quantities is justifiable if the discount is sufficient to offset the extra holding cost incurred as a result of the excess inventory. f) FLEXIBILITY OF INVENTORY SERVICE- Flexibility of inventory will help the company to keep inventory services to an agreed service level in a predictable manner with acceptable risk and cost. This capability has tested and valued by customers. Managing inventory to ensure high customer service level is critical in the supply chain. So, to maintain assets is very costly. Availability of inventory to the customers through raw material inventory, work in progress inventory and finished goods inventory (Liberman et al., 2002)43. Excess of inventory is wasteful so preventions of stock outs, production runs, seasonality or improvement of customers satisfaction levels (Liberman et al., 1999)23. By keeping right amount of inventories to meet customer needs. Inventory service flexibility can also be as pursuing high inventory utilization while reducing waste, because an important indication of management efficiency and effectiveness in inventory utilization (Caplice and Sheffi, 1994)44. The relations between company performance capability and competence simultaneously. The resource of the company contends that company performance is a function of resource mix. When resources and capability are heterogeneous special and difficult to replicate. When organizational offerings create more value or capability for customers then competitive advantage is achieved. Thus difference in performance across company results from variances in service capability which is further decided by the resource or competence portfolios. g) FLEXIBILITY- The survival of an organization in the long run depend on the ability of the organization to adapt to change (Upton, 1994)45. In the short run, the competitive position of the company is affected by the management flexibility and may impacts on its overall profitability. Flexibility in supply chain management represent a potential source to improve a companys efficiency and significant measurement of supply chain performance (Vikery et al., 1999)46. Inventory management flexibilities, organization can reduce reliability on forecasting when and where inventory will need to be located to meet customer demand and instead allow suppliers to respond to demand on a just in time basis. It is directly linked to overall company performance for its control and coordination inventory allocation and delivery to multiple destinations at the warehouse level. (Stock and Lambert, 2001)47 proposed that one of the common delivery service variables is inventory service level. The organization can keep a reasonable level of raw material inventory, work in process inventory and finished goods inventory and reduce inventory waste simultaneously. These flexibilities seek a reasonable inventory service chain level based on a high level of coordination, participation and close communication through these points efforts. Companies with proper supply chain lead to prevent out of stock or over stocking problem. (Zhang et al., 2005)48 argued that casual relationship exists between inventory management flexibility and performance. They suggested that good inventory management flexibility allows company to leverage their managerial experience and intra and inter inventory management competences and finally generate high level of inventory service flexibility. That is because flexible competency which is an internal management focus provides the process and infrastructure that enable a firm to achieve the desired level of capability. The outcome of an efficient inventory service is developing service capabilities as these investments will provide firms with access to different market segments hence yield economic returns. Higher the level of inventory flexibility the higher the performance of company. The development of inventory management flexibility and service flexibility will reinforce a companys ability to improve performance. This implies that inventory management flexibility is expected to positively influence performance via its positive impacts on service flexibility (inventory service flexibility as a mediating variable) 1.2 OBJECTIVES OF INVENTORY MANAGEMENT The objective of inventory management is to keep down capital investment at a minimum level in inventories without hampering the process of manufacturing. To minimize the idle time of person, machinery capital caused by shortage of various kinds of materials to reduce the cost in maintaining the inventory and to minimize the losses of obsolescence. Larger portion of working capital of an industrial unit is invested in inventory. The total working capital warrants for their maximum efficiency. Aim of inventory management is to balance between too much inventory and too less inventory. A company cannot afford excess or shortage of inventory. To achieve the operational results it is important to maintain effective control and management of inventories. The major objective of this study is to determine the effectiveness of inventory management in a manufacturing company. They are as follows The company has suffered from poor management and control of inventories. Minimize companys investment in inventory At what extent the ineffective management of inventory. At what extent the insufficient inventory or finished goods cause loss of sales to the company. Degraded inventory method used by the company has resulted to low productivity in the company. Adequate inventory for the companys requirement in the process of work. Low productivity in the company Smooth flow of materials in production and sales operations Reducing administrative workload Minimize inventory investment Utilizations of scares resources (capital) and investment judiciously Keeping the production as ongoing basis Inducing confidence in customers and to create trust and faith. Maximize the level of customer service by avoiding understanding Preventing idleness of men, machine and morale Allow cost efficient operations Avoiding risk of loss of life (moral social) Giving satisfaction to customers in terms of quality care, competitive price and prompt delivery Promote efficiency in production and purchasing by minimizing the cost of providing an adequate level of customer service. Provide acceptable level of customer service (on time delivery) The purpose of the research is to investigate the efficiency and understand the existing practices, problems and expectations in the application of inventory management functions in an Indian manufacturing industry. Through this study I have found out the functioning of Indian manufacturing industry and also highlighted the various problems being faced within the industry. The study brings out the detailed analysis of inventory management system followed in the organization the observation issues and variable suggestions. The main objective of inventory management is to ensure the availabilities of inventories as per requirement every time. This is because both shortage and surplus of inventories prove costly to the industry. In case of shortage of availability in inventories the manufacturing slow down or even idle for sometime till the material reached for further production. This causes less production or no production. As a results the less sale to less revenue to less profit and more loss. On the other hand surplus in inventories means lying inventories idle for sometime which cause cash blocked in inventories. This also means that the company invested money in inventory where it is blocked but if the same money is invested anywhere else in business it would have earned a certain return to the organization. But also reduced the carrying cost of inventories and in turn increased profits to that extent. Closely related to the above objective is to minimize both cost as well as volume of investment in inventories in the organization. This is achieved by ensuring required volume of inventories in the organization all the times. This benefits organization mainly in two ways. 1) Not to block the cash as idle inventories which can be invested elsewhere to earn some return. 2) Reduce the carrying cost which in turn will increase profits. In lump sum inventory management if done properly can bring down costs and increase the revenue of a company. A good inventory management is to place an order at the right time from the right source to acquire the right quantity at the right place and quality. For developing an appropriate level of inventory the following objective should be required- Company should maintain inventory to such a level that smooth and unhampered production is ensured without any obstruction. Company should make an effective effort in buying quantity of raw materials in accordance to its needs. Investment in inventory should be kept minimum so that undue amount is not locked up it as investment in inventories involves costs. Continuous efforts should be made to shorten the production cycle. The longer production cycle runs heavy costs and the risk of the extra inventory investment. To the extent possible, a firm should try to minimize the possibility of the risk of loss through obsolescence or shrinkage in the market value between the time of purchase of manufacture on the one hand and the time of sale on the other. To serve a means for the location and disposition of inactive and obsolete items of stores. Company should maintain a sufficient amount of finished goods to meet the demands of customers regularly because if it is not done then the customers may shift to the competitors which will amount to a permanent loss to the firm. Retailers, wholesalers, food service industry use tangible inventory even though they are service industry. Management is to provide the desired level of customer service, to allow cost-efficient operations, and to minimize inventory investment. Inventory investment is measured in inventory turnover and/or level of supply. Inventory performance is calculated as inventory turnover or weeks, days, or hours of supply. Lot-for-lot, fixed-order quantity, min-max systems, order n periods, periodic review systems, EOQ models, quantity discount models, and single-period models can be used to determine order quantities. To keep all the expenditures within the budget authorization. Relevant inventory costs include item costs, holding costs, and shortage costs. The ABC classification system allows a company to assign the appropriate level of control frequency of review of an item based on its annual volume. Cycle counting is a method for maintaining accurate inventory records. Determining what and when to count are the major decisions. Calculating the appropriate safety stock policy enables companies to satisfy their customer service objective at minimum costs. Ordering decisions can be improved by analyzing total costs of an inventory policy. Total costs include ordering cost, holding cost, and material cost. Inventory decisions about perishable products can be made using the single-period inventory model. The expected payoff is calculated to assist the quantity decision. Practical considerations can cause a company to not use the optimal order quantity, that is, minimum order requirements. Smaller lot sizes give company flexibility and shorter response times. The key to reducing order quantities is to reduce ordering or setup costs. Inventory management makes a balance between too much inventory and too little inventory. The efficient management and effective control of inventories help in achieving better operational results and reducing investment in working capital. It has a significant influence on the profitability of a concern are mentioned below To suggest the certain techniques to increase the overall efficiency. To suggest scientific inventory management tools and techniques to overcome the present problems in inventory management. To suggest certain techniques to reduce material cost and cost of production. To find reasons for low capacity utilization and to give practical solutions to overcome this problem. To suggest ways and means to increase the return on investment. HOLDING INVENTORY Managing inventories which means when to hold inventories. Holding up of inventories involves trying up of the concerns funds and carrying costs. If it is expensive to hold inventories why do concerns hold inventories There are three motives for holding inventories. Transaction motive Precautionary motive Speculative motive Inventories are held for the purpose of carrying on transactions smoothly and at the same time, ensuring that the cost of ordering is kept minimal. Such a motive is called transaction motive. Sometimes inventories are increased as a hedge or protection against stock out when it becomes clear to the management that the lead time for any particular item is likely to increase or there is a possibility of short supply. This increasing of the safety stock arises from purely a precautionary motive. Lastly a situation may arise when an all round price increase is expected due to market demand or due to change in cost. In such a situation the company management is keen to hold on to the inventories or increase them in order to get a better price for the finished goods. Such a motive is known as the Speculative motive. Inventory management must tie together the following objectives to ensure that there is continuity between functions-Company strategic goals, Sales forecasting, Sales and operation planning, Production and material requirement planning. Inventory management is design to meet the markets place and support the industry strategic plan. There are many changes in the market demand, new opportunities due to worldwide marketing, global sourcing of materials and new manufacturing technology means many companies need to change their inventory management approach and change the process of inventory control. Inventory management system provides information system to efficiently manage the flow of materials, effectively utilize people and equipment coordinate internal activities and communicate with customers. Inventory management does not make decisions or manage operations. They provide the information to managers who make more accurate and timely decision to manage their operations. Inventory is defined as the blocked working capital of company in the form of materials. As this is the blocked working capital of the company, ideally it should be zero but we are maintaining inventory. This inventory is maintained to take care of fluctuations in demand and lead time. In some cases it is maintained to take care of increasing price tendency of commodities or rebate in bulk buying. Traditional supply chain solutions such as materials requirement planning, inventory control, typically focuses on implementing more rapid and efficient systems to reduce the cost of communicating information between and across the inventory links in the supply chain management. It focuses in optimizing the total investment of materials cost and workload for every inventory item throughout the chain from procurement of raw materials to finished goods inventory. Optimization means providing a balance of supply to meet the demand at a minimum total cost, inventory level and workload to meet customer service goal for each items in the link of inventory chain. It is strategic in the sense that top management sets goals. These include deployment strategies (Push vs. Pull), control policies the determination of optimal level of order quantities and reorder points and setting safety stock levels. These levels are critical, since they are primary determinants of customer service levels. Keeping in view all concerns, the latest concept of vendor managed inventory is used to optimize the inventory. We are entering into vendor managed inventory, annual rate contracts with manufacturers or their authorized dealers, who maintain inventory on our behalf and supply the items as and when required. Vendor managed inventory reduces stock outs and optimize inventory in supply chain. Some features of vendor managed inventory include Shortening of supply chain Centralized forecasting Frequent communication of inventory, stock outs and planned promotion -Trucks are filled in prioritize order Items that are expected to stock out have top priority then items that are furthest below targeted stock levels then advance shipments of promotional items. Despite the many changes that companies go through the basic principles of inventory management and inventory control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles of accomplishing goods inventory management and inventory activities have not changed. The inventory management system and the inventory control process provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities and communicate with customers. Inventory management and the activities of inventory control do not make decisions or manage operations they provide the information to managers who make more accurate or timely decision to manage their operation. Diagram-1.2 Low costs- to optimize materials costs, capital costs and overhead expenses High level of service- to optimize response towards production and markets Quality Assurances- to maintain and improve the quality of material Low level of tied up capital- to optimize capital tied up in inventories Support of other functions- to support sales and design development The basic building blocks for inventory management system and inventory control activities are Material requirement planning Inventory reduction Sale forecasting or demand management Sales and operation planning Production planning The emphasis on each area will vary depending on the organization and how it operates and what requirements are placed on it due to market demands. Each of the areas above will need to be addressed in some form or another to have a successful program of inventory management inventory control. Inventory is usually a distributors largest asset, but many distributors are not satisfied with the contribution inventory makes towards the overall success of their business. The wrong quantities of the wrong items are often found on warehouse shelves. Even though there may be a lot of surplus inventory and dead lock in their warehouses, backorders and customer lost sales are common. The material a distributor has committed to stock isnt available when customer requests it. Computer inventory records are not accurate. Inventory balance information in the distributors expensive computer system does not accurately reflect what is available for sale in the warehouse. The return on investment is not satisfactory. The companys profile considering its substantial investment in inventory is far less than what could be earned if. The money was invested elsewhere. PROCUREMENT- It is a process when a manufacturer, a wholesaler or a retailer, buys material service and supplies from outside suppliers to support its operation. It is a relationship between buyers and sellers and is in a higher, strategic level activity (Bowersox et al., 2002)49. Many organization purchase the material from suppliers accounts for 50 of manufacturing costs and in some cases it can be over 70 (Lambert, 1998)50. The procurement is important in organization and its role in supply chain management. (Bowersox et al., 2002)49 discussed procurement perspective mainly as 1) CONTINUOUS SUPPLY- Production can be possible through continuous supply of material. If production stops then it increased operation costs and resultant to provide finished goods or service to customer. 2) MINIMIZE INVENTORY INVESTMENT- Procurement is done to maintain supply continuity with the minimum inventory investment possible. Through this we need to balance the costs for carrying excessive material against the possibility of a production stoppage. The goal is to have needed materials arrives just before scheduled production. 3) QUALITY IMPROVEMENT- Procurement plays a critical role in quality of a companys products or services. When used materials and parts are not of good quality, then the finished goods quality will not satisfy customer requirements. Quality improvement through procurement also impacts on costs in the company by scrap and rework in the production. 4) SUPPLIER DEVELOPMENT- Procurement depends on locating or developing suppliers, to know their capabilities and working with those suppliers to achieve continuous improvement. 5) PRICING AND PURCHASING DISCOUNT- Due to quantity discount in item company buy the material in large quantity (Towill, 1982)51. But the company will need to store the item which not in use immediately, the increased inventory costs may be less than what the company saves by buying in large quantities. This is becoming important to company involved in offshore sourcing activity, which may result in significant quantity discount. Companies are trading off between a purchase price discount and storage costs. As long as the amount saved on the purchase price exceeds storage costs. These companies are willing to accumulate raw materials inventory. It is not unusual for companies to stockpile inventories of materials and components parts without regard to whether or not the free cost tradeoffs justify doing so. To take advantage of purchase price discounts is a practice. 6) DEMAND MANAGEMENT- Demand generate forecast based on sales history, currently scheduled orders, scheduled marketing activities and customer information (Veinott, 1966)52. Demand management works collaboratively and interactively both internally across the company functional components and externally with supply chain partners to develop a common and consistent forecast for each item period, location and item. The forecast also incorporate feedback from customers to integrate the influence of combined demand generation activities such as advertising and promotion. Demand management and forecasting are closely related and forecasting in an extensive topic in itself (Bowersox et al., 2002)49. Demand forecasting is a critical tooling below are the reasons for forecasting include Scheduling production more efficiently Reducing product obsolescence cost Increased customer satisfaction Managing shipping better Reduce stock out Making more informed pricing decision Lowering safety stock requirements Improving pricing and promotion management The above reasons are essential to management decision making. The forecasting time frames are- (a) Long term forecast usually cover more than three years and are used for long range planning and strategic issue. (b) Mid range forecast usually range from one to three years and address budgeting issues and sales plans. (c) Short term forecasts are most important for the operational logistics planning process. They project demand into the next several months and in some cases more than a year ahead (Chien, 1989)53. 7) TRANSPORTATION- Physical movement or flow of goods that moves the product. The logistics manager is responsible for selecting the mode or modes of transportation used in moving the raw materials or for developing private transportation as an alternative. A direct relationship exists between transportation and the level of inventory and number of warehouses required (Aghezzaf, 2001)54. For example if company use slow means of transportation, they have to keep higher inventory levels and have more warehousing space for the inventory. They examine the possibility of using faster transport to eliminate some of these warehouses and the inventory stored therein. Industries may combine inventories of finished or semi finished product is similar to a reason for accumulating raw materials transportation economies (Jaillet, 1997)55. By shipping in carloads or truckload quantities rather than less than carloads or less than truck load quantities, a company experience lower per unit transportation rates. As long as the transportation cost savings exceeds any expense associated with warehousing the additional volume of product it will be advantageous to ship in the larger quantities. Also shipments in large volumes may experience better service such as faster transit times and more reliable and consistent service. These results will help to reduce other costs such as in transit inventory carrying cost and potential cost of lost sales due to product unavailability at point of sale or use. 8) CUSTOMER SERVICE- Customer service has recovered widespread attention over the last ten or more years. It is a complex topic and one that concerns other functional company areas. Decisions about inventory transportation and warehousing relate to customer service requirements. While customarily the logistics area does not completely control customer service decisions. Logistics play an extremely important role in ensuring that customers get the right product at the right place and time. Logistics decisions about product availability and inventory lead time are critical to customer service. Maintain a level workforce Provide cost effective operations Minimizing inventory investments Percentage of order shipped on schedule Percentage of line items shipped on schedule Percentage of volume shipped on schedule Idle time due to material and component shortages Customer service is the ability to satisfy customer requirement Buffer stock for smooth production flow Allowing longer production runs quantity discounts Inventory turnover Maximum customer service Keeping the production on ongoing basis Minimum inventory investment Avoiding risk of loss of life Inducing confidence in customers and to create trust and faith Reduction administrative workload Low cost plant operations 9) WAREHOUSING AND STORAGE- Warehousing is an integral part of every logistic system. Warehousing is the part of a company logistics system that stores product ( raw materials, parts, goods in process, finished goods) at and between point of origin and point of consumption of items being stored (Richard, 1995)56. The term distribution center (DC) is sometimes used but the terms are not identical. Warehouse is the more generic term with an increasing interest in improving inventory terms and reducing time to market the role of distribution increasingly focuses on filling orders rapidly and efficiently. The objectives of inventory management are divided in two parts as follows Primary Objectives Secondary Objectives Primary Objectives This is classified as below Procuring and receiving Efficient materials planning Improved departmental efficiency Quality assurance Storing and Inventory control Supply and distribution of materials Buying and purchasing Goods supplier and customer relationship 2. Secondary Objectives This is classified as below Quality control of materials purchased To take make or buy decisions Developing skills of workers in inventory management Prepare specifications and standardization of materials Smooth flow of materials in out of the organization Efficient production scheduling To assist in product design and development Forecasting demand and quantity of materials requirements Material handling Use of value analysis and value engineering To fulfill all these objectives it is necessary to establish a good coordination between all the employees of inventory management department and this department should have good coordination with the other departments of the organization to serve all production centers. The basic objectives of management in an organization are Selection of alternative materials Meet the technological changes Sales increase through sales promotion Profit maximization Social objectives Improvement in customer service Globalization of its product sales Good employer employee relationship Reduction in manufacturing and other costs To fulfill these objectives of management the objectives of material management should be set in such a way that they should totally help to meet ultimate goals and to provide a high velocity flow of high quality relevant information. That will enable supplies to provide an uninterrupted and precisely times flow of materials to customer (Zinn, 2002)57. 1.3 FUNCTIONS OF INVENTORY MANAGEMENT The functions of the inventory management are also categorized as primary and secondary functions. Primary Functions To meet the primary objectives the primary functions of the inventory management are given below 1.3.1 MATERIAL REQUIREMENT PLANNING (MRP) Planning of materials requirements in manufacturing is important function in any company as inventory of materials which involves about 60 of the total investment of the company. The profit earned depends on the utilization of these materials and reducing the inventory of the materials. The latest techniques used is called Just In Time (JIT) is referred practically to no inventory. In the present situations in any kind of the company particularly manufacturing company, it is not absolutely possible to keep no inventory of materials required for production. The MRP is a technique used to plan the materials starting from the raw materials, finished parts, components, sub-assemblies assemblies as per bill of materials (BOM) to procure or produce them to support a Master Production Schedule (MPS). It is used to computers productively by any company that users a MPS to manufacture products which require assemblies components materials to produce the final products. The MPS is exploded using the bills of materials to determine requirements of lower level assemblies components, finished products raw materials. It plans order to meet these needs. 1.3.2 PURCHASING The company required an efficient economic purchasing procurement of its various supplies of materials from the suppliers. The materials management department has to perform this function of purchasing procurement of materials very efficiently. About 50-60 of sales turnover spent on the purchase of various materials, the amount of profit earned on this very much depends how economically the materials are purchased and utilized in the organization. The profitability depends on the efficiency by which this particular function of purchasing procuring the requisite materials at appropriate time will be done its availability is assured. The function of purchasing is as follows The quality of materials must be assumed should not be compromised with the cost of material. Setting the proper purchase policy procedure. The requisition of materials is necessary by proper authority to initiate its purchase. Negotiate the price of materials from the supplier it will be purchase at the cheapest price. Selection of proper supplier for the materials requisitioned before placing an order. Materials purchased of rights quality right quantity at proper time at the cheapest cost. 1.3.3 INVENTORY PLANNING CONTROL Inventory planning is that the materials should be purchased brought in the stores just before it enters the production or sold out so that inventory cost is negligible. The zero inventories are the ideal planning. There are three types of inventories. Raw Materials Purchased goods Finished parts components The inventory control of these various materials lies with the inventory management department, production department sales department. Inventory at different levels is necessary to make sure about the availability of all these types of materials goods and their proper flow from one facility to another at different levels of production centers in a manufacturing concern. The storing of various types of materials and parts as inventory is very essential before its delivery and use at different production centers. It involves inventory planning control of materials in the stores department. Sometimes the supplier may not be in a position to supply the materials of the ordered quality at the proper time. To maintain the continuity in production and line balance in assembly work the different types of inventories are necessary to be maintained and kept in the stores. The raw materials before being supplied to a production process some of it is sent to store as inventory and rest is sent to production facility as per its requirement and in the same way different parts manufactured assembled as components and assemblies are also stored as finished parts inventories at the different places in the stores. The final products before being supplied to the customers are also stocked as inventory of the final products of the organization to meet the fluctuating demand and to regularize the supplies in the market. The inventory control is a very important function of the inventory management department. The different types of inventory models are developed for the different materials for purchase, supply, inventory control and production control to analyze optimize the costs involved in ordering, set-up and inventory carrying of materials required in the production. 1.3.4 MAINTAINING THE FLOW SUPPLY OF MATERIALS Distribution of materials by the different productions centers other departments is in flow and continuity of supply should be maintained by the inventory management department. Insufficient or zero inventories many times create the situations of stock-outs leads to stoppage of production. Failure of materials handling device is also responsible for disruption of materials suppliers. An emergency supply system is used for assuring production lines to continue. Uncertainty in demand and production quality is the main factor. When the customer requirements as per their needs and liking are changing very fast. The management has to maintain continuity in production to meet this uncertainty in demand control the situation by proper flow of materials supply distribution at different production facilities and other departments as per changes in production quality. 1.3.5 QUALITY CONTROL OF MATERIALS The quality of the product manufactured by the company depends upon the quality of the materials used to manufacture that product. It is very important necessary function of materials management to purchase the right quality of materials. The inspection of quality of material with their specification and standardization are the main activities for the measurement. The quality assurance is decided by inspection and checking of materials as per their specification and standard. The size and dimensional measurements within tolerance limits assurances the interchangeability and reliability of components and parts. Quality is largely determined by consumer taste liking. The market is under buyers control. Customer decides the quality of the product. Materials quality control aims at the delivering product at higher quality and lower cost. The product will be specified not only by it dimensional accuracy but its quality standard durability dependability, high performance, reliability aesthetic value. Each of this factor added cost to the product. To achieve high quality, the materials input to the product should be of high quality which will have higher cost. The performance decides the reliability which is obtained through high quality production. The performance is checked by quality inspection accuracy which added cost to the product quality of the materials and decide the selection of vendors the relationship between buyers suppliers. The specification size and quality of materials should be referred and if possible the standard should be followed for specification sizes. The types of tests required for assuring the quality specified and conducted to establish the standards. 1.3.6 DEPARTMENTAL EFFICIENCY The function is to ensure the efficiency of the system adopted. If the system and procedure adopted for materials management are insufficient of faculty none of the functions mentioned above is fulfilled so the procedure works smoothly. In order to maintain the things in proper way as per planning an efficient control is necessary in each and every department. Management Information system (MIS) and feedback control at every stage of working should be adopted to control and make the management and employee work as efficiently as possible to achieve the best result. 1.4 SECONDARY FUNCTIONS There can be number of secondary functions. Some of them are discussed below 1.4.1 STANDARDIZATION AND SIMPLIFICATION The standards specifications of various types of materials are fixed by design technical department of the company and they are followed by production department standards define the quality, reduction in sizes and variety, interchangeability of parts and products. It ensures efficient utilization of materials reduces wastage. Standard materials are always available at reasonable cost. It also helps purchasing department in selection of materials vendors. If less variety of items purchased and put in the stores the types of inventories will be reduced and in this way the cost of carrying the inventories in the stores will be reduced. The objective of this function will be to produce standard product reducing the overall cost of the product. 1.4.2 DESIGN DEVELOPMENT OF THE PRODUCT The variety in product functionality are the important factors to promote the sales of a product. The new techniques of designing a product using Computer Aided Design (CAD) has made possible to develop variety of products at faster rate. The new technological development in manufacturing using Computer Aided Manufacturing (CAM) can produce different types of products at much faster rate with all types of flexibility in the manufacturing as compared to conventional methods. Inventory management department act according to use of different types of materials to produce variety of parts ensure the supply of such materials. It is decided how to purchase and produce such variety of products with flexibility and economic cost. 1.4.3 MAKE BUY DECISIONS These types of decisions are the policy decisions of management. The capacity of the company and the various facility developed by the company to manufacture different items is the main objective of every company. This is the important planning activity of every undertaking. But when the organization grows fast its sales increases at rapid rate then it becomes an important matter to decide whether the company should buy the parts and components to increase and establish its facilities to cope up with the increased demand and sales. It concern to inventory management department. It will help in selecting the suppliers to buy the items at reduced cost. The material evaluation its availability, alternative material selection, procurement and inventory control are the functions influence the make and buy decisions are largely based on cost economies cost benefit analysis made by the company using the existing production capacity of labor, skill and machines available with the factory and how best they can be utilized. 1.4.4 CODING AND CLASSIFICATION OF INVENTORY It is an important function of the materials (inventory management) to help the production and purchasing department of every company. It uses its own method of classification of materials used to manufacture the product or a company selling various goods. ABC analysis is one of the simple and standard methods used by most of the company for classification and storing their variety of materials. The materials are recognized to purchase and store as an inventory by its code and nomenclatures. The different methods of coding are used by every company to control the variety of materials and its quantity and price rates. 1.4.5 FORECASTING AND PLANNING Materials requirement planning is based on correct forecasting of sales and demand of the product in the market. The market fluctuations are observed to control production of the company. The various methods of forecasting are available and the materials management department can choose the one which gives the best results to the organization. Forecast of future demand of sales set the planning of material supply. Analytical methods are adopted for systematic forecasting and planning to procure the different materials required for production. In case of fluctuating demands there can be uncertainties in supplies as well. It can be overcome by maintaining the proper quantity in inventory of shot supply materials at proper time. The different techniques available to use correct forecasting have to be utilized by materials manager to plan the procurement, purchase, supply managing the outside and inside transport and storing of the materials to maintain the supply chain lines at every production facility to meet the changes in production quantity and schedule of production to meet the fluctuating demand of sales of products manufactured by the company. The objectives and functions of materials management and control the activities of this department are thoroughly scheduled and analyzed. The analysis of this study are given as follows Purchasing Inventory control Material handling Material management Organization Material Requirement Planning (MRP) Forecasting Storing, warehouse planning control Value analysis Just In Time (JIT) The main functions of inventory management are summarized Distribution of materials Developing new source of supply at competitive way Material cost control and cost reduction Storage, warehousing securities and preservation Materials planning as per production requirements for quantity and time Purchasing the required materials Make or buy decisions Receipt and inspection of materials Research and development in material management and their use. Transportation should be expedited and must be economically done Inventory control Disposal of overstock, surplus, scrap and salvage of materials Ancillaries industrial development Coordination and cooperation with the other departments 1.5 IMPORTANCE OF INVENTORY MANAGEMENT The effective and efficient functioning of production, system requires the regular demand and supply of inventory at the input transformation and output phases of the production process. Management is also seen as the effective and efficient utilization of resources for the achievement of company objectives. To ensure the achievement of the objective there must be free from flow of material at every stage of the production process. When stocks are held, it means lying down capital that would have been used in other areas so it all represent cost and should be managed properly to acquire efficiently. To hold stocks to meet production needs sales needs. This is because if we do not hold stock in sufficient quantities and the risk of running out of stock. If we short of finished goods we may disappoint our customers. Inventory shortage is both these forms will lead to loss of customer and money. For the company not to have above problems they should strike a balance between too much stocks (over inventory) and carrying too little stock (under inventory). Importance of inventory management, managing assets of all kinds is an inventory problem the same method of analysis applies to cash and fixed assets as to inventories themselves. Basic stock must be on hand to hand balance inflow and out flow of items of size of the stocks depends on pattern of flow whether fast moving or regular item. It is important to have safety stock on hand so to avoid the cost of not having enough to meet current needs. Additional amount required to meet future growth needs these are called anticipation stocks, related to anticipation stock in recognition that these are optimum purchases size defines as economic order quantity (EOQ). In borrowing money for buying raw materials for production or purchasing plants and equipments it is cheaper or more economical to buy more than just enough to meet immediate needs. Manufacturing companies have three kinds of inventories. Raw materials- Inventories are influenced by production, seasonality of production, reliability of resources or supply and efficiently of scheduling purchased and production operations. Work in process- An inventory is influenced by the length of a production period which is the time between planning raw materials in production and completing the finished goods. Inventory turnover therefore can be increased by decreasing the production means of accomplishing these to perfect engineering technician, therefore spreading up to manufacturing process. Another means to buy instead of make them. The level of finished goods inventories is a matter of coordinating production and sales. Finished goods- Holding stock in any form cost money, the capital tied down by the stocks itself has to be serviced by the payment of interest and the land or warehouse needed for the stock has to be brought or rented. The stocks and quality also cost money. The sample type of the stock control system used in most company is the system of stock control and which is of two quantities the first is the stock level below which a new order has to be placed the other gives the quantity to be ordered. Using this system the units of stock is taken from bin as required until this bin is empty. More are then ordered by the quantity being determined by the rate of usage or consumption rate. Inventory, planning and control system have been successfully installed or established in many companies. The importance of inventory management is to maintain at optimum level of investment in inventory. Inventories may be too high or too low, but if too high there are unnecessary carrying cost and risk of obsolescence, if too low production may be disrupted or sales permanently cost and loss of goodwill, reputation and customers to their company in the same organization. The optimum inventory level is that which minimizes the total cost associated with inventory. 1.5.1 IMPORTANT ISSUES WITH INVENTORY Inventory is an important aspect of distribution management. There are cost in carrying inventory stock out and wrong product delivering. Stock out issue if a customer order is received and the stores does not have stocks when we call it an instance of stock out. Geographical specialization in inventory opening depots at several places which is geographically spreading the inventory rather than concentrating the same at a central place and servicing the markets from such central location. There are techniques to obtain the efficiencies through stock piling, work in progress at a certain stages of conversion to finished goods in the manufacturing unit, by converting them into finished goods, so that when required the work in process can be converted to finished goods in short notice. Managing the time gap between consumption and manufacturing of the item which are seasonal in demand but manufacturing of this will carried out and spread throughout the year. Like-safety stock, they know what will be the level of cover, safety stock has an effect of multiplying across depots and increases cost of the operation and average inventory. Inventory management is influenced by the nature of demand including whether demand is dependent or independent. Dependent demand came from the production of another product. Manufacturers of all sizes use such calculation which is part of flow management to manage inventories schedule deliveries for inputs and manage capacity. Flow management software has evolved from materials requirement planning (MRP) to enterprise resource planning (ERP) . A flow management system is made by the demand for end products. Independent demand rises from demand for an end product and end products are found throughout a supply chain. 1.6 BENEFITS OF INVENTORY MANAGEMENT Inventory management is a technique to optimize, performance in meeting customer service needs by adding profitability and minimizing cost to make the best use of available resources. The benefits of inventory management as explained by (Banjoko, 2000)58 and (Jacobs et al., 2009)59 is to ensure that the right item to be made and make it available to the manufacturing operations at the right time, at the right place and at the lowest possible cost. Adequate planning is required for material resources and overall performance of the company. (Barker, 1989)60 said that improvement in continuity of supplies to reduce lead time with reduction in inventories and surplus improvement is in cooperation with communications. Cost improvement in quality control, improvement in status control and quicker identification of problems are the main benefits of inventory management in organization. 1.7 FUNCTIONAL AREAS OF INVENTORY MANAGEMENT (Barker, 1989)60 argued on five key functional areas of inventory management which included purchasing production and inventory control quality control storage and warehousing and physical distribution. (Donald, 1975)61, (Whybark and William, 1986)62, (Linton et al., 2007)63 extending it by including the forecasting demand and quantity of materials requirements goods supplier and customer relationship. Supply of materials by developing skilled workers in inventory management improved interdepartmental efficiency and research and development in inventory management. These activities are managed by the inventory management department. Selection of personnel for marketing, purchasing inventory control, stores management and materials handling and their training and placement is also to be seen by the inventory management department. The inventory manger has to manage all these functions areas with proper authority and responsibility in the inventory management department in any company to support the management in the production activities. It also helps in the marketing, sales promotion and control of all the types of materials for its quantity, quality and cost. Profits are the balance from sales revenue after all costs have been deducted. It is a controllable factor which management can control his revenue through price on one hand and through costs on the other hand (Ogbadu, 2009)64 (Ramakrishna, 2005)11 argued that profit can be obtained by deducting the manufacturing cost from the selling price. It emphasizes in the current competitive market situation, and the selling price is determined by the market forces and profit is ensured by reducing the manufacturing cost which can be minimized through reduction in the material cost. Material cost contains around 70 of manufacturing cost. Their observation showed that material cost as well as manufacturing cost of company is inversely proportional to its profitability. Material cost is divided into unit price of materials and consumption for production. (Ramakrishna, 2005)11 suggested that how inventory management in purchasing help to minimize materials cost and increase profitability. It include to obtain materials at lower price through development of new sources and effective price negotiations with suppliers by using cost price analysis to determine the right price for materials, managing taxes payable, reducing the cost of packaging, optimizing transportation cost ensuring right materials quality. (Lyson, 1996)65,66 and (Adeyemi and Salami, 2010)17 said that effective inventory management is to increased profitability in any manufacturing company for about 70 of the total funds invested in current assets of the. Inventory control will increase profitability by reducing cost which is combined with storage and handling of materials. Proper management of inventory is shown in a business return on investment (ROI) which is calculated by ROI Profits/ Capital employed100. ROI can be minimized by reducing the material cost or by reducing the current asset so that inventory of materials can be optimized by increasing profits and reducing capital used (Omoletinwa, 2000)67, (Ramakrishna, 2005)11, (Asaolu and Nassar, 2007)68. 1.8 SCOPE The study has covered the major units on inventory management. The functioning, objectives and benefits of stores and purchase departments have also been covered by this study. All the information is obtained from other functional areas like Company accountant, planning engineer, production manger etc. the study will also have focused on production and financial department at appropriate places. The scope of inventory management used in the thesis shows the activity of company system with the various functions. The major objectives of inventory management is low costs, high level of service, quality assurance, and low levels of tied up capital and support of other functions. Each objective is connected with overall corporate goals and objectives. So, trade off among the objectives is made by using a wide range of materials flow throughout the total system from source of supply to the ultimate customer. 1.9 PROBLEM DISCUSSION Inventory is starting from raw materials, cash, finished goods etc. Effective inventory management is to optimize the supply chain, eliminate cash flow and reduce the possibility to occur and inventory shortage caused by different orders. It is important to optimize inventory management to satisfys the business strategy goal. (Lee et al., 1997)1 described a problem which is frequently occurred in supply chain which is called the bullwhip effect. Supply chain can lead to inefficiencies and excess inventory investment, poor customer service, lost revenues, misguided capacity plans, ineffective transportation and missed production schedules (Lee et al., 1997a)1. In manufacturing companies, inventory constitutes most important part of current assets (Songet et al., 2006)69. Manufacturing companies invest their savings from effective material management which amounts between 50-60 of the total costs (Songet et al., 2006)69. Effective management of inventory lead to a reduction in cost, which result saving. Saving on total cost through effective inventory management is achieved by (Bell Sturkhart, 1987)70. There are different types of materials is managed in any company include purchased materials work in process, materials and finished goods. Manufacturing company invest its inventory costs upto 50 of total production costs (Chen, 2005)71. The cost of holding stock to a business is in between 4 10 on top of the stocks value. Manufacturing company are characterized by elongated or over extended chains retailers (buyers/ agents) which in turn mean long chains of transactions between chain members and consumers showed that leading firms in Kenya are faced with problems of wrong forecasting due to an unavailability of enough inventory management information. Inventory management has become important in each and every department where manager responsible for production in business. Inventory is one vital resource that any company requires and just like any other resources that is very scares and that requires effective management rather than neglect. The cost of acquiring these inventories is also important for the fact that too much of it will mean trying down capital and risk of becoming obsolete while having little could lead to shortage and production bottle neck. To determine adequate quantities of raw materials to buy, where to buy on a regular basis devoid of scarcity, the amount to invest on the inventory is the concern of the researcher. Manufacturing industry contributes significantly to the nation economic growth and that inventory is crucial to the substance of their operations. Manufacturing company is faced with the problems of inadequate inventory of raw materials and spare parts. These shortages often lead to breaks in production schedule, machine breakdown and low capacity utilization and thus constituted a barrier to their effective growth. This paper therefore examines the inventory management problems and their impact on the performance of small and medium scale manufacturing industry. The problems seen in the course of the study are as follows Low productivity in the manufacturing industry as a result of poor inventories model used by the industry. Ineffective management of inventory in the manufacturing industry. Poor management and control of inventories in the manufacturing industry. Loss of sales or business of the organization as a result of insufficient inventories of finished goods. 1.10 AIM OF THE STUDY This research work is to achieve the following To ascertain the extent at which cost effectiveness technique are implemented to enhance the return on investment in the company. To explore and understand the extent to which inventory control management has reduce operational cost. To ascertain the extent at which inventory control management has made storage and retrieval of material easier. To ascertain the relationship between operational feasibility, utility of inventory control management in the customer related issues of the company. 1.11 PURPOSE Impact of inventory on supply chain management How manufacturing company deal with the inventory from cost effective view Cost reduction procedure that can have an impact on the economies of the company directly and on other departments indirectly Meet anticipated demand Production and distribution (permit constant production quantities) Quantity discounts advantage Hedge against inflation Protect from shortage Regular operations through work in process Customer service improved Economies of purchasing Saving in transportation Hedge against future Unplanned stocks (labor strikes, natural disaster, surges in demand etc) Independence of supply chain management Decoupling function Storing resources Irregular supply and demand Avoiding stock outs and shortages Inventory is the stock of any item or resource used in company. An inventory system is the set of policies and controls which monitor levels of inventory and determine what levels should be maintained, when should be reorder and how much should be order for all company (including JIT operations) keep a supply of inventory. A supply of materials allows flexibility in operation. There are cost of making each new production setup this inventory allows management to reduce the number of setups. Independence of workstations is desirable on assembly lines as well. The time that it takes to do identical operations will naturally vary from one unit to the next So, it is desirable to have a cushion of several parts within the workstations so that shorter performance time can compensate for longer performance times. This way the average output can be fairly stable. If the demand for the product is known then it may be possible to produce the product to exactly meet the demand. Sometimes demand is not completely known and a safety or buffer stock must be maintained to meet the same. A stock of inventory depends on the production system to get the goods out. It causes longer lead time which helps production planning for smoother flow and lower cost operation through longer lot size production. When the material is ordered from a supplier delays can occur for different reasons, a normal variation in shipping time, a shortage of material at the suppliers plant causing backlogs and unexpected strike at the suppliers plant or at one of the shipping companies, a lost order, or a shipment of incorrect or defective material. There are costs to place an order labor, phone calls, typing, postage and so on. Long cycle times are caused by large amounts of inventory and are undesirable as well. Considering the strategic importance of inventory to effective operations of an industrial company and in view of the problems highlighted above this study was to examine the different inventory management practices in manufacturing company and access their impact of the inventory decisions on the company. 1.12 DEFINITION OF TERMS Diagram-1.3 Lead or Procurement Time is the time interval between placing an order and receiving or delivery. Control is the process that company activities conform to its plan through which its objectives are achieved. Planning means selection of policies, strategies, tactics, and action required to achieve these objectives in company. Carrying Cost consists of all cost associated with keeping stock. Reorder Level The level of stock (usually free stock) at which a further the same order should be placed. Maximum Level is that level where stock should not normally be allowed to rise. Minimum Level This is the level where stock is not allowed to fall below the normal. Material Management is the planning and controlling of materials. Ordering Cost All the cost incurred starting from raising purchase orders, sending inquiries, receiving and inspecting the goods till transportation cost. Management It includes planning, controlling, organizing and coordinating company resources in a more effective and efficient manner to achieve company objectives. Buffer stock A stock which is kept in forecasting the lead time or the demand during the lead time. Shortage cost Cost of item known as inventory when it is required. Back orders previous orders which is not yet completed Stock outs Occurs when the required item is not available Independent demand is demand which is not dependent on other items. Dependent demand is demand which depend on another demand eg demand for tiers steering wheels (dependent) is related to the demand for cars (independent) Cumulative lead time Phases of process in which it is the sum of the lead times. Bill of materials (BOM) list of raw materials, parts, subassemblies and assemblies needed to produce one item of an end product. The bill of material file contains all bills of materials for each end product the industry produces. CHAPTER-2 SIGNIFICANCE OF STUDY 2.1 REVIEW OF LITERATURE Inventory in any company contains the largest portion of working capital. It has been observed that there are factors which influence investment in inventory. The studies suggested that due to increase in demand for the product stocks are maintained accordingly to meet it on time. Inventory management is considered as a separate department in any organization. In India there in no research take place either at the micro or macro levels in inventory management. It has been observed that inventory holding can be reduced by having the qualified trained inventory manager, reducing lead time, setting and regulating consumption stocking norms of raw materials and other goods, which is applying new techniques of inventory management and identifying slow and non moving items. Rao K. Vis article Techniques of inventory management in the economic times considered four costs i.e replenishment cost, inventory carrying cost, under stocking cost and overstocking cost in developing an inventory system. Gopalkrishnan P. in his article published in The Hindu entitled Importance of inventory control stressed the need for inventory control in view of the Tandons committee norms and suggested some methods to control inventories. The problems of valuation of work in progress in the context of identification of materials and work in progress. Ramakrishna Rao B. in his thesis Inventory control in public sector units highlighted the problems of inventory control in public sector units and also classified the cost for inventory accumulation as internal and external. According to which the government policies with regard to import license and delivery schedules and long lead times are responsible for inventory accumulation in public sector units. The effective management of inventory reduces the cost of production and consequently increases the profitability of the industry. (Cynthia Wallin et al., 2006)72 In their paper, asked the question that what is the Right inventory management approach for a purchased item i.e. how best to manage inventory of a purchased item that is critical to the company In answering this question, they have given a data which provide some guidance to how to handle this and also rely on existing scientific research. (Razi and Tarn, 2003)73 Is an applied model for improving inventory management in ERP system, which provides a simple approach to improve inventory management for spare parts in an ERP system The model they have given is uses pooled distribution which shows that similar in demand and lead times with feasibility and practical alternatives to complex theoretical distribution. (Marcello Braglia et al., 2004)74 have designed a multi attribute classification method for spare parts inventory management. In this method spare parts inventory management in individual company represents a very difficult problem due to the difficulties concerning data collection the number of factors to be considered and the large amount of the items involved. This new technique defines the best strategies of spare inventories management is presented in their method. (Gary P Mohynihan et al., 1996)75 has studied the inventory control situation in the central store room of the University of Alabama and they developed a system for inventory control through which demand for any product is directly moved to the store department their the date complied into an aggregate planned demand schedule for each item. As per the schedule, an appropriate ordering scheme was generated by INFORMM (Integrated systems for materials management). In the case of a material demand the system is divided into five distinct points. Point I contains the INFORMM data base. Point II provides system utilities such as the modification of system variables. Point III deals with planned demand i.e. demand due to special projects. Point IV provides the unpredictable demand arising from preventive and corrective maintenance activities on company. It also deals with single item and grouped item decisions. Point V gives the disposal of excess stock. The system was developed as a standalone entity. Later integrated with the main frame based inventory tracking system was planned. For proper running of supply chain management is inventories and inventory control. It leads to cost savings, largely through reduction in inventory. For the most effective logistical strategy the company should know the product demand, inventory cost and supply chain capabilities. Company can also use these three approaches to manage inventory. Retailers use an inventory control approach monitoring inventory levels by items. Manufacturers concerned with production scheduling and use flow management to manage inventories. Not many department or person involved to manage inventory. (Nasiri et al., 2010)76 in their study they said that the location of warehouse and retailer warehouse to form the policy for inventory control to managing order quantity and safety stock level. The aim is to meet the demand on time without any miscommunication and time delay. The model was developed as a non- linear mixed integrated programming and solved using language relaxation and sub gradient search for the location/ allocation module and a procedure for the capacity planning module. (Saeed, 2008)77 has used forecasting system through which ordering is done by keeping the market demand in mind and control process for making the supply responsive to demand. Then forecasting is used frequently to access demand. It is observed that due to this there increased instability to creating the so called Bull whip effect. Trend is used on the other hand with reliability to increase stability in controller control but with the difference that a trend of a tracking variation is used to drive correction. While both process involve use of trend to determine policies for achieving reliable performance the outcomes of the former are variable while those of the later can create improvement in control with certainty. So, the similarities and differences between the two process and have developed guidelines for applying trend forecasting to enhance stability in supply chain. 2.3 LEAD TIME The importance of lead time in the experience of inventory management, can lead to the overall perception of a service firm to each encounter because customers often have continuous contacts with the same service firm. Therefore the lead time issue was introduced on yet another component in the perceived process was considered as well. Company asset is important because it has an impact on customer perceptions of the communications and operations of the company in many respects. If a service provider has a strong inventory management but in the minds of customers, minor mistakes will be forgiven. But if mistakes often occur then the image will be damaged. If a service provider image is negative then it on consumers mind. In any industry service provider has to meet the customer expectation within lead time. The main aim of any organization is to timely delivery of materials, components and work in progress by meeting the quality. Supply chain includes materials and goods flowing in and out of production facility as well as its internal handling have become very important to an organization to acquire competitive advantages as the company struggle to deliver the right product at the correct place and time. (Bowersox Cross, 2002)49 suggested that improvement in smooth flow of supplies with reduced lead time will enhance corporation and communications. Hence, there is reduction in material costs and improvement in quality control which are the main benefits of material management. 2.4 SUPPLIER DEMAND In every organization it is important that they should have performance parameters which means in their process procedure and plans experience lower performance and higher customer dissatisfaction and employee turnover measuring the performance of the purchasing function which turns to organizations benefits such as cost reduction increased profitability, quality improvements. However, long back the need for performance in organization is recognized for various reasons. Many organization fail to measure its adequately review the history of PP in the literature through the 1980s and early 1990s and conclude that a general weakness of traditional measures is that they recognize and reward mainly short term gains rather than long term ones. Small and medium organization has more stable structure of supply demand and contact then does larger organization. Small organization is less satisfied with their relationships with their other firms due to a lack of confidence and cooperation which shows that the companies are less knowledgeable of their business. Leading organization has the capability of competitiveness on loans and adaption and speed of decisions. Personal contact with the organization and the level of company technology is not that important company partner. 2.5 INVENTORY MANAGEMENT SYSTEM It was observed that IT investment makes no contribution to business performance. There was a survey performed randomly selected from the database. In this sample there was equal representation of small, medium and large companies. With two similar samples were also created with the same percentage of companies. Then it was rejected by saying that investment makes a statically significant contribution to business performance. (Chase et al 2009)59 explain the concept of inventory management which brings in total system approach through which the whole information from starting which is flow of materials and services from raw materials till supply to the customer warehouses. It is confirmed that company profit depend on how they manage their inventory effectively and efficiently. It is important to monitor inventory at every stage because it is connected with the resources. Therefore effectively inventory management is fundamental to the survival of business industry and economy. In developing countries proper inventory control system is there to ensure the inventory stock is held by an organization to meet demand (Coleman 2000)78, (Jay Barry 2006)79. Inventory is the availability of any stock or resources used in an organization. In inventory system policies are made which control and monitor the stock level and forecast how much inventory required at what quantity and when stock should be replenished. Inventory control is done to check the storage, supply and accessibility of items to ensure an adequate supply without excessive oversupply (Miller, 2010)8. Inventory control means availability of materials whenever and wherever required by stocking adequate number and kind of stocks. Inventory management is the total sum of items which is essential for the procurement, storage sales disposal or use of material. Stock manager has to maintain the materials available on the warehouse and excess items should not be there to occupy the space because of that. They have to meet the demand on time and order the items accordingly where they decide what to order, how to order and when to order so that stock is available on time and at the optimum cost (Benedict and Margeridis, 1999)80. Therefore, inventory management involves planning, organizing and controlling the flow of materials from their procurement till the finished goods through distribution (Smaros et al., 2003)81. Inventory is the important part of any retailer, supplier, or any organization in which huge amount of investment is involved. Intelligent inventory management strategies can not only help boost profit but they can mean the difference between a business thriving or barely surviving. Holding inventories at the lowest possible cost and giving the objectives to ensure uninterrupted supplies for ongoing operations in the aim of inventory management. When the company have to make the decision then they make comparison between the cost of supply goods of inventory holding and the cost result from sufficient inventory (Peterson and Silver, 1998)82, (Zipkin, 2000)35. Inventory control is organizes the availability of items to the customers. It includes the purchasing, manufacturing and distribution functions to meet the customer needs. The supply of current sales items, new product, consumables, spare parts, Obsolescent item and all other supplies. Inventory plays an important role in the growth and survival of an organization. To maintain this company has to meet customer demands. Customer demand has played a vital role in a company not only to maintain sales but also to increase it (Tersine, 1994)83, (Potilen Goldsby, 2003)84. (Kotler, 2002)85 suggested that inventory management refers to all the activities involved in developing and managing the inventory levels of raw materials, semi finished materials (working progress) and finished goods so that adequate supplies are available and the costs of over or under stocks are low. (Rosenblatt, 1977)86 says To maintain inventory cost it included in the final price which is paid by the customer. Good in inventory means the cost bear by the manufacturer with the expenses of materials and labor. Hence, the basic goal of manufacturers is to maintain a level of inventory that will provide optimum stock at lowest cost. (Morris, 1995)87 stressed that inventory management is to keep the economical asset in order to increase the total value of all assets in any organization. (Ogbo, 2011)88 said the major objective of inventory management and control is to inform managers how much goods to be order, when to order and how much to order and how frequently the order should be repeated and placed and how much amount of safety stock is for maintain stock outs. (Ghosh and Kumar, 2003)7 defined inventory as a stock of goods which is maintained by the company to meet the future demands. This definition was also supported by (Bragg, 2007)89 who stressed that inventory management made impact on all business functions, particularly operations, marketing, accounting and finance. He established that there are three motives for holding inventories, which are transaction, precautionary and speculative motives. The transaction motive occurs if there is need to hold the stock to fulfill the production and sales requirement then company decide to hold more amount of stock to meet the present needs and estimated its future production and sales requirement. This represents a precautionary motive it applies only when future demand is uncertain. The speculative motive in which holding inventory where company purchase a large quantity of materials than normal in anticipation of making abnormal profits. Inventory is a detailed list of those movable items which is necessary to manufacture product and to maintain the equipment and machinery in good working order. Many researchers have analyzed different inventory management practices and performance and these studies have amazed an enormous knowledge related to inventory management and operational performance of industry. (Maria and Jones, 2003)90 argue that implementation of inventory management practice involves providing high quality products at relatively less cost. (Ballou, 2000)91 argues that inventory cost should be considered which taking inventory decisions. He found that inventory carrying cost typically range from 20 to 40 of inventory value. (Palmer and Dean, 2000)92 are of the opinion that selection of right inventory management practice is a must for a companys inventory management performance. The linkages between inventory management and competitive advantage have been discussed by many authors in the context of large enterprise. Reducing throughput time by faster value addition to the materials clearly would lead to competitive edge. This would lead to advantage on the inventory cost and front also. Inventory cost is reduced as materials spend less time in the system. The importance of lead time as a measure of inventory effectiveness has been mentioned by (Rabinovich, Martin and Philip, 2003)93 (Ng Partington and Sculli, 1993)94 are of the opinion that long lead times and large usage fluctuations call for higher reorder stock levels and vice-versa. (Chandra and Grabin, 2005)95 argued that the reduction in the inventory replenishment lead time allows reducing safety stock and improving customer service. (Wallin, Rugtusanatham and Rabinovitch, 2006)72 also view lead time as an important inventory element. (Elorantha and Raisanen, 1988)34 argue that one of the reasons for keeping large amount of inventory items has been related to customer service. Another reason is that smaller purchasing lots imply more work in purchasing department. However (Toelle and Tersine, 1989)96 argue that excess inventory is an operational liability, because it uses valuable storage space, increases inventory costs. Raw material ordering frequency is identified as an important factor contributing to inventory cost frequent ordering in small quantity is considered as an important strategy. This is very relevant in the context of the manufacturing industry. This is because their purchase requirement quantity of material is more in number. A scheme developed for the above purpose found useful in optimizing inventory cost (Flores, Wang Burgess, 2003)97. The management of inventory in manufacturing industry studied viewed the need for a more formal procedure to calculate its inventory policy parameters (maximum and minimum inventory levels). In their own words the growing investment in inventory combined with an increasing numbers of backorders and lost sales lead to lower profitability. Therefore it was decided to follow a small scientific approach than the currently used rules of thumb to establish inventory policy parameters with the objectives of optimizing their inventory cost to exercise inventory planning and control the understanding of the factors including inventory management is necessary. This will enable manufacturing industry to select an appropriate an inventory management practice in the industry. Though the role of inventory management practice of a firm their inventory cost an order quantity and hence on inventory performance is well explained in theory an empirical evaluation of the same is not done so far in the context of manufacturing industry particularly in developing countries. The present study is expected to reveal the latest facts regarding the inventory management practices prevailing in units under the study. To highlight the mal practices which are responsible for the mismanagement of inventories and spare units To expose the problems confronted in the context of prevent inflation shortage of funds and credit squeeze policy. To develop feasible solutions to alleviate genuine difficulties experienced by the inventory managers in all the plants in the management of inventories such as uncertainty about the time when spare parts are needed and quantity required, problem converting requirements estimates into provisioning quantities, problem in procurement, storage identification and distribution. The study aims to find out the solutions of the basic problems arising in the management of inventories. For example what should be the level of inventories for a particular item that a unit should carry or how much should one procure in a lot. Replacement time is not constant but fluctuates resulting in stock out situation. If the spare parts and other items of inventory are to be purchased when to order and how much to order. 2.8 INVENTORY COSTS Managing inventory different models are used that are continually available or products available for limited time. The economic order quantity (EOQ) model shows the least cost level of inventory to carry as well as costs. New vendor models are used for products only which is available for a single period. EOQ and new vendor models have proved very useful for managing inventory. These models can be customizing to particular industries. With these approaches it will help in costing of shipping cost as well as quantity discount. Inventory costs divided into three parts (1) carrying cost of regular inventory and safety stock (2) ordering cost (3) stock outs cost. Inventory control system balance the cost of carrying inventory against the cost associated with ordering or shortfalls. The service cost is known as fixed costs in company. Company should analyze how much of its insurance and tax expenses are associated with inventory. This is especially important in stakes that have an inventory tax. Company has cash outlays for warehouse and material handling equipment either occurring or leasing space from a distributor. Company must know how much they spend on space. If there is too much inventory is held then it will cost a burden to company. To determine the cost of carrying inventory, one needs to know the average quantity of inventory on inventory carrying cost (as a percentage of product cost) and the average cost per unit of inventory. If the company carry extra inventory for the uncertainty then it is known as safety stock. The main aim of this inventory is to provide protection against stock outs. Safety stock is called as cost just like regular inventory, it is an interest rate times the level of safety stock. The level of safety stock is equally proportion to stock out depends upon the customer service level, the standard deviation of the demand of the product and lead time. For managing the uncertainty of safety stock is to reduce inventory levels. Due to competition it is difficult to lower safety stock requirements for two reasons. First some buyers (especially large retailers) are requiring higher customer service levels, due to which safety stock levels increases. Secondly the product mix for many company include more new product with the corresponding greater demand variability. So, most company seeking to reduce safety stock is the only way to reducing lead times. Considering ordering costs include a cost for transmitting the order, receiving the product and placing it into storage, inbound transportation and processing the invoice. Due to the advancement in technology it lowered the cost in many industries. A manufacturer uses the cost of production instead of an ordering cost. Stock out cost leads to lost sales when no inventory is on hand. The Correlation between stock out costs and inventory depend upon the accuracy of the demand forecast and the ability of the company to recognize and reach to a change in demand. Stock out costs means that how a customer react when there is stock out. Stock outs cost is very high if lack of substitute products means that a customer will switch suppliers. Likewise, if buyers substitute a different product stock outs cost may be in consequential. In practice many firms do not assess stock outs cost because different division of a firm cannot reach agreement on what it the cost of running out. Marketing may desire a very high stock outs costs to force a penalty cost on running out. Operation or finance may resist this as it leads to inventory buildups. Service level goals can differ by the value placed on stock outs and indirectly carrying costs. A high stock out valuation wills result in higher inventories and higher service levels. 2.9 HOW COMPANIES USE THEIR INVENTORY To meet the customer requirement company need to maintain sufficient stock of finished goods and fast delivery of goods Seasonal inventory Maintenance, repair and operating (MRO) inventories By keeping the buffer stock in case of any fluctuation in demand. To keep the inventories as low as possible consistent with the market condition By having the quantity discount or to increase the purchasing efficiencies company have the cycle stock To forecast market and economic condition then availability of materials at their warehouse. Transportation inventory Speculative or hedge inventory protects against some future event eg labor strike To minimize out of stock danger which results in crash purchase an uneconomical rate. To maintain proper record so as to supplying accurate and regular material report to the management 2.10 SIGNIFICANCE OF INVENTORY MANAGEMENT The cost structure of products manufactured materials contains about 60 of the total cost for the proper budgeting and control on cost of inventory which is a core objective of inventory management. Different types of inventory to be managed in any organization include purchased materials, work in process (WIP) materials and finished goods. (Banjoko, 2000)58, (Ogbadu, 2009)64 defined basic price, purchasing cost, inventory carrying cost, transportation cost, material handling cost, office cost, packing cost, marketing cost, obsolescence and wastages as the various cost involved in these materials. The management of these materials so as to reduce the cost associated is what we refer to as inventory management. Integrated approach of inventory management is the function responsible for the coordination of planning, sourcing purchasing, and moving, storing and controlling materials in an optimum manner so as to provide a predetermined service to the customer at a minimum cost, (Ramakrishna 2005)11, (Gopalakrishnan Sundaresan, 2006)98. Inventory management which includes decisions on purchasing raw materials, staffing, inventories, stores and warehouse management, production levels and distribution of finished goods at minimum cost at due time (Banjoko, 2000)58, (Osotimehin, 2006)99, (Ogbadu, 2009)64. 2.11 QUALITY CONTROL AND STORES IN ORGANIZATION Procurement, storage and maintaining activities form the link in the inventory management process. Quality control of raw materials parts and supplies are an integral part of the process through which a supply department maintains a flow of the items maintained from the points of supply from outside the organization to their points of usage in the organization. The stores management plays an important role in the smooth running of an organization. The purpose of the store is to provide without disruption of the items flow to the work sites of the various departments in the organization. Through this it is clear that stores are not the area for keeping the waste but an import part of the business organization and played a crucial role in economy of the company. The stores management has greater importance because of the shifts supply position of various scarce materials. Companies having the huge investments in inventories by storing the materials in advance. The store management is responsible for receipt standardization, identification, general inspection and levels of stock of the incoming materials. They also have the responsibility to store, distribute and dispose of various materials which held by it. The stores locations and layout have a bearing on the organizational effectiveness. Locating to store proximity to user department is a general practice to minimize transportation and other handling expenditure and to ensure timely supply of the necessary material. The stores organization in the selected companies is headed by officer in charge (stores) who is responsible directly to the general manager (commercial). In turn the general manager is responsible to chairman cum managing director. Under officer in charge there are three different sections in charges and are responsible for various functions of stores organization. The officer in charge is in the cadre of deputy general manager and the section in charge is in the cadre of senior manager. Under these three sections in charge there are five dealing officers 58 store keepers and equal numbers of store attendants and mazdoors. The process followed in respect of materials involves the physical inspection of the materials received and to examine the quality and quantity against the specification made in the purchase under and this is to ensure the suitability of material for the requirement of the companies end to know whether the suppliers fulfilled the terms and conditions led down or not. The stores section after careful inspection of the materials received need to make arrangements for the quality control check which is going to be done by quality assurances section of the selected manufacturing companies. If any derivative in the quality and quantity of the material ordered and receive is found, it will be kept in abeyance till the supplier rectifies the discrepancy. The items received are recorded in the ledger and the incoming material particulars are fed to the computers simultaneously. Afterwards the receiving officer prepares a goods receipt note in case of rejections if any the companies have a practice of informing it to the supplier within 15 days from the date of receipt of it by the selected companies. 2.12 VENDOR MANAGEMENT INVENTORY Vendor managed inventory is a supply chain strategy where the vendor or supplier is given the responsibility of managing the customers stock (Smaros et al., 2003)81. The vendor is given access to its customer inventory and demand information for reasons for monitoring the customers inventory level. The vendor has the authority and the responsibility to replenish the customer stock according to jointly agreed inventory control principles and objectives (Smaros et al., 2003)81. Vendor generates purchase orders on as needed basis according to an established inventory level plan and shared forecast data consumption data and historical sales data. When the purchase order is made an advance shipping notice informs the buyers on materials in transit. The material is then shipped delivered and logged according to the shipment strategy. The concept of replenishment of inventories at retailers distribution center (Potilen and Goldsby, 2003)84 Inventory at the customer site may be owned by the supplier and brought by the customer and simply monitored by the supplier for replacement. The business model suppliers will bill their customers once shipment is made depending on the agreed payment terms. In some VMI payment made on what the manufacturers have pulled from the hub (Kuku, 2004)42. Inventory management aims to buffer from uncertainties in forecasting, consumer demand and vendor deliveries (Benedict and Margeridis, 1999)80. Vendor managed inventory is used to resolve the conflict in performance measures. VMI is the most widely discussed partnering initiatives for improving multi firm supply chain efficiency and that it is also known as continuous replenishment or supplier managed inventory (SMI). But in (Potilen and Goldsby, 2003)84 views this is wrong. They said that VMI involves the finished goods inventories from a manufacturer distributor or reseller to a retailer while SMI involves the flow of raw materials and components parts to a manufacturing process. As technology advances so does the integrated relationships. The strategy of point of sales data (POS) have facilitated consignment selling agreements where the product is not sold to the customer until an end user purchases the goods (Potilen and Goldsby, 2003)84. Vendor managed inventory move supply chain management to the next level by streaming functional performance with process across multiple companies requiring a shift of functions to the lowest cost firm as well as performing cost trade off across company boundaries (Potilen and Goldsby, 2003)84. VMI is an important coordination initiative. It can be used as one of the initial steps in a supply chain management and trading partners. Major challenge for manufacturing companies is that usually only part of their customer base is involved in VMI. This means that the vendors need to set up their customers in a way that both VMI and non vendor managed inventory customers simultaneously can be efficiently served this is both hard and costly. If purchase, ordering cost, holding or carrying cost, difficult to control, this causes production problems. 2.15 FUNCTIONS OF INVENTORY Meet anticipated demand To smoothen production requirements Protect against stock outs Take advantage of order cycles To hedge against price increases To permit operations Take advantage of quantity discounts Inventory Optimization Evaluate your inventory Recommend safety stock Cross plant rationalization Eliminate duplication and standardize material of constructions Inventory process Improvement Automate replacement process Integrate plan repair schedules Population survey Recommend sub assemblies to eliminate costly multiple levels of inventory Identify upgrade opportunities Identify obsolete inventory Recommend material rationalization Excess inventory disposition Diagram-1.4 2.14 FACTORS INFLUENCE THE INVENTORY STOCKING SYSTEM Demand for finished products is sometimes seasonal and prone fluctuations. Value risks. Limitation of space. Consumption figures are noted. Variations in patterns are also noted. To spread vulnerability. For obtaining economies of scale. Materials costs are affected by fluctuations in demand and subsequently by fluctuations in manufacturing. Each item is given as unique code number. Manufacture requires relatively long process cycle time. Procurement of materials has a long lead time. 2.15 FACTORS TO HOLD INVENTORY a) Finished goods which is essential in produce to stock positioning strategies, necessary in level aggregate capacity plans, products can be displayed to customers. b) Raw material which suppliers may produce ship materials in batches, quantity discounts and freight or handling savings. c) Improve customer service. d) Reduce certain costs such as ordering costs, stock out cost, acquisition cost, and start up quality cost. e) Contribute to the efficient and effective operation of the production system. f) Work in process which is necessary in process focused production, may reduce material handling production costs. 2.16 FACTORS INFLUENCE NOT TO HOLD INVENTORY Cost of production problems Non value added costs Carrying costs Cost of customer responsiveness Cost of diluted return on investment Cost of coordinating production Reduced capacity costs Large lot quality cost Opportunity cost Inventory deteriorates, becomes obsolete, lost, stolen etc. 2.17 POLICIES OF INVENTORY MANAGEMENT Raw materials, purchased components, work-in-process, finished goods, distribution inventory and maintenance, repair and operating supplies are all types of inventory. Marketing is concerned as stocking decision affect the level of customer service. Accounting is concerned of the cost implications of inventory. Information Systems tracks and controls inventory records. CHAPTER-3 INVENTORY CONTROL SYSTEM 3. INVENTORY CONTROL SYSTEM Inventory control system helps the companies to ensure that the supply of goods with right quantity and right quality will deliver at right place on right time without any unnecessary investment in inventories. According to (P. K. Ghosh and G.S. Gupta)100 Inventory control is concerned with the acquisition, storage, handling and use of inventories so as to ensure the availability of inventory whenever needed, providing adequate cushions for the contingencies deriving maximum economy and minimizing wastage and losses. To make a balance operation in inventory control we need to design such system through which inventory can be managed and maintained. It is used by keeping the inventory which is desired and maintains it with minimum level of inventory carrying cost. Our purpose is to avoid huge and insufficient levels of inventories. Companies have to be flexible while making any order as due to inventory control system which to place the order at right time with right source to take the right quantity at right price and quality. If there is any loop holes in the system then it result unbalanced inventory, out of stock, over stock which causes increase in investment. Companies should be flexible in inventory management. Difference in efficiency of the inventory control for a given level of flexibility affect the level of investment required in inventories. If the less efficient in inventory control greater is the investment required. Therefore, excess investment in inventories increases cost and decrease profit. Points mentioned below of various types of inventory control with its purpose To take advantage of favorable raw material price. To Control investment in inventories and keep it at an optimum level. By controlling capital investment. Protection against strikes and work stoppages and acts of god. To minimize the carrying cost and time. To maintain sufficient stock of raw materials in periods of short supply and anticipate price charges. To maintain sufficient goods inventory or smooth sales operations and efficient customer service. By minimum costs and maximum profits. – To achieve all these firm determine the optimum level of inventory and it can be done through the following inventory management techniques. To ensure a continuous supply of raw materials to facilitate uninterrupted production. 3.1 ABC ANALYSIS This is a technique which is based on the selective control of inventory where there are many items but in that it is essential to value the item analysis which is known as ABC analysis. In this technique items are classified according to the importance of their respective value. This approach is also known as proportional value analysis (PVP). The ABC analysis technique is based on small part of items in inventory which represent the bulk of money value of the total inventory used in the production process, on the other hand a large number of items which form a small part of the money value of stores. The money value is ascertained by multiplying the quantity of materials of each item by its units price. According to this system inventory control high value items are more closely controlled than low value items. Each item of inventory is given A, B or C demand depends on the amount spent for that particular item. A or the most used or high value items should be under the highest control and under responsibility of the most experienced personnel while C or the lowest value item is under simple physical control. This system is explained below which is as follows A category- It consists of items that have a highly in usages and have a high unit value. The items included in group A which involve the large portion of the investment i.e. 70 to 75 of the total value of stock and represent 10 of the total number of items. B category- It include small investment i.e. 15 to 20 of the total cost of inventory and 20 to 25 of the total no. of items. So, slightly lesser time and efforts is kept to the control of such items. C category- It include those items which are of least unit value i.e. 5 to 10 of total value of inventories, having a low frequency in usage. These inventories represent 70 to 75 of the total no. of items. The main purpose of inventory management is the proper classification of all the inventory items into one of the above three categories. It can be prepared as follows. Table-1It is clear from the above table that group-A consists of 10 of total items but the total value percentage is 75. However, Group-B includes 20 of total items and 20 of total value. So, general or routine control is necessary for it. Group-C consists 70 of total items but their total value percentage is only 10. Therefore it is clearly confirmed that the item which are highly used and has highest demand should be keep on top priority and so on. 3.2 INVENTORY HOLDINGS The inventories of the companies are either set by the top management of the organization or store department. The main purpose of the top management is to ensure that they stock that much amount of material through which the large amount of money is not hold to stocks and also for smooth running of the production. Then purchase department has to allocate this investment to the various items and ensures the smooth run of the production. Inventories were set by the Management of Objectives concept. This concept expects the top management to set the inventory norms in consultation with the materials department A no. of factors enter into consideration in the determination of stock level for individual items for the purpose of control and economy. These are mentioned in below points Storage costs Requirements of funds The rate of consumption Obsolescence risks Seasonal consideration of price and availability Lead time for deliveries Economic order quantity Availability of space Price fluctuations 10. Insurance costs For the procurement of raw materials or storage and its usage is depending on the production w.r.t to its demand. If less amount of inventory is stored then the company will have to face frequent stock outs and incur heavy ordering costs. But if the company keeps large inventories the company has to bear heavy inventory carrying costs in addition to unnecessary tie up of capital. For the effective inventory Management Company has to maintain inventories at an optimum level where inventory costs are minimum and at the same time there is no stock out which result in loss of sale or stoppage of production. 3.3 MINIMUM LEVEL OF INVENTORY When the companys order is in production then they have to keep the stock for their processing. Time is also required by the supplier to execute the order this period is called lead time. For the smooth production during lead time the company has to maintain the minimum stock at their inventory, but this may fluctuate as per the consumption rate. Company has to make the provision that to maintain the lead time and keep the stock in inventory as per sudden demand occurs to meet the requirement with the safety stock which is holing in the stores. If there is any delay in receiving supplies fluctuations in the consumption rate, and other relevant factors such as transport bottlenecks, strikes or shutdowns. In the case of uncertainty, the this approach is applied to determine the safety stock to avoid stock outs out of such eventualities, companies always carry some minimum level of inventories including safety stock. Safety stock is not constant for all the time, but it varies time to time and as per the demand. The studies suggested that the companies keep the safety stock as per the consumption rate over the period of the time while some companies do as per their last log period, but some companies keep the level of safety stock throughout the year. The minimum level of inventories for their reorder point may be determined on the following basis- Stock out costs Consumption during lead time. Production holds out Consumption during lead time plus safety stocks. Customer irritation and loss of goodwill 3.4 MAXIMUM LEVEL OF INVENTORY It includes Future production plans, Opportunity cost of funds employed, Supply conditions of goods, Price changes, Carrying cost of inventories such as insurance, interest and rent etc, Build discount, Bulk transportation cost, Import consideration, Storage space available According to Van Horne Inventories should be allowed that much which does not affect the total holding cost. A study has observed that for industry it is important that they should keep the inventory as much for the operation required otherwise it will affect the business. The balance of inventory depends on the estimates of the actual savings, the cost of carrying additional inventory and the efficiency of inventory control other things will remain the same. The company will increase the inventory, until the opportunity cost of funds is less than the estimated return from investing funds in inventory. Goods supply also influences the inventory level. 3.5 ORDERING SYSTEM OF INVENTORIES Three important systems of ordering materials they are- Single order and scheduled part deliveries system. Fixed order quantity system, popularly known as Economic order quantity (EOQ) system. Fixed period order system or periodic recording system or replenishment system. Inventory Carrying cost include the following Loss on account of deterioration and obsolescence The rent or depreciation of godowns Repairs and maintenance charges for equipment used in handling of inventories Expenses for the insurance of inventories Salaries and wages of staff assigned the duty to look after the receipt, issue and the proper storage of inventories. Cost of interest of the money invested in inventories For managing the inventories the company major part is the finance. To reach this, the company should determine the optimum level of inventory, sufficient inventories is maintained neither excessive nor inadequate no mange inventories efficiently and effectively the answer is sought to the following two questions, 1. How much should be ordered 2. When should it be ordered The first question how much to order is related to the problem of determining economic order quantity (EOQ) and is answered with an analysis of the costs of maintaining certain level of inventories. The second question when to order is to rise because of uncertainty and is a problem of determining the reorder point. (Harvey M. Wagner)101 suggested that one major issue of inventory control is how much to order Answer of this problem is that all inventory models no matter how complex, address themselves to the problems of timing and magnitude of replenishment. Decisions regarding the problems relating to ordering of inventory are very much affected by ordering and carrying costs. The expenses which are incurred by the company to acquire inventories are known as ordering costs. The inventory ordering and carrying costs are inversely related to each other. The ordering system must strike a balance between these two costs so that the total inventory cost (ordering cost plus carrying cost) may be the minimum. 3.6 REORDERING SYSTEM PERIODCALLY When the order is placed after a fixed period for the quantity by which the inventory level has come down from a previously determined level known as the periodic reordering system or replenishment level. This system is also known as reorder point. On the basis of the requirement of materials during the period and lead time plus safety stock. The period is decided to suppliers regarding the minimum quantity and the average consumption rate of the company. By this the required amount is placed to bring the inventory to the previous determined level. 3.7 PART DELIVERY SYSTEM AND SINGLE ORDER In this system company prepared the order for the required customer and supplies the material as per their requirement whether in six months or year. Sometimes they keep the inventory for a longer period of time or supply in a single order also. This system ensures continuous supply of materials. The concern has not to be incurring high ordering and carrying neither costs nor make heavy investment in inventory, it is also spared with the inconvenience of arranging for storage space. 3.8 EVALUATION OF INVENTORY MANAGEMENT PERFORMANCE Aim of company management by keeping various components of inventory at economical levels and in proper proportions. Inventory is divided into the following parts on the basis of the functions it performs- raw materials, work in process, finished goods, stores and spares. Some parts are prone to a high degree of control where as others may not be controlled easily. The stock of raw materials and stores and spares can be reduced to a level where it does not disrupt the production process. The amount of work in process is, determined by the length of the production cycle. The market forces and the nature of the industry determine the stock of finished goods. Some of the above parts of inventory are fast moving while others are moving slowly. If unwillingly large funds are blocked in slow moving segments, then it will not only place a financial burden but also affects badly the liquidity of the working capital of any company. Hence, for efficient control of Inventory Company management must try to allocate limited funds to each component of inventory in an optimal manner. 3.9 EFFECTS COST CONTROL OF INVENTORY IN BEARING MANUFACTURE 1. STORING – The manufacture stores three months of inventory at its central stores. 2. SPARE PARTS STORAGE – The manufacture maintains its spare parts inventory of about 30 to maintain and run the machine/ equipment. They are as follows Running maintenance inventory Preventive maintenance inventory Over hauling inventory 3. FINAL USER REQUIREMENT- All the stores including sites stores/ sub stores besides central stores are created to meet the day today requirement of shop floor. 4. WAREHOUSE- Items is divided in different groups centrally for the requirement of the indenting departments. All items are coded and the system followed 6 or 8 digit code. Items are stocked nature wise and tagging is done for easy identification. Apart from central store there exist site stores also. The items are issued from central stores to the site stores of the identifying department. 5. COSTING- For costing it takes the weight average of all units available for sale during the accounting period and then uses that average cost to determine the value of cost of goods sold and ending inventory. 6. PRICE CONTRACT If the manufacture is engaged in underground and open cast mining, the items which is related to the safety of the workers like leather shoes, helmet cells, explosives, like drill rods, drilling spares and automobile spares are covered under rate contract. 7. PROCUREMENT CYCLE From the above dig.1.5 it shows that the user raises the indent and takes non-availability certification from the stores. The indent is then submitted to the monitoring control cell where the indent is scrutinized. The indent is then passing on to the purchase dept. for the procurement of the item. Purchase dept. makes an entry in the register and then the enquiry is floated to the approved suppliers. Four types of enquires are there depending on the nature and value of the item. Limited tender enquiry Single tender enquiry Open tender enquiry Global tender enquiry 3.10 INVENTORY CONTROL TECHNIQUES ABC ANALYSIS- This is a technique which is based on the selective control of inventory where there are many items but in that it is essential to value the item analysis which is known as ABC analysis. The ABC analysis technique is based on small part of items in inventory which represent the bulk of money value of the total inventory used in the production process, on the other hand a large number of items which form a small part of the money value of stores. According to this system inventory control high value items are more closely controlled than low value items. Each item of inventory is given A, B or C demand depends on the amount spent for that particular item. A or the most used or high value items should be under the highest control and under responsibility of the most experienced personnel while C or the lowest value item is under simple physical control. A item- initial 70 of consumption value B items- following 20 of consumption value C items- following 10 of consumption value To maintain the inventory level of the stock item, the safety stock is keep for A item for one month, two months for B items and six months for C items. In case of A items delivery schedule to ensure that minimum level as prescribed above of the safety stock is maintained. In the case of B items annual ordering is restored and in the case of C items is done on the basis of the indent raised by the store department. 3.11 BENEFITS OF RESEARCH 1. MANPOWER MANAGEMENT- Stores is headed by Store manager in the same way each person is assigned for a particular department and they are responsible for that area. For example one is responsible to procure spare items the other is responsible for machinery and so on. Some persons from non materials background too are placed in stores and purchase dept. 2. COST REDUCTION AND CONTROL- they are as follows Cost reduction by negotiating the rates. Cost reduction through entering into rare contracts Cost reduction by cutting consumption after scrutinizing the indenters requirement by a well established inventory control cell. 3. COST AND BENEFITS OF INVENTORY Diagram-1.6 4. PRODUCTION INVENTORY SYSTEM Diagram-1.7 5. PLANNING PRODUCTION AND INVENTORY CONTROL Production planning and inventory control is the subset of supply chain management which functions and focuses on managing production operations and inventory throughout the supply chain. 6. OPERATION MANAGEMENT IN MANUFACTURING This is used to view an end to end manufacturing process with a view to optimizing efficiency. There are many types of operation management in manufacturing software, including for production management, performance analysis, quality and compliance. Production management software provides real time information about jobs and orders, labor and materials, machine status and product shipments. Performance analysis software displays metrics at the machine line, plant and enterprise level for situational or historical analysis. Quality and compliance software is used to promote compliance with standards and specifications for operational process and procedures. 7. SOFTWARE USES IN MANUFACTURING With the advancement in technology and market demands, we are enabling new capabilities in manufacturing through software, gradually closing gaps in end user needs. Combining and work flow services support people to people, people to system and system to system interactions, enforcing procedures and rules while flexibly adapting to real time situations with alternate workflows and processes. Manufacturing system will leverage common security service that determine roles, responsibilities, authorities and access across all system and application functions while fitting into corporate IT security schemes. Manufacturing will also have a unified asset and production model that support all of the interrelationships between physical production, equipment, facilities, inventory materials/ people as well as production definitions such as the manufacturing bill of materials production orders etc. It is difficult to separate the older data from the historical data and production databases that were difficult to correlate across service based platforms which will have a unified operations database historians. Now a days different manufacturing software applications support different graphical user interfaces with interfaces, specific mobile application etc. the future manufacturing system will provide common visualization and mobility for a consistent user interface experience from different form factors, supporting dedicated and mobile workers by consistent workflows and procedures. 8. INVENTORY PLANNING AND CONTROL To maintain the right balance between high and low inventory to minimize cost. Diagram-1.8 Diagram-1.8 CHAPTER-4 DATA PRESENTATION AND ANALYSIS 4.0 RESEARCH METHODOLOGY The studies of advance and research hypothesis are tested during the course of this research. 1) Relationship between the stock level and optimum use of production resources. When the level of stock to hold inventory at certain time period by the company, then company will obtain efficient use of its production resources. Resources are labor, time, fund, and other operational facility. The company will use it efficiently when idle time is minimal on prevention of stock out. When stock level such as safety stock, maximum stock and reorder levels are available but still be the possibility of stock out. 2) Relationship between skilled store personnel and optimal use of production resources. This hypothesis is based on the optimum use of production resources with direct consequence of educated and skilled store workers. The use of illiterates and unskilled store personnel is unproductive to the company in developing countries where the level of automation is still very low. Skilled personnel are useful in stock tracking and are instrumental to proper record keeping, reporting low stock level or impending damage to stock. 3) Relationship between stock control and optimal use of production resources. The optimum use of resources can be achieved through automated control and management of inventory. Automated system allows producers to input inventory and track the items that are delivered to store and spot depreciating inventory. Depending on the application software automated inventory can be changed or directly orders when re-order level is reached. The system prevents over and under stocking and so improves working capital, reduces waste and ensures that optimal use of labor and time. 4) Relationship between se of production resources and overall company efficiency. This hypothesis is used to fulfill the resources at its optimum level. This study proposes that optimum use of resources is directly affecting the stock level and with the involvement of skilled personnel and automation it will affect the overall efficiency level in the manufacturing company. Overall efficiency can only be be attained with improved sales, customer satisfaction, improved profit and high competitive advantage for manufacturing company. 5) Relationship between optimum use of production resources and performance of entrepreneurs. (Kachru, 2011)102 said that innovation and learning are the basis on which entrepreneurship is established. The owner or manager is motivated to improve their performance by learning experience of the entrepreneur. Through the process of attaining overall efficiency to influence high level performance with improved managerial skills. Innovation and growth is inherent in entrepreneurship. These hypotheses are further explained through the following research model SHAPE MERGEFORMAT Diagram-1.4 4.1 RESEARCH MODEL HYPOTHESIS- Improper management of inventories and the irregular supply of the critical parts when they are needed are mainly responsible for the unsmooth and irregular production by different manufacturing company. For proper and efficient management of inventories is importance. But there are many loop holes in the present practices of inventory management. The complete system of material planning is to be detailed and to create better management of inventories. 4.1.1 RESEARCH DESIGN AND METHODOLOGY The purpose of this research is known through survey research method. Survey research design describes the process of collecting data from population in order to determine their current status in that population with respect to one or more variables. The sample design and procedure is based on simple random sampling. The research objective is to reduce the production lead time and work in progress by increase the production rate. Batch processing with full fledge and bottlenecks in the production process are important for long production lead times. Their results to the research will made an impact on product production lead time and work in progress through which it will help in reducing cost and meeting customer demand. Diagram-1.10 There are different methods used which include the use of statistical techniques in inventory control. These tools are used in collection of data. It is divided into two parts 1) PRIMARY DATA- In this a questionnaire is made which include all the relevant data from personal interviewing of executives planning commission and other government officers of the related department, academicians and financial analysis in real life setting. 2) SECONDARY DATA- In this there is annual reports and financial statements of the selected organization inventory and financial statics from different journals periodicals, newspapers, reports, economic survey, magazine, material management journals, books and different publications of inventory management. To highlight the points which are responsible for the mismanagement of inventories and spare parts It may be due to shortage of funds and credit related policies of the company. To find the proper solutions the inventory managers in all the plants is collectively communicate and put their input to resolve the issue. In the management of inventories when there is sudden need of item and the quantity required but due to procurement issue and shortage in stock the item is not fulfilled and leads to customer dissatisfaction. The aims of the study to find out the solutions of the basic problems arising in the management of inventories. For example, what should be the level of inventory for particular items that a unit should carry or how much should one purchase at a time. Replacement time is not constant but varies which result stock out problem. All organization store department must minimize such a situation by stocking the spare parts and other items of inventory on time and with right quantity. It also develops some new models of inventory management and try to improve the existing practices in the management of inventories. 4.2 TECHNIQUES OF DATA ANALYSIS Through the statistics it will helps to reduce and simplify data with various techniques. It depends on how many times response occur for a particular product. With this it is easy to categories the product. Hence, interpret percentages are also used to show comparisons between categories of responses. 4.3 CRITICAL EVALUATION OF INVENTORY PRACTICES Inventory management is an important part of materials management which plays a key role in the smooth economic and uninterrupted running of the company. To achieve the profit and efficiency in any company then those companies have to reduce their inventories through which their much amount of capital invested in inventory. The will also help in improving the liquidity position of the organization as inventories involve locking up of capital, so properly company have to deal with inventory management. The total value of raw materials, fuels and lubricants, consumables, spare parts, processing materials and finished goods are called as inventory. Inventory management in public sectors is classified into five categories raw materials, goods in process, finished goods, stores and spares. Inventory can be analyzed in two ways. First the store of each component of inventory is called total sum of inventory. Secondly proper indication regarding adequacy or inadequacy of each type of inventory which will be developed and applied to capital positions obtained in public sector enterprise. 4.4 METHODS OF DATA COLLECTION Important information for this research work was collected through primary secondary sources the combinations include Interview with some important personnel in the stores, purchase, production and inventory departments of the organization. Observation of the production process was done to see the flow of goods in the conversion process. Materials handlings and storage were also observed and how the inspection process done. Record analysis of relevant data was obtained from the organizations annual report and journals. Theoretical background information was gathered through review of related literature on inventory management. 4.5 OBSERVATIONS When company order and create huge inventory then the company is holding inventory in that way the blocked inventory result higher debt and improper working capital which causes higher financial cost. When the company is facing financial issues, due which company is unable to buy the material as a result it hampers the production line. There is a gap between demand and supply. With this it leads to production losses, and maintenance team dissatisfied. The objective of inventory management is to provide the required level of customer service and to reduce the sum of all costs involved. To achieve these objectives, two basic questions must be answered. 1) How much should be ordered at one time 2) When should an order be placed Management made their decision by keeping in mind the above two questions and they are Economic order quantity (EOQ). The advantage of EOQ is many. EOQ is not done by many companies. Inventory carrying and inventory ordering cost is not the part of ordering policy but it result higher working capital requirement and inventory cost. (Arnold and Chapman, 2001)103. As it is true that the lead time is very high (for consumable items) so companies tries that materials made available in time to the consumers shop floor so that the final product ready on time. When a product arrives at the warehouse it inevitably takes several days for it to reach the customer. When the lead time is higher it results production to hold. It is important to recognize that consistency of lead time is more important than its actual length. Material requirement planning (MRP) and Just In Time (JIT) technique are stoppage of delivery dates or receipt of defective materials requires constant scrutiny to ensure that suppliers maintain consistency. In certain conditions it is necessary to maintain safety stocks (Lysons, 1996)65,66 (Tursine, 1988)104. Sometimes it is observed that in scrap material many serviceable and valuable parts/ components were observed to be overlooked while declaring the materials as scrap /waste. Due to this the repair of the equipment at unit workshop through original supplier is not taken it seriously. Inadequate control on procurement cost, controlling purchase cost will lead to profitability. Methods adopted to control the purchase cost are not found adequate. Cost reduction by purchasing in lot size is not followed. Consolidation of purchase as well as good vendor relationship can assist in cost reduction and better cost management. Cost price analysis is very important when the item purchased on single quotation basis only few items are covered under rate contract. Relationship between buyer and seller in many cases it was found that the suppliers were not paid for the past six months to a year as a result suppliers looses it reputation. The enquiry was floated to many registered suppliers but the response was very poor. Then the company was finding it difficult to have competitive rates and the material was being procured on high prices. After getting the order the vendors do not supply the material in time due to not getting payments after supply. The purchase department does a lot of correspondence to get the supply in time resulting in waste man hours and follow up cost. There is no system followed to repeat the earlier order in spite of the rates and specifications of the item being same. The lead time is very high (for consumable items and for spares) at this company repeat order may prove fruitful. There is mismatch of demand and supply. This may result in higher production cost and loss of production capacity. Inventory carrying and inventory ordering costs do not form part of the ordering policy which results, higher working capital requirement and inventory cost. Only a limited number of items like safety items for workers, explosives and automobile spares are purchased under rate contract policy. 4.6 ADMINISTRATIVE APPROACH Poor Manpower management This means that the persons like Asst. general Manager (AGM), Chief manager and Manager none of the persons working in the stores and purchase department have the materials/inventory management degree. Many persons from technical department are placed in stores and purchase department who do not have sound knowledge of inventory management. Manpower Planning Right persons are not placed on right jobs. Many persons from technical department are placed in stores and purchased department who neither have the materials management degree nor have the sound knowledge of materials management and sometimes are not aware of the right kind of procedures/ practices. The function of the inventory management is a specialized one and so it should be carried out by the persons who have the expertise in materials management field. Therefore the materials department must have the persons with specialized background. 4.7 HYPOTHESIS OF STUDY -INVENTORY MODEL THE ECONOMIC ORDER QUANTITY (EOQ) Well known and most fundamental inventory decisions model is EOQ model. Its origin dated back to the early 1990s. The EOQ has been previously defined by (Dervitsiotis, 1981)105, (Tersine, 1994)83, (Coleman, 2002)106 and (Ogbo, 2011)88 as the ordering quantities which minimizes the balance of cost between inventory holding costs and reorders costs. (Ogbo, 2011)88 stressed further that to be able to calculate a basic EOQ certain assumptions are necessary That there is known constant price per unit No stock outs are allowed. That there is known constant stock holding cost That the rate of demand is known That there is known constant ordering cost That replenishment is made instantaneously, that is the whole batch is delivered at once. From the above points it is found that the EOQ ignores buffer stocks which are maintained to cater for variations in lead time and demand. The above assumptions are wide ranging and it is unlikely that all could be observed in practice. Mathematical device for arriving at the purchase quantity of an item that will minimize the cost. Total cost holding costs ordering costs. Basically, EOQ helps to identify the most economical way to replenish the inventory by showing the best order quantity. EOQ system is to determine order quantities and order points. When demand for the inventory item occurs the inventory level drop. When the inventory level drops to a critical point the ordering point, then ordering process is triggered. The amount ordered each time an order is placed is fixed or constant. When the order quantity is received the inventory level increases. An application of this type is the two bin system. A perpetual inventory accounting system is usually associated with this type of system. The inventory management problems can be resolved when we know that how much inventory should be added when inventory is replenished. If company is buying raw materials, it has to be decided the lots in which it has to be purchased on replenished. If a company is planning a production run, the issue is how much production to schedule (or how much to take). These problems are called order quantity problems, and the task of the company to determine the optimum or economic order quantity (or economic lot size). By determining an optimum inventory level, it involves two types of costs (a) ordering costs (b) carrying costs. The EOQ is that inventory level which minimizes the total of ordering and carrying costs. If an organization buys in large quantities the cost of carrying inventory will be high because of the high investment involved, on the other hand if purchases are made in small quantities frequent orders with corresponding high ordering costs will result in high cost. Hence the quantity to be ordered at a given time must be determined by balancing two costs through the acquisition cost and the cost of carrying inventories. When large quantities of items buy then it may decrease the unit cost of ordering but this saving may be more than offset by the cost of carrying inventory in stock for a longer period of time. When considering both the points it is necessary to ascertain the quantity called the Economic order quantity which can be must economical for an organization. The EOQ model attempts to determine quantity to be ordered at a time so as to optimize the cost of carrying and holding inventory and also ensuring the availability of that item whenever needed. The most economic size of the order is determined by considering the cost of carrying the inventory, its purchasing and its ordering costs and usage rate. The EOQ model is based on the following assumptions No time gap between placing an order and getting its supply. The usage of an item for a given period is known with certainty and that the usage rate is even throughout the period. The cost per order of an item is constant and is the cost of carrying inventory is also fixed and is given as a percentage of average value of inventory. There are only two costs associated with the inventory, and these are the cost of carrying the inventory. Given the above assumptions, the EOQ model may be presented as follows Costs carrying cost Ordering cost EOQ Ordering size quantity Diagram-1.11 4.7.1 FUNCTIONS OF ECONOMIC ORDER QUANTITY From the above diagram costs- carrying, ordering and total are plotted on vertical axis and horizontal axis is used to represent the order size. It shows that the total carrying costs increases as the order size increases and the ordering cost decreases with the increase in the order size because the larger order size means the less number of orders. The total cost decrease in the first instance, but they start increases when decrease in average ordering costs is more than offset by the increase in carrying costs. The economic order quantity occurs at the point where the total cost is minimum. 4.7.2 ASSUMPTION IN EOQ METHOD The assumptions are wide ranging. The existing inventory control policy in Indian manufacturing industry as follows Company can forecast accurately its annual requirement Only one product is involved Usage of inventory in steady There is no time gap between ordering and the supply of inventory Only two types of costs are considered ordering cost and inventory carrying cost Both cost are constant for the given inventory level Annual demand requirement known Demand is even throughout the year Lead time does not vary Each order is received in a single delivery There are no quantity discounts Annual demand (D), Carrying cost (C), and ordering cost (S) can be estimated Average inventory level is the fixed order quantity (Q) divided by 2 which implies that No safety stock No inventory when an order arrives Orders are received all at once Demand occurs at uniform rate Stock outs, customer responsiveness and other costs are inconsequential Acquisition cost is fixed i.e no quantity discounts Annual carrying cost (average inventory level) x (carrying cost) (Q/2)C Annual ordering cost (average number of orders per year) X (Ordering cost) (D/Q)S Total cost Annual carrying cost (Q/2) C Annual ordering cost (D/Q) S 4.7.3 CALCULATION OF EOQ Accurate forecast of annual requirement difficult Better discounts may be offered by the supplier for placing order higher than EOQ No time gap between ordering and supplying of raw materials assumed which may not be the case EOQ of manufacturing firm not be economical for the supplier 4.7.5 EOQ MODEL INSIGHTS When holding costs increases, the optimal order quantity decreases. (Order smaller amounts more often because inventory is expensive to hold) and when ordering costs increases, the optimal order quantity increases. (Order larger amounts less often because it is expensive to order) 4.7.6 EOQ DECISION MODEL ASSUMPTIONS No stock outs occur Demand for item in question is independent Quality costs are considered only to the extent that these costs affect ordering costs or carrying costs. Demand is known and constant The same quantity is ordered at each reorder point Demand, ordering cost, carrying costs and purchase order lead time are known with certainty. Purchasing costs per unit are affected by the quantity ordered. Demand, ordering costs, carrying costs and purchase order lead time are known with certainty. Lead time is known and constant 10. Ordering cost is known and constant 11. Infinite Planning horizon and no limit on capital availability. 12. Back orders, stock outs and quantity discounts are not allowed. 13. No inventory in transit cost 14. One time and no interaction among the inventory items. 15. The same quantity is ordered at each reorder point. 16. Purchasing cost per unit are unaffected by the quantity ordered. 17. No stock outs occurs 18. Quality costs are considered only to the extent that these costs affect ordering costs or carrying costs. 19. A constant and known replenishment time 20. Constant cost/price, independent of order quantity or time. 4.8 FIXED ORDER QUANTITY APPROACH EOQ is a popular inventory model. It does not handle multiple locations as well as a single location. It does not do well, when demand is not constant. Some adjustments can be made to the basic model. New techniques will take the place of EOQ uncertainty is more normal condition. Demand is affected by exogenous factors weather etc. Lead times also vary. 4.9 ECONOMIC PRODUCTION QUANTITY (EPQ) This determine how much to produce. The EOQ model assumes inventory arrives all of the sudden. In many cases inventory arrives slowly. The economic production quantity (EPQ) model assumed inventory is produced at a rate of P units per day. There is a setup cost each time production begins. Inventorypart of inventory cyclethere is no productionLevelduring which production isduring this part ofMax.taken placeinventory cycleInventory T Time Determining Lot size or EPQ (Diagram-1.12) Parameters Q Optimal production quantity/ EPQ Cs Set up cost D Annual demand d Daily demand rate p daily production rate 4.10 ABC ANALYSIS There are some inventory items are more important than others. A group items are considered critical (often about 70 of total value and 10 of items). B group items are important but not critical (often about 20 of total value and 20 of items). C group items are not as important (often about 10 of total value and 70 of items). Classify inventory by cost, demand and need. Those items that have substantial shortage costs should be maintained in larger quantities than those with lower shortages costs. Maintain smaller quantities of expensive items. Maintain a substantial supply of less expensive basic materials. Costing method that first assigns indirect cost to activities then to products based on their consumption of the activities. More detailed measures of costs. Better information for use in managing activities that causes costs. Benefits should always be compared to costs of implementation. More accurate product costs for pricing decisions and product elimination decisions. When companies become more automated then overhead will become the larger portion of product costs. Direct labor becomes a smaller portion of product cost and consequently a less reliable cost drive. ABC analysis helps to result in cost reductions. Focus is on activity analysis. Cost reduction usually requires or changes in activities. Activity based costing concepts and methods are also applicable to marketing and administrative activities. Accountants implementing activity based costing may experience opposition to change. 4.11 REORDER POINT Due to uncertainty of demand, the reorder point becomes the average daily demand during lead time plus the safety stock based on rate of probability. Uncertainty of demand affects simple EOQ model assumption. The point in time by which stock must be ordered to replenish inventory before a stock out occurs. R dL R Reorder point d average demand per period L Lead time (in the same unit as above) 4.12 INVENTORY ORDER CYCLEorder qty,QdemandReorderAverage amount ofratepointInventory holdQ/2 Inventory level 0 Time Lead Lead Time Time Order Order Order Order Placed Received Placed Received Diagram-1.13 4.13 JUST IN TIME (JIT) JIT systems are design to manage lead times and eliminate waste goal in zero inventory and zero defects. Two bin system one bin fills demand for part the other is used when the first is empty. It reduces lead time through requiring small and frequent replenishment. It is widely used and effective strategy for managing the movement of parts materials, semi finished products from points of supply to production facilities. Products should arrive exactly when a company needs it, with no tolerance for early or late deliveries. JIT system places a high priority on short consistent lead times. In JIT the purchase of goods or materials is managed in such a way so that the delivery immediately precedes demand or use. Industries are moving toward JIT purchasing argue that the cost of carrying inventories has been dramatically underestimated in the past. JIT production systems take a demand pull approach in which goods are only manufactured to satisfy customer orders. 4.13.1 JIT PURCHASING AND EOQ MODEL PARAMETERS TO INVENTORY MANAGEMENT The cost of placing a purchase order is also being re-evaluated. There are factors which causes size reduction in the cost of placing a purchase order. Industries increasingly are establishing long run purchasing arrangements. JIT requires a strong mutual commitment between buyer and seller, emphasizing quality and win win outcomes for both partners. Industries are using electronic links such as the internet, to place purchase order. JIT relies on high quality incoming products and on exceptionally high quality inbounds logistic operations. Industries are increasing the use of purchase order cards. JIT attempts to eliminate excess inventories for both buyers and sellers. JIT minimizes waiting lines by delivering goods when and where needed JIT system involves short production runs with frequent changeovers JIT uses short consistent lead times to satisfy inventory needs in a timely manner. 4.13.2 JUST IN TIME VERSUS TRADITIONAL INVENTORY MANAGEMENT JIT reduces excess inventories JIT is shorter and more frequent production runs JIT minimize waiting lines by delivering materials when and where needed JIT has short consistent lead times through proximate location JIT has quality stressed throughout supply chain JIT maintains a healthy supply chain 4.13.4 JUST IN TIME INVENTORY Diagram-1.14 4.13.3 JUST IN TIME INVENTORY CONTROL Objective is to achieve greater efficiency in the production process by having less in process inventory on hand. JIT inventory achieves this objective when inventory arrives just in time and used during the production process to produce subparts, assemblies or finished goods. Technique of implementing JIT is a manual procedure called Kanban. Kanban is Japanese means card with a dual card Kanban system, there is a conveyance Kanban or C- Kanban, a production Kanban or P-Kanban 4.13.4 JUST IN TIME BENEFITS High quality and flexibility Reduces inventory levels Less warehouse space needed Reduced inventory carrying costs Reduced risked of obsolete inventory Reduced lead times Reduced need for indirect labor Reduced space requirements Increased productivity and equipment utilization Reduced scrap and rework Pressure for good vendor relationships 4.13.5 MAJOR FEATURES OF JIT SYSTEM Non financial performance measures of time inventory quality. Personal observation by production line workers and managers Building store supplier relationships. Organizing production in manufacturing cells. Reducing manufacturing lead time and setup time. Hiring and retaining multi skilled workers. Emphasizing total quality management. Financial performance measures such as inventory turnover ratios JIT system makes smooth flow of work (the ultimate goal) and eliminates waste. It makes continuous improvement and eliminating anything that does not add value to the product. It is a simple system that is easy to manage and use of product layouts to minimize moving materials and parts with quality check at the source. Poke-Yoke fail safe tools and methods with preventive maintenance, good housekeeping. It reduces the set up time and cross trained employees with pull system. 4.14 SUPPLY CHAIN MANAGEMENT Supply chain management describes the flow of goods, services and information from one part to other regardless of whether those activities occur in the same company or other company. 4.15 MASTER PRODUCTION SCHEDULE (MPS) MPS is a schedule of how much and when to produce independent (customer end product) demand. It does not show when raw materials, components, subassemblies or parts are needed but shows when the end product is needed. 4.16 MATERIALS REQUIREMENT PLANNING (MRP) MRP is a computer based information system for ordering, scheduling and managing dependent demand inventory requirement. It is taken into account when the lead times develops a production plan showing quantity and timing for materials components parts and subassemblies from the first component to the last. Two of the most prevalent reasons for MRP failure are lack of planning for implementation and GIGO. It take a Push through approach that manufacturer finished goods for inventory on the basis of demand forecast. It the necessary outputs at each stage of production. Management accountants play important role in MRP system, which include maintaining accurate and timely information related to materials, work in process and finished goods and providing estimates of the setup costs for each production run, the downtime costs and carrying costs of inventory. Diagram-1.15 MRP OUTPUTS Output includes primary and secondary reports and inventory transactions. PRIMARY REPORT Planned Orders- amount and timing of future orders Order Releases- authorizing the execution of planned orders Changes- to planned orders, including revisions of due dates or order quantities and cancellation of orders. SECONDARY REPORTS Performance control reports- evaluate system operations including deviations from plan and cost information. Planning reports- data assessing future material requirements. Exception report- data on any major discrepancies. Other MRP considerations include safety stock, lot sizing (lot for lot, EOQ, fixed period ordering, part period ordering), Master Production Schedule (MPS), Bill of material file, Inventory status file, Outputs and reports, It also shows the following time phased elements as follows GROSS REQUIREMENT Total expected demand for an item or raw material in a time period. SCHEDULED RECEIPTS Open orders scheduled to arrive (from vendors or elsewhere) in the pipeline. PROJECTED ON HAND Expected amount of inventory that will be on hand at the beginning of each time period. NET REQUIREMENTS The actual amount needed in each time period. PLANNED ORDER RECIPTS Quantity expected to be received by the beginning of the period in which it is shown. PLANNED ORDER RELEASES Planned amount to order in each time period offset by lead time. 4.16.1 MRP SYSTEM Diagram-1.16 4.16.2 BENEFITS OF MRP When MRP implementations are made successfully benefits have been seen in some areas. MRP is applicable to inventory type, raw materials, components, work in process. In process inventories where we keep track of material requirement with the results of day to day operational effects with respect to the MPS. It reduces inventory costs and provide better inventory planning and scheduling with higher total sales. It also evaluates capacity requirements generated by the Master Production Schedule which means of prioritizing and allocating production resources with increased customer service and satisfaction. By the identification of process problems the production schedule which is based on actual demand is in coordination with materials ordering and suitable for batch or intermittent production schedules. It is relatively new sophisticated mature approach of inventory control which ensures to improve customer service. By faster response to market changes and shifts it reduces inventory levels without reducing customer service and maintain reasonable safety stock and minimize inventories. It is also useful when there is sudden change in demand in market or sudden change in quality or date of the order. It is an effective method of minimizing unnecessary inventory investment both warehouse work in process inventories. Machine material utilization can be planned in such a way to provide greater productivity. Although most MRP systems are computerized, the analysis is straight forward and similar from one computerized system to the next. 4.16.3 METHODS OF MRP In manufacturing there is often a dependent demand between different components. In this case, (net components requirements) (gross components requirements) (number of components in inventory). It is a process of generating net requirements for components from the master production schedule for an end item is called a BOM explosion. The net requirements calculation enables one to determine the required additions to inventory. An order placed during the current planning period is referred to as a planned order release. Both net and gross requirements are assumed to refer to requirements at the beginning of a time period. An order placed during a previous planning period but scheduled to arrive during the current planning period is called a scheduled receipt. The gross component requirement is the quality of the component necessary to support production at the next higher level of assembly. An orders arrival is known as a planned order receipt. Items are normally assumed to arrive at the beginning of a time period. 4.16.4 MRP PROCEDURE To develop a BOM (Bill of Material).The BOM identifies the component, components descriptions and amount required to produce one unit of final product. To develop a material structure pyramid. The pyramid has several levels depending on the depth of subcomponent required. Parents and components are identified. Items above in any level are parents. Items below in any level are components. The pyramid shows how many units are needed at each level of production. Two approaches used to update MRP records are the regeneration approach and the net change approach. In the regeneration approach the records for all items are updated periodically. In the net change approach the MRP system recalculate net requirements whenever changes make it necessary, hence the records affected by the new or revised information are updated. MRP determines the date the net requirements are needed by a procedure called time phasing. In time phasing of production plan for component is developed by working backwards from the desired completion date of the finished product through the various manufacturing stages. It is used to find the proper planning horizon for each subassembly or parent corresponding to the planning horizon for the end product. MRP worksheet can then be prepared for the part or sub assembly over this planning horizon. It consists of a set of logically related procedures, decisions rules and records designed to translate a master production schedule into time phased net inventory requirements for each component item needed to implement this schedule. Net requirements based on charges in schedule demand etc. Requirement of successful MRP implementation is not limited to proper planning for implementation, a computer system with software to handle the nuances of a company, accurate and up to date master schedules, and bills of materials, inventory records, and integrity of data transactions. To ensure the availability of materials components and products for planned production. Maintain lowest possible inventory level, plan manufacturing activities, delivery schedule and purchasing activities. MRP processing takes the end item requirements specified by the master schedule and explodes them into time phased requirements for assemblies, parts and raw materials using the bill of materials offset by lead times. The quantity which is generated by exploding the bill of materials is gross requirement they dont take into consideration any inventory which is currently on hand or due to be received. The materials that a company mostly acquire to meet the demand generated by the master schedule are the net material requirements which is calculated as the gross requirements minus the projected inventory plus a safety stock. The product planning horizon shows the timing, lead times and steps in the manufacturing process to assure that the end item is manufactured correctly and on time. 4.17.8 DISADVANTAGES OF MRP Computer intensive Not usually as sensitive to short term fluctuation in demand May not work exactly as intended Difficult to make changes once operating Close monitoring of the material stocks is essential. Ordering transportation costs may rise Frequently become quite complex In MRP system procurement costs are high because each item is processed separately. 4.17 MASTER SCHEDULING PROCESS Master scheduling process is a procedure for considering inventories based on customer orders forecasts through which they produce a projected inventory, master production schedule. Diagram-1.17 4.18 CAPACITY REQUIREMENTS PLANNING The process of determining the short range capacity requirements, when the MRP is completed for all items that an industry produces and it has visibility of all the requirements for assemblies, sub assemblies, materials etc. An organization can evaluate its ability to meet the requirements based on equipment and labor availability plans. It can be adjusted according to the capacity planning procedure. Develop a tentative Master Use MRP to simulate materials Production Schedule requirements Convert material requirements Revise tentative master To resource requirements production schedule NO Is shop capacity adequate NO Can capacity be changed to Yes meet requirements YES Firm up a portion of the MPS Change capacity Diagram-1.18 CHAPTER-5 CASE STUDY 5.1 CASE STUDY 5.1.1 ABSTRACT This thesis shows the rolling contact fatigue (RCF) which occurs due to the cyclic stress and developed at the time of operation and mechanism as a result fretting failure of rolling element bearing. Bearings are the most important components which are used in rotation and vibratory machinery for many applications. Since the bearing is not that costly but its failure can disrupt the production in manufacturing plant as a result no production and production losses. The analysis done for estimating the fatigue failure profitability of surface cracks in silicon nitride ball bearings which lead to rolling contact fatigue. The classification has done based on experimental data, inspection capability and geometric reasoning. When the bearing raceways of non rotating rolling element bearing is in direct contact to vibration or sliding oscillation then false brinelling occurs. Due to false brinelling it damages the bearing surface within a short period because the cavities created on the bearing raceway. It is also advised to increase the bearing life. This case study deals with the study of different types of bearings failures and their solution to improve the performance of shakeout. An alternate models for equivalent stress intensity factors are then used for uncertainty which are built on high dependable element modeling with half penny shaped surface cracks. Instead of black box type alternate modeling, physical observations are there to decompose the high dimensional alternate model into multiple one dimensional models. The cross validation technique is used to find the best alternate model which has the smallest prediction deviation. By using the Monte Carlo simulation and alternate models technique the failure can be estimated. The studies shows when we reduce the maximum crack size (by limiting inspection threshold) and increase the fatigue threshold (by improving fracture toughness of a material) it helps to reduce the failure. This thesis also gives a review on fundamentals of rolling element bearing designs and technologies. The purpose of the study is to make an interrelation of all fundamentals with the rolling contact fatigue and maintain bearing life. The fundamental includes other bearing stressing and life capability. It also shows the different types of rolling bearing stressing and the analysis of the stress distribution (principal stresses and equivalent stresses) in the material under the rolling contact area. As it is clear that with the combination of bearing with foreign particles extremely reduce the bearing life. Hence, the impact of the bearing, lubrication and coating as well as the effect of additives on the attainable life and wear. Therefore, the fundamental of rolling element bearing design are the materials and the material cleanliness and the heat treatment. The importance of the cleanliness of bearing steels as well as different types of inclusions and their effect on rolling contact fatigue. Furthermore, it describes how to optimize the material properties (strength, toughness and residual stress) by the heat treatment processes. The result of these investigations is that capacity life of a rolling element bearing can be achieved only when the specific operating conditions an adequate lubrication, good system cleanliness and specific bearing stressing are combined together. 5.1.2 INTRODUCTION The Bearing is a machine element which is used for rotation in every machine. Bearing helps in smooth friction of rotation and linear movement between two surfaces. It works both the ways whether a sliding or a rolling action. Today if we reduce the friction in all the rolling bearing which is used then it an energy saving which is equal to the combined output of not less than 25 large Nuclear Power Stations. Bearing is further divided into two parts- 1) Bimetal Bearings- It is also known as engine bearings. It is used in engines of automobiles or machines. The bearings are used to reduce the friction between the moving parts of the engine crank shaft or related support surfaces. 2) Antifriction Bearings- are essential to mechanized equipment they hold or guide moving machine parts and minimize friction and wear. It is a simplest form of bearing which consists of a cylindrical shaft, called a journal, and a mating hole, serving as the bearing proper. It includes ball bearings and roller bearings. Roller bearings are subdivided into tapered roller, cylindrical roller, needle roller, thrust bearings and other special application bearings. The main components of an antifriction bearing are the inner race (ring), the other race (ring) the rolling elements, cages (retainers) and seals. Different types of bearings are given below Ball bearing – are small metal balls placed between the moving parts of a machine to make the parts move smoothly. It consist of a number of hard steel balls rolling between a metal sleeve fitted over the rotating shaft and an outer sleeve held in the bearing housing, by reducing friction between moving parts while providing support for the shaft. Cylindrical roller bearing- is bearing in which cylinders are used as the rolling elements as opposed to balls in ball bearings. The rollers have a greater (linear) contact area with the outer ring and are distribute loads across a broader surface. So, they have a relatively high radial load capacity and are suitable for high speeds. Double-row cylindrical roller bearings have high radial rigidity and are used primarily for precision machine tools. Tapered roller bearing- are rolling element bearings that can support axial forces (i.e., they are good thrust bearings) as well as radial forces. It is widely used for fleet, automotive and other ventricular applications. Its construction differs from ball bearings and other types of roller bearings. The rolling element and both races bearings slant inward much like a cone. The advantage of this design is that the tapered rollers have a positive alignment with the shaft. Each roller will align itself perfectly on the tapered faces of the cup (outer race) and cone (inner race). Tapered roller bearings have other roller bearings types also which include cylindrical roller bearings and needle roller bearings. The taper roller bearing seems like a wide edge of a cone rather than a circle. There are two advantage of this design. 1) True rolling motion is obtained. 2) The bearing can handle all loads-radial, thrust or both in any combination. Advantage of tapered roller bearing 1) The tapered roller bearing is its cone shaped design. This is a major development in bearing design and operation. Each roller in the bearing can align itself perfectly between the tapered faces of the cup and cone without guidance by the cage. The larger end of each roller has been ground so that it is square against the rib along the back of the inner race (fig.10) without the rib rollers would be forced from the cage (fig.11). Each roller revolves about the cone a wide area of contact is made between the large end of the roller and the rib. This wide area of contact compels each roller to maintain accurate alignment. With each roller perfectly aligned between the two races, the bearing works to maximum productivity. Each roller has an equal share in the total workload. Rib restrains rollers in bearing (Fig.10) Without proper restraint the rollers would be forced from the cage (fig.11) There are grooves cut in the sides of the rollers pockets that correspond to the curvature of the roller when it is in the cage. The separator also called the cage is constructed with an open space over each roller. This permits the rollers to turn evenly without any disturbance by the cage interference. 2) The bearing ability to support radial and thrust load simultaneously which result of its internal design. A radial load on a tapered bearing produces both radial and thrust reaction. The rib restrains the rollers and counteracts the load. So, adequate lubrication and proper end play adjustment are necessary to prevent excess operating temperatures. When carrying simultaneous loads, the bearing must be adjusted with another bearing capable of carrying thrust loads in the opposite direction. Types of roller bearing -There are two main categories of rolling bearings. Ball and Rollers but it also includes- Tapered Rollers Cylindrical Rollers Needle Rollers There are two main types of roller bearings one with non-tapered rollers which is cylindrical and needle rollers and other with tapered rollers. Further classifications of bearings are as follows Roller Bearings Single row deep groove ball bearings Thrust Ball Bearings Maximum capacity type ball bearings Ball and Roller Bearings Self aligning ball bearings Thrust Roller Bearings Single row angular contact ball bearings Duplex angular contact ball bearings Double row angular contact ball bearings Four point contact ball bearings Radial Ball Bearings Ball Bearings Radial Roller Bearings Single direction thrust ball bearings with flat back face Spherical roller bearings Single direction thrust ball bearings with seating ring Cylindrical roller thrust bearings Double direction thrust ball bearings with flat back face Tapered roller thrust bearings Double direction thrust ball bearings with seating ring Spherical roller thrust bearings Double direction angular contact thrust ball bearings Single row tapered roller bearings Single row cylindrical roller bearings Double row cylindrical roller bearings Double row tapered roller bearings Needle roller thrust bearings Designed for bearing are given below Reduce friction- in any automotive or industrial applications, bearings is designed in such a way that by reducing the friction it keep the shaft moving smoothly and consistently. For rolling bearing with its internal mechanism it reduces the effort and energy to slide or move an object over the surface. So the invention of the bearing is very important. Support a load- The load is dependent on both weight and direction, so the shaft has to push the bearing in the same direction in which the load moves. If the wrong type of bearing is used then it is unable to carry the required load. There are three types of loads Radial load-When the direction of the load (weight being moved) is at right angles to the shaft it is called a radial load. The load pushes down on the bearing (fig.1). The word radial means in the direction of the radius moving from the circumference inward or the center outward. In this case it moves from the outside in. A radial load pushes down from the outer race inward to the balls, cage and inner race at the corner of the bearing. The load is at right angles (90 degree) to the shaft on which it is being supported (fig.2) (Fig.2) ii) Thrust load-When the direction of the loads is parallel to the shaft then it is called a thrust load. The load pushes sideways on the bearing (fig.3). (Fig.3) Thrust means a pressure or pushing force extended by one part against a touching part. Pressure is extended sideways pushing the shaft either right or left. This shaft movement then pushes the inner race of the bearing in the same sideways direction. The lien of pressure that is the load runs parallel to the shaft (fig.4) (Fig.4) Angular load-When the direction of the load is a combination of radial and thrust is called an angular load. The load pushes down sideways on the bearing (fig.5). (Fig.5) An angular load is a combination of radial and thrust loads. When the load moves at an angle towards the shaft it pushes against the corner of the inner race. Pressure is transmitted diagonally through the corner of the race, cage and rolling elements to the opposite corner of the outer race (fig.6) (Fig.6) Guide moving parts (wheel, shafts, and pivots) – It is the final output of the other two frictions by supporting a load while reducing friction, a bearing guide shaft operation. It helps the movement of important shafts wheels and pivots. The rotation part cannot continue their operation in smooth and constant basis if bearing is not there. Bearing is one of the important machine elements which are used in many applications as rotating component. It also supports another moving machine element helps the relative motion between the rolling elements. Bearing consist of balls or rollers positioned between raceways. Depending on the bearing design specification, the loads acting on the bearing may be angular, axial or radial. Ball and roller bearing is appearing as simple mechanism but their internal operations are very complex. In a very extreme operating condition of heavy loading, very high speed and very high or low operating temperature can cause bearing failure. It is a continuous process for bearing engineers whose main aim is to develop advanced bearings which provide higher efficiency, lower friction and are less sensitive and more reliable when the application run under adverse operating conditions. The demand for bearing is crucial so advanced technology is applied to meet the operating requirements. It is important for both the rolling bearing user and the rolling bearing manufacturer who will cooperate with each other from the beginning of the design so that it will meet the application requirement and bearing performance capabilities so that they will develop best design solution at the lowest system life cycle cost for the user. In critical operating condition of heavy loading when design requirements does not met then it causes heavy deflection, vibration high frictional torque and temperature. Failure of ball and roller bearing due to interference of the lubricant supply to the bearing or inadequate delivery of the lubricating oil to the raceway contact. With continuous research and development done by bearing manufacturer to develop and advance the bearing performance capabilities. It includes the bearing designs and analysis, materials heat treatment and surface engineering technologies. The bearing manufacturing technologies give an impact on the bearing performance capabilities and operating reliability. Ball and roller bearings are mostly used in different industrial machinery to provide relative motion and support load in rotating shafts. Ball bearings with metal raceways and balls subsurface originated spalling and surface originated pitting have been recognized as the dominant modes of failure due to rolling contact fatigue (RCF) (Sadeghi et al., 2009)107.Bearing subsurface material is related to RCF cycles which include a complex tri axial stress state, non-proportional loading, high hydrostatic stress component and changing planes of maximum shear stress during a loading cycle that leads to a subsurface crack. The spalling failure occurs when subsurface crack increase towards the surface to form a surface spall (spadeghi et al., 2009)107. This mechanism is the dominant mode of failure in rolling element bearings that have smooth surfaces and operate under elasto hydrodynamic lubrication (EHL) conditions. Surface introduces pitting where the surface irregularities in the form of dents or scratches are present. There cracks initially seen at the surface of stress concentrators and then increase at a shallow angle to the surface (Bower, 1988)108.This mechanism of failure is very common in gears where substantial sliding occurs between the contact surfaces. Ball bearing can be divided into three categories i.e. radial contact, angular contact, and thrust. Radial contact ball bearings are designed to support radial loads. Angular contact bearing design to support combination of radial and axial loads. Thrust bearings design to support axial loads. Due to surface cracks of silicon nitride ball bearings under rolling contact have been addressed by ring or C-cracks is the main reason for failure (Hadfield, 1998)116, (Hadfield and Stolarski, 1995)117, (Hadfield et al., 1995)117, (Kida et al., 2004)118, (Wang and Hadfield, 2000 a, b, 2001)119,120,121, (Wang et al., 2000)122 and wedge effect models (Chen et al., 1996)123. In the C-crack model the Hertizian contact stresses occurring around the perimeter of the bearing contact area are thought to dominate the crack growth. In the wedge effect model, the fluid pressures insert into the crack by contact pressure. When the fluid is pressurized by the maximum contact pressure at the contact center then it causes crack growth. The mechanisms of these two models have been investigated separately. Surface crack is affected by the stresses under in both model when the ball passes over the crack (Oguma et al.,1997)124, (Wang and Hadfield, 1999)125. The stress intensity factor at the crack tip is also adversely by the presence of friction induced fraction forces at the contact. Hence, the effects of the fluid pressure are not well understood or characterized but the dominant mode of failure is thought to be crack growth driven by SIFs arising by the contact patch passing over the C-crack (Hadfield, 1998)116, (Hadfield and Stolarski, 1995)117, (Hadfield et al., 1993)113, (Oguma et al., 1997)124, (Wang and Hadfield, 1999, 2000 a, b, 2001)119,120,121,125, (Wang et al., 2000)122. Partial cone or C-crack are considered the most damaging surface defect which limits ball life in hybrid bearings under service conditions (Evans, 1983)126, (Hadfiled et al., 1993)113. The fatigue damage process in ceramic rolling elements is very different from metal balls. RCF in metal bearings is manifested as a flaking of metallic particles from the surface of raceways or rolling elements. When a crack below the surface and increased to the surface, then form a pit or spall in the load carrying surface (Harris, 1991)127. Bearing fatigue life is based on the seminal probabilistic life model by (Lundberg and Palmgren, (LP) 1947)128 and was first proposed in 1945. Many improvements done to the LP model but current probalistic bearing life prediction methods are based on the ISO standard set up in 1989 and continue to rely on extension to the LP model are empirical in nature and include variables that are obtained from extensive experimental testing. 1. Bearing Life and Endurance limit Bearing life means the total no. of revolutions or time period a bearing perform under stated conditions before failure. Based on the operating conditions the scope of the bearing life is defined. In case of heavy machinery, small flaking or spalling on the bearing may not be considered as an immediate failure and its life can be increased with proper maintenance. It has some limiting factor where the application demands high precision control and sensitive even to vary slight dimensional variation, noise or vibration. More commonly the life of a bearing is specified by L10 (or B10) life which is defined as the total number of revolutions in which 90 of identical bearings will survive under the same operating and environmental conditions before failure by fatigue. The operating load and speed are the prime factors in estimating the L10 life which is given by Lnaa1.a2.a3(C/P) p Where, Lna- rated life in millions of revolution (106) a1 -reliability adjustment factor a2 -material adjustment factor a3 -operating condition adjustment factor -basic dynamic load rating in Newton P -equivalent dynamic load in Newton p -3 for ball bearings and 10/3 for roller bearing With the proper selection of bearings for a given application, the bearing fails predominantly by fatigue and can be estimated by the above equation. There are many other parameters like improper selection of bearing for a given application, inadequate lubrication, improper installation, excessive loading/ preloading, vibrations, impact loading, environmental factors, like corrosive media, temperature, contaminated environment, that can cause a bearing to fail before its predicted life time and are classified as premature failures. The failure mode of a bearing apart from fatigue includes plastic flow, fracture wear, corrosion and electrical fitting. By collecting data on application of the bearing and operating conditions during running. When the failure damage analysis can be made by studying the mode of failure and its most probable root cause for the premature failure can be established. If more than one parameters is involved in premature failure, then it will increase the complexity of identify the root cause Damage analysis made on the early stage of the front wheel outer tapered roller bearing. The service life of bearing is expressed as a period of time or as the total number of rotations before the occurrence of failure in the inner ring, outer ring or in rolling element (ball or roller) because of rolling fatigue due to repeated stress. Rated life of the bearing expressed as the period at which equipment or machines element fails under specified conditions of use given by its manufacturer. The service life of bearing differs from rated life where bearing failure may cause by poor lubrication, misalignment and mounting damage before its actual life. During 1970s and the early 1980s the FAG Kugelfischer research work has given the important step regarding the knowledge and understanding of the bearing life capabilities. It is connected with the discovery of the endurance strength. This discovery was abruptly revolutionary and had a stimulating effect on the development of bearing technology. 2. Real fatigue life behavior of rolling bearings The real fatigue life behavior of rolling bearings was not discovered recently. Main cause is seen with the high loads which were used to accelerate ageing in life tests, the negative effect of contamination was comparatively small for this reason it was underestimated. The same kind of damage patterns with and without particle cycling disguised the actual damage course fatigue cracks develop on damage surfaces, particularly at raised edges around the particle indentations on the rolling elements in contact. The subsequent cycling causes them to penetrate into the depths to the zone of the highest equivalent stress where they increase and ultimately causes pitting and flaking of material. The pitting has developed from an indentation which was intentionally produced. In early stage such as flaking cannot be differentiated from classical fatigue pitting where the crack formation start at a weak spot somewhere below the surface in the most highly stressed subsurface material zone. FAG has adjusted the life calculation process standardized in DIN/ISO the takes the latest findings well into consideration for aerospace bearings these new findings and the life calculation method have been adopted accordingly. 3. Rolling bearing endurance strength Endurance strength is known for materials and components. It was not known previously till the researcher was working on why the roller bearing not achieves the endurance life which is known for many other components. The FAG has proven that there is endurance strength for rolling bearings and to describe the necessary pre conditions under which endurance life for bearing can be achieved. Fig.1.19 displays the correlation which FAG discovered and introduced in international presentation and publications for the first time in 1981. In comparison to the assumed life behavior, the standardized in DIN/ ISO the left straight line FAG found the actual correlation between the life and the specific bearing stressing which the right curve in fig.1.19 shows. It shows that endurance life can be achieved with rolling element bearings which is mandatory for the validity of the right curve with surface separation by an elasto hydrodynamic lubrication film and clean lubricant. Operating stresses of some rolling bearing applications are also entered in fig.1.19 in order to demonstrate the importance of that finding for these and many other applications. In these applications the importance for endurance life are completely or largely met for life improved bearings. When there is high influence of stress, it minimizes the bearing stress and maximizing the load carrying capability. By minimizing the contact stressing in the bearing with external load is a particular challenge to the bearing engineer. It is important to optimize the bearing design with consideration of the surroundings parts and construction. A high degree of cleanliness reduces stress as well and prevents indentations with stress concentration in the rolling contact area during the subsequent cycling. The operating condition also influences the bearing stress. Lubrication film and additives in the lubricant is good for surface separation and mixed friction reduces extra stress arising from friction within the contact area. Material technology is necessary for maximizing strength. When the stress is minimized then material strength determines the attainable life mainly in material properties such as residual stresses induced by the machining process as well as by the heat treatment. The endurance life behavior presented by the FAG is confirmed and verified in millions of bearing applications that have been designed, since FAG introduced the adjusted fatigue life calculation method in 1985. 3250 Attainable life (test) 3000 2750 Contact 2500 L10 DIN/ISO Pressure 2250 2000 Lubricated aerospace Application high speed grease bearings, m/c tool bearings 1750 0 1 10 100 1000 Related life L10 DIN/ ISO- Rated life with 10 failure probability Dig.1.19 Actual attainable life in comparison to DIN/ISO life calculation (un factored) 4. Lubricants at mixed friction full fluid film lubrication, mixed friction Formation of a separating lubricating film between surfaces in rolling contact with oil or grease lubrication, rolling bearings reach the longest possible life with full fluid film lubrication. 4.1 Boundary layer A boundary layer is created by reaction of the additives in the near surface zone under the conditions existing at the contact area such as pressure, sliding motion and temperature. The repeated reaction yields a constant renewal of the layer in the case of layer loss and thus for a steady separation effect. The boundary layer thickness varies from a few tenths of a nanometer (nm) and several nanometers. It includes chemical compounds containing the example phosphorus, sulphur, oxygen, carbon, zinc, copper and nitrogen. Different elements contribute to the layer formation depending on the additive properties. The share of such elements decreases differently with the increase depth into the surface zone and so the boundary layer can be measured by Auger analysis which works in the nanometer range. 4.2 Operating behavior and damages in mixed friction range Depending on lubrication the mixed friction affects friction and wears behavior with the extent of sliding friction that occurs within the bearing contact areas and on other rubbing areas such as the case piloting surfaces, the rolling elements/ cage contacts or the roller end face contacts. Rolling contact areas with large shares of sliding friction are exposed to severe wear under unfavorable lubrication. Bearing types with higher sliding at mixed friction have coefficient of friction that can be a multiple of the coefficient with full fluid film lubrication, depending on the type of lubrication. If lubricants with extreme pressure (EP) additives are used in the mixed friction range then the contact surfaces are usually smooth and friction reduced to a moderate extent. Hence some lubricants lead to changes the geometry in particular in zones with sliding friction. Depending on additives and temperature different patterns of wear development can be recognized. At temperature between 30 degree Celsius and 120 degree Celsius there is no measurable wear with EP oil I the additive package contains additives which are effective at different temperatures. With EP oil II at 30 degree Celsius running in wear occurs during the first 20 operating hours then wear stops. The running in wear is found preferably near the roller ends and the running track edges which are the sliding zoned i.e. protection is insufficient. Wear increases slowly and too moderately with EP oil II at 80 degree Celsius to 120 degree Celsius. The additive package is more effective at 120 degree Celsius than at 80 degree Celsius. 5. Industrial bearing failure by rolling contact fatigue (RCF) Rolling element bearings are mostly used in industrial machinery to allow relative motion and support shaft load. Rolling contact fatigue includes tri-axial stress state, high hydrostatic stress component, and non-proportional loading and during loading cycles changing planes of maximum shear stress that leads to sub-surface cracks. RCF occurs due to the result of cyclic stresses developed at bearing contact surface during operation. Due to sliding forces it can cause failure to originate at the subsurface that propagate parallel to the surface and it may reduce bearing life. Rolling contact fatigue is divided into two categories i.e. surface and sub-surface initiated. Further classification of RCF is done by location and appearance of the fatigue and factors that leads to cracks initiation which causes bearing failure. These factors related to lubrication materials, operation and mounting. Fractography play a vital role to identify these defects. 5.1 Wear Mechanism RCF wear mechanism involves fretting. Fretting wear may be of two types i.e. contact corrosion and brinelling. Contact corrosion takes place between the bore of the bearing and the shaft. Fretting occurs within the contact area of the bearing also referred as false brinelling. Brinelling is defined as damage to a solid bearing surface characterized by plastically formed indentations due to overload, generally caused by vibration. False brinelling detected after starting of machine and at extreme high loads due to loud sound generated in the machine component. Lubricant is squeeze out between the contact area of rolling elements raceways, resulting in direct metal- to- metal contact that causes wear. At the contact area between the rolling element and raceways lubricant is squeezed out that leads to wear due to direct contact of two metal surfaces. At normal running false brinelling does not occur while at rest, bearing of machines subjected to vibration, due to fretting occurred between the loaded rollers and race and that giving rise to the false brinelling. The rollers left deep and clearly defined impression on the shaft. Vibration causes wear of the surface in contact and the fine abrasive particles produced rapidly that results in a characteristics grooves with the oxide acting as an abrasive The damage was identified as false brinelling because of the dull surface with little trace of the original surface finish remaining at the bottoms of the indentations, although the shaft was also brinelled by a very extreme load.. The corrugated surfaces produced by false brinelling may produce excessive noise and cause premature spalling by rolling contact fatigue. Experimental details A detailed study is done on the failure of bearing which include visual examination, chemical composition, micro hardness, microstructure, retained austenite measurement, wear debris analysis and scanning electron microscope (SEM) studies. Bakelite mounted and polished cut sections were used for metallographic observation and microphones measurements. Visual examination was carried out using spark emission spectrometry. The damage cage was carefully cleaned using petroleum benzene and the wear debris collected after filtration of the solvent for particle size analysis using an image analyzer. The microstructure was studied after etching with 3 Nital. Retained austenite content was measured using X-ray diffraction (XRD) technique on the roller surface and cone raceways. 7. Operating conditions-it is further sub divided as mentioned below Tolerance- When there is a size, finish and diameter requirement, and then all bearings should meet AFBMA (anti-friction bearing manufacturers association) standards of bearing manufacture or the ultimate use of the bearing. In tapered roller bearing for example cups and cones are interchangeable. Tolerance is the amount of deviation from given nominal dimensions permitted by the company. Internal bearing clearance- It is important because rollers have to turn without building up excessive heat and friction during operation. The amount the inner race move as opposed to the outer race under a given radial or thrust load is called bearing clearance. It is measured by how much space there is between the internal parts during operation (fig.7). To prevent excess heat buildup when rollers turn at higher operating speeds then roller bearing needs a small amount of space internal clearance. Good performance under radial loads, ball bearing must have minimal clearance because the groove in both races of a ball bearing is designed to provide ample clearance. (Fig.7) Cage clearance- In tapered roller bearings there must be enough clearance in the housing for the cage. If the cage levels against the housing it can cause the rollers to drag. If the clearance is not sufficient the cage may became distorted and worn which can cause misalignment and slanting of rollers. Then there is possibility of premature bearing failure. Bearing seats – Bearing races are mounted on areas called seats. The cup seat in the housing (fig.8) while the cone seat in the shaft within these two seats are upward extensions on which the races rest. They are called shoulders. (Fig.8) Alignment- The bearing cup and cone seats the shaft and housing must be properly aligned. When the bearing is misaligned then the rollers will not carry the load along its entire length. Misalignment can reduce the capacity and life of the bearing which is proportionately to the amount of misalignment. They will carry the load but only on a small portion near or at the ends of the rollers. This cause a concentration of load in a small area on the inner and outer race which could result in clipping and early bearing failure (fig.9). (Fig.9) Shaft and housing condition – For proper bearing performance the conditions of the area in which the bearing sits the shaft and housing is pivotal. When the seat the shaft and the housing supports the bearing then it should have good surface to surface contact. If seat has a rough finish or is not round then the bearing does not have the surface contact area which is necessary for proper performance. 8. Operating temperature- Every component of the bearing is constructed of materials which not only handle the load but also accommodate with temperature fluctuations. There are different types of load, shaft, speed and amount of friction all combine and give the most critical conditions for operating temperature. All heat is not due to environment but the bearing may cause excessive heat because of Surface friction from too little lubricant Excessive churning from too much lubricant Friction between the rolling elements retainer and races Too heavy of a load resulting in deformed races and rollers 9. Lubrication- Right type and amount of lubricant for the job is important for bearing performance. Whenever bearing use excess friction then heat rises accordingly. Regular lubrication helps relieve the heat which results from bearing friction. 10. Material and heat treatment- AISI52100 alloy steel is used as rolling contact bearing material. The demand of the material used for the elements in rolling contact may vary just as widely as the types and sizes of rolling bearing. Chemical, mechanical and thermal properties of AISI52100 steel. It has high compressive strength, low cost, good wear resistance and excellent corrosion resistance in oxidation and acid atmosphere. Hence, thorough analysis of the stress condition is required for selecting the appropriate material. Material composition was evaluated by spark emission spectrometer and the chemical composition (in weight percentage). High strength, resistance to wear, high temperature hardness and dimensional stability, corrosion resistance certain magnetic properties and low noise operation are bearing characteristics, some of which tend to have a contradictory effect. Selection criteria are always of the technical economical type which can qualify the quality and reliability, availability and machine ability. TYPES OF ROLLING BEARING STRESSING To introduce the external loads into rolling contact elements under the other operating conditions like speed, lubricant type, lubricant amount all design specific and production related possibilities like contact geometry, surface quality should be considered, to minimize internal material stress of the elements in rolling contact. Stressing of a rolling contact element is the reaction to an external load acting on the rolling bearing. The load can be mechanical but also thermal or chemical stressing can affect the bearing. There are four major stressing types of elements in rolling contact. 1) ELASTOHYDRODYNAMIC LUBRICATION The coordination of bearing load, speed lubricant viscosity and surface quality of the contact areas can give a load carrying lubricating film in between elements in rolling contact which are then fully separated. The depth profile of the equivalent stress which was calculated according to the distortion energy hypothesis shows the peculiarity of this stressing condition. Ideal elasto hydrodynamic (EHD) lubrication conditions are all loads which are transmitted is normal loads. With the normal loads, the stress distribution in the material can be calculated. The maximum stress occurs at a certain depth below the surface under such stress conditions, rolling bearings reach the longest lives and even endurance life can be achieved. After very long running time, the life of a rolling bearing is limited by the formation of first subsurface cracks which typically progress to macroscopic pitting. The locations and effects depend on the distribution of internal defects in the material and on the stress distribution within the rolling contact partners which differ in time and location. 2) MIXED FRICTION The processes near the surface are more important under the second type of stressing the mixed friction. The processes inside the material determine the length of life under EHD conditions. If a load carrying lubricating film is not formed during operation, then the roughness peaks of the contact areas will touch one another. This can happen with the stationary bearing. Normal forces from the Hertzian pressure, and tangential forces caused by mixed friction are superimposed at the surface. The changes of the surface topography are clearly visible under the SEM. Due to an unsuitable lubricant and also during the starting and stopping phases of a bearing otherwise running under EHD conditions during the steady state operation. The calculation of the depth pattern of the equivalent stress shows that the consequence of the additional friction stress, the maximum stressing is moved towards the surface. 3) WEAR The degradation of the lubricating conditions can cause solid body friction in dry condition, which is called wear. This condition does not represent a normal operating condition in cases where short lubrication breakdowns may occur. Under these conditions the rare elements in rolling contact are damaged and put out of function due to wear. Some beneficial resistance against wear is tried to be provided by protective coatings or by the reaction layers formed by suitable lubricants and their EP additives. 4) PARTICLES IN CONTACT AREA The list of contaminants in the lubricating gap is like foreign particles at the contact area are much more frequent than dry friction. The particles also vary widely in size, shape and distribution. Foreign particles which enter the bearing together with the lubricant damage the contact surfaces by indentations. Their hardness differs from very soft to extremely hard in relation to the hardness of the elements in rolling contact. The material around the indentation is plastically deformed and work hardened favorable residual stresses from heat treatment and/or machining are greatly disturbed. The larger the particles the indentation caused in the rolling contact area. The contaminants can be mineral particles like mould sand grit or metallic ones like chips, grinding dust, abraded material. The material edged up around the indentation penetrates the lubricant film and causes local mixed friction. The result of damage is a bearing life reduction which can be drastic. The greater is the life reduction. In some situation cycled particles can get embedded in the surface of one of the parts in rolling contact, then act like a cutting tool and wear down the mating part abrasively. FAG has investigated the fundamental co-relations and uses the results for actual bearing designs, so as to achieve the optimum life capability even under such adverse operating conditions. There are different forms of stress types described the following factors for an optimized bearing design. Chemical stressing due to corrosive surrounding media Thermal stress in case where the bearing and lubricant are heated by an external heat source. Additional mechanical stressing from extreme operating conditions i.e. high hoop stresses from centrifugal forces in the rings caused by very high speeds, stress from tight fits etc or bearing deformations, bending or vibratory stressing etc from integrating the rolling bearing function into a complex statically or dynamically stressed component. FAG always make the greatest effort to analyze in close cooperation with the customer, the stress as precisely as possible and to assess the requirements on material and specific material properties accordingly. This is done with the help of theoretical means such as FEM calculations as well as with experimental means like material failure analysis. 4.1 MATERIALS FOR RINGS AND ROLLING ELEMENT It includes the use of special materials and special productions methods. The availability and inability (deform ability, heat treatability) influence the material selection. The most commonly used rolling bearing steel 100 crb the following describes the demand to be made on the material and how the strength and fatigue characteristics can be optimized by the suitable heat treatment. Every application a solution is prepared which will serve the purpose of technical and economical points. The fatigue behavior of such high strength materials is influenced by processes which take place at internal imperfections (non-metallic inclusions, carbides, pores).The specific stresses at the rolling contact area require high static and dynamic strength which can only be achieved by material conditions at a certain minimum hardness. The adverse effect of non metallic inclusion is steel 100 Crb on the rolling bearing life. It is demonstrated by the number of attainable cycles versus the index of microscopic cleanliness determined for the individual heats. Objective of material optimization is to reduce the number and size of these internal notches or to produce a position effect on their distribution or minimize their risk potential. The development of rolling bearings with better life and reliability capabilities required among other measures to constantly improve the melting processes. The correlation rolling bearing steel is the greatest challenge to the steel making industry. By new technologies the secondary metallurgy rolling bearing steel has developed in previous years into a material of supreme cleanliness. Under this precondition FAG could for the first time prove in tests that endurance strength applies also to rolling bearings and that endurance life can be achieved. FAG is in continuous cooperation in order to monitor and further improve the quality of bearing steels. The special requirements of the rolling bearings steel have always been a pacemaker in development of the steel making industry and are the motor for the development of good quality and reliability in continuous casting being one of the most modern steel making processes. The approval of steel supplies by FAG is product specific and it is subjected to stringent and clearly defined criteria it is part of a comprehensive quality management concept within FAG. 4.2 OPTIMIZING MATERIAL PROPERTIES BY HEAT TREATMENT Rolling bearing components are heat treated in the most modern automatic furnaces with full process control. When quality is also included in the steel making process, then it takes full effect during processing in particular in heat treatment. The most common procedure is martensitic hardening, the processes parameters are adapted in such a way that the required high hardness is reached at the greatest possible plastic deformability. (a) STRENGTH AND TOUGHNESS PROPERTIES Martensitic heat treatment of through hardening chromium steel allows achieving a wide range of specifically engineered material properties. These possibilities can be done by two typical bearing rolling part characteristic name as the hardness and retained austenite. Different combinations of the austenitizing and tempering temperatures, the same hardness values can be brought by the lines of identical hardness in the contour chart. The lines of same retained austenite content show the obvious trend which prohibits too high austenitizing temperature from small retained austenite contents (which is a prerequisite for dimensionally stable bearings) and demands high tempering temperature. Hardness alone is not a sufficient criterion for maximizing the fatigue capability of a rolling bearing. These interrelations and contradict with each other are important to understand in order to optimize the bearing material and bearing performance characteristics. Bearing which were tested within the wide range of 58 to 65 HRC the hardness has no significant effect on the life. The cyclic yield strength is the relevant material parameters but for simplification reason it can be replaced by the elasticity or micro strained yield limit for high strength steels. In the first approximation material condition with a very high resistance to plastic deformation offer the highest fatigue strength. The optimization of the raw materials the heat treatment parameters and consequently the final properties of bearing material are complex tasks in particular because the fatigue processes do not take place in a flawless homogenous material matrix but are clearly localized in a material which is comprised of different structure types (martensite, retained austenite, carbides) and which non metallic inclusions as internal notches. A cyclic strength delays the occurrence of plastic deformation which is the first stage of the fatigue process. Other material parameters the plastic deformability, indicates the extent to which a material condition accommodates plasticization until first cracks form. (b) EFFECTS OF RESIDUAL STRESSES ON COMPONENT STRENGTH AND LIFE CAPABILITY The residual stress condition has a positive effect on the component strength and life capability. The processes for heat treating rolling bearing steels i.e. martensitic hardening, austempering and induction hardening of surface layers lead to characteristic residual stress conditions in the components. (c) DIMENSIONAL STABILITY OF ROLLING BEARING Effort is to minimize stressing by design and lubrication is useless if the components in rolling contact change their dimensions during operations. Loosening of the press fit on the shaft, clearance alteration or loss of preload may induce premature bearing failure. Material dependent property for reliable rolling bearings is their dimensional stability. The effects of temperature and time reduction of retained austenite lead to an increase in volume and carbide precipitation in the martensite leads to a decrease in volume. Dimensional instabilities are caused by transformation of the retained austenite and martensite is hardened rolling bearing steel. Both processes together result in the total dimensional change of a component. Hence, more the changes in volume described are stress depending and follow the laws of least constraint that is, tensile stresses support dimensional growth ( for example caused by a tight press fit on the shaft) compressive stresses stabilize retained austenite and force the dimensional change into that direction in space where compressive stresses its not act. 5. ROLLING CONTACT FATIGUE The trends towards lower weight and low or no maintenance bearing designs demands more reliability and longer life which is a great challenge to rolling bearing makers. Demands on rolling bearings are constantly increasing. Important step forward in meeting these demands is the utilization of all capacity reserves of the bearing material. If there is a fundamental knowledge of the material behavior, origin and progresses of damage under rolling contact stressing. Material selection and the micro structural state of the material must be optimized performance and capacity which will be yielded by this optimization must be predetermined as accurately as possible. The basis for the investigation is the antagonism between the location of maximum material stressing according to the traditional theory of the rolling contact fatigue and the origin of damage in practical cases. The evaluation of weak points in the hardened material in particular non metallic inclusion is very important for increase of the endurance strength limit. The highest material stressing and the starting point of classic fatigue damage is at a certain depth below the surface. So, cracks are generated much closer to the surface or even directly at the surface. 5.1 MATERIAL STRESSING UNDER CONTACT PRESSURE The basic stressing in rolling contact is characterized by the Hertizian contact pressure. The stress distribution in the material below the contact areas by the direction and magnitude of the principal stresses. The elastic deformation a semi-elliptical load distribution take place in the contact zone of the two elements in rolling contacts. The centre of the contact area is chosen as the origin of coordinates. A comparison between this theoretical statement and findings from actual rolling bearing failures shows that in many cases the damage starts near or at the surface even where the bearings are run under ideal EHD conditions and therefore with a very low coefficient of friction within the rolling contact area. The principal stresses at the surface reach the same magnitude which results in the low equivalent stresses at that area. Expressed in a simplified way the equivalent stress reaches its maximum where the difference between the three principal stresses is the greatest. 5.2 EFFECTS OF INCLUSION ON ROLLING CONTACT FATIGUE Inclusions in the steel cannot be entirely avoided in the steel producing process. The properties of the inclusions are entirely different from those of the surrounding matrix. It is technically not feasible to remove them completely the extent of their reduction by specially developed processes has technical and economical limits. There may be sub microscopically small cracks in the phase boundary area of non metallic inclusions. It is possible at great expenditure to reduce certain inclusions types to very small residues so from the higher cost also other drawbacks must be accepted. The share of other inclusions for example may rise or a different composition of alloy may be required. With some inclusions types the different thermal expansions lead to the formation of tensile stresses along the phase boundary. The evaluation of the performance and capacity of rolling bearings require the microscopic analysis of the material stressing under consideration of the presence of non metallic inclusions. Their effects on the material strength are varying widely. The phase boundary is usually incoherent and in positive contact with the matrix. The strength and toughness properties of the inclusions have effect on the material strength which inclusion properties become particular important in operation depends largely on the operating conditions. (1) TYPES OF INCLUSIONS Inclusions in steels is most widely varying properties. The inclusions types vary in their morphologies and their properties. The condition of the phase boundary, the hardness, brittleness, possible cooling residual stresses and the internal notch effect are of particular importance for the rolling contact fatigue behavior. (2) INTERNAL NOTCH EFFECTS DUE TO DISTURBED FLOW OF FORCE The different elastic properties of the inclusion disturb the flow of force. A stiff inclusion i.e. an inclusions whose modulus of elasticity is higher than that of the matrix, support the matrix because it attracts the flow of force. Soft inclusion with a smaller modulus of elasticity than the matrix some of the forces by pass the inclusion. The matrix is relieved at the pole area and more loaded at the equator than would be the case without an inclusion. This will put stress on the inclusion and also on the matrix in the zone where force flows into the inclusion. Even at an external uniaxial load very inhomogeneous stress condition prevail around inclusions. The photo elastic analysis the effects of inclusions can be assessed with finite elements method (FEM) calculation and in special cases with analytical calculations. FAG makes use of those possibilities to assess the effects of inclusions in areas under contact pressure. The rolling contact fatigue is for optimization of the rolling bearing materials and for the increase of bearing performance and capacity. All important types of inclusions have considered with their properties and the maximum equivalent stresses in the matrix depending on their positions relative to the center of the contact area. The notch effects of different inclusions may differ widely. The elastic properties of the inclusions and in particular their hardness and brittleness play a decisive role. It depend on these properties whether the internal notch effect caused by an inclusion is softened by plastic deformation or whether a crack is generated inside or near the inclusion. APPLICATION Tapered roller bearings are used in automobiles, trucks, tractors and various farming vehicles including Front wheels Differentials Transmission Rear axle shaft Trailers wheels Transfer cases TROUBLESHOOTING Ball and roller bearings are designed for longevity. Their life expectancy based on metal fatigue, which can be calculated if general operating conditions are known. It causes due to improper lubrication to incorrect mounting to poor condition of shaft housing or bearing surfaces. Bearing failures not caused by normal material fatigue are called premature failures. Premature bearing failure can be avoided. To identify the visible danger signs on bearing shaft and housing surfaces. These signs of bearing damage include BRINELLING- It refers to indentations pressed into the bearing race, so small that they are hardly visible to the eye. This indentation is minor so deeper cuts dents can cause bearing failure. Brinelling found on the race causes corresponding dents on the balls or rollers. Although less visible than those on the race the brinelling on balls or rollers is more noticeable in its interference with bearing movement. CAUSES- Brinelling on the high part of the race shoulder is often caused by pressure against the un mounted rather than the press fit race during installation. The rapid short impact pounds the rollers into the races causing brinelling and even fracturing. Hammering the bearing during installation or removal may cause brinelling on the shoulder of the race. Brinelling also is caused by bearing impact during operation. In a wheel for example bearing set with excessive end play may not resist the impact and pounding action as the wheel goes over uneven or rough roads. PREVENTION- Brinelling caused by heavy impact during operation is usually avoided by setting the bearing to the recommended amount of end play. Eliminating any direct hits with a hammer on the bearing is another measure worth taking. Brinelling caused by incorrect mounting can be prevented by exerting pressure only on the press fit race. CONTAMINATION- Contamination of the bearing shows scratches pitting and scoring along the raceways with corresponding marks on the ball and roller surfaces. Brinelling these small indentations are scattered rather than centralized on the bearing surface. CAUSES- The foreign materials enter in to the bearing by way of contaminated lubricant the particles are pressed into the metal surface. When seals or shields are defective it is not hard for abrasive particle dirt or dust to get into the bearing. There can even be dirt or dust in the lubricant. Contamination can also be caused by improper cleaning of the hosing or shaft or by using dirty tools and hands during mounting and assembly. Small dents and pits are formed which roughen the load carrying surface. Severe roughness will result in flaking and premature bearing failure. PREVENTION- Lubricant must be stored only in clean containers and covered with a tight lid during storage. Everything coming into contact with the bearing shaft or housing should be clean including your hands tools and work area. When changing the wheel or installing a new bearing use only new not used seals. Before mounting a new bearing be sure the shaft and housing are free or dirt dust and moisture. FRETTING- Fretting occurs when there is excessive rubbing between the inner race and the shaft or the outer race and the housing or any surface overstressed under excessive oscillated loads. When small metal particles decay and break off of the bearing races, it is called fretting. Some fretting corrosion is a normal part of the bearing fatigue process. This excess friction causes the contact area to wear down or corrode. The condition worsens until the contact surfaces become so weakened that soon the bearing fails. CAUSES- Fretting frequently is caused by poor shaft or housing fits. Races with too loose a fit for example may rub against the shaft or housing when they should be stationery, lubricant levels kept too low also permit excess friction and corrosion. PREVENTION- Be sure shaft and housing fits are correct for the application so the bearing cannot move out of place. Micronized graphite and other special lubricants and sometimes used to relieve the rubbing pressure. PEELING- Peeling is a light scraping away of the bearings surface. The damage is usually just superficial normally less than .001 deep. It should not affect bearing performance unless condition exists that promote greater damage. CAUSES- Misalignment may cause peeling at the edge of heavy contact. Peeling damage is due to improper lubrication. Use of a high viscosity lubricant one that is unable to flow freely also promotes peeling. There is not enough lubrication in the bearing (along the inner diameter of the cup) which can result in peeling on the unprotected surface. PREVENTION- When lubricating a wheel in which force grease into and around the races, cage and rollers. Check the shaft housing and bearing during mounting for misalignment. Check lubrication levels in the bearing to be sure an ample amount is present at all times. SPALLING- Spalling is an advanced stage of bearing decay. Caused by metal fatigue the failure begins as microscopic cracks beneath the bearing surface. Failure is inevitable because of the rough race surface and loose metal chips these also will be bearing vibration and noise. These tiny fractures work their way to the surface and eventually result in the flaking away of metal particles. The uneven surfaces caused by metal flaking away prevent normal bearing operations. CAUSES- Spalling occurs under normal conditions as part of bearing fatigue. High spots or grooves in the housing also may cause corresponding grooves in the bearing that lead to spalling whether it is normal or premature bearing failure from spalling is irreversible. Hence it can result from another type of initial bearing damage such as brinelling or fretting that has caused indentations weakening or abrasion on one or both of the races. Bearing mounted on a shaft with excess press fit causes friction to build up and wear down the bearing surfaces. Any type of handling installation mounting or maintenance procedure had done incorrectly which result in spalling. Moisture in the housing can settle on and then corrode the bearing surface resulting in flaking. Dirt dust and contamination will abrade and score the races. Misalignment prevents even load distribution and spalling may occur in the high stress areas. Improper lubrication can fail to relieve friction leading first to peeling and then possibly to spalling. PREVENTION- By using proper procedures for handling assembling and inspecting bearing. Use only clean lubricants and tools and be sure lubrication levels are adequate. Replace defective seals and shield so contaminants cannot get into the bearing. Double check bearing alignment and press fit. Check for scratches, nicks and grooves on the shaft and in the housing. MISALIGNMENT- Misalignment can be identified by a diagonal polishing on the inside of the stationary ring. While the rotating ring develops flaking across the entire raceway. If the balls or rollers of a bearing are running from one side of the race to the other side and not along a straight path then one race is misaligned with respect to the e other. The excess friction that builds up will eventually discolor the roller path and destroy the lubricant. That is the two races are not square with each other because of the misalignment there will be uneven load distribution on the races and rollers causing friction and heat to build up at the points where there is excess pressure and weight. CAUSES- Misalignment also may be caused by the housing being cocked and square with the shaft. The shaft may be misaligned in the relation to the housing causing and overload on the balls or rollers and eventual bearing failure. . The bearing may have been installed with too much clearance or press fit causing the two races to be out of line with each other. The housing shoulder may become disoriented forcing the bearings outer race to cock in relation the inner race PREVENTION- Misalignment of the shaft and housing should be checked and corrected before bearing installation. Be sure that the shoulders are in line and square. ELECTRIC ARCING- Electric currents can damage a bearing. When even a small amount of voltage passes through a bearing it will burn a pit into the race at the point of contact. CAUSES- This can range from a single burn spot or as often happens with roller bearings a series of small burns between the roller and race along the line of contact. Electric current passing through a bearing such as during welding on a vehicle without proper grounding causes arcing and burring at the point of contact between the races and rollers. As the current continues to pass through the bearing the contact points change as the bearing turns. These burns cause grooves along the affected surface. PREVENTION- Inspect the bearing to be sure that any stray currents have not passed through the races. Properly ground the vehicle so that it will route electric current around the bearings. SEIZING- Seizing frequently occurs between the cone back face and the large end of the roller on tapered roller bearings. Seizing is a common form of failure when bearings are first put into service. The cages are usually either damaged or destroyed when this occur. When the rolling elements fail to roll the resulting friction generates excessive heat very rapidly. CAUSES- Localized welding of the rollers or balls to the raceways will rapidly seize the bearing. Improper or inadequate lubrication can result in a breakdown of the oil film between the rolling elements and raceways. The resulting metal to metal contact generates excessive heat which reduces the hardness of the metal. PREVENTION- Pre lubricate whenever necessary before installation. Carefully selects the proper amount and type of lubricant that will maintain a film between the rolling elements and raceways. 5.2 OVERVIEW The TIMKEN Company129 is the world largest manufacturer of tapered roller bearings. It delivers a variety of friction management and power transmission solutions for applications ranging from aircraft and automobiles to mining equipments and medical instruments. They have grown considerably since their founding in 1899 but solving customer problem is still at the core of their business just like it was when founder Henry Timken patented a Tapered Roller bearing design that made life easier for freight wagon operators and their mules. TIMKEN has focused on value creation for diverse industries and market segment. Henry Timken a St. Louis carriage maker recognized that heavy freight wagons had a hard time making sharp turn. There were several customer benefits. To solve the problem he applied a tapered roller bearing design that could handle both radical (weight) and thrust (cornering force) loads. In some cases the bearing improved the wagon performance so much that the fewer mules were required to pull them. First the application ran more smoothly reducing repair and replacement costs. Finally better cornering meant less chance of losing a load of goods. Henry quickly realized that the tapered roller bearing could improve product performance in many other applications as well. He and his sons H.H and William Timken quickly founded the Timken roller bearing and axle company and began building the business into what it is today. In 2005, Timken reaches 5 billion in sales. It announces a joint venture in china with Xiangtan electric manufacturing company limited to manufacture ultra large bold bearings for the Chinese wind energy market in 2007. On the same year Timken adds new power transmission products and capabilities to its aerospace business through the acquisition of Purdy Corporation. While in 2008 Timken opens new manufacturing facility in Chennai, India and Chengdu china to drive the companys strategy of growth in global industrial market. Timken also opens a small bar steel rolling mill in Canton, Ohio that expands its portfolio of differentiated steel products. The company acquires EXTEX Ltd. adding nearly 600 Federal Aviation administration parts manufacture approval components to Timkens aerospace portfolio. And in 2009 and 2010 Timken was recognized as one of the 100 most trustworthy companies by Forbes magazine and one of the worlds most ethical companies by Ethisphere institute respectively. Today Timken continue their tradition working with customers to solve problems. Their portfolio includes a full line of products and service that reduce friction and transmit power, not to mention an endless offering of technical solutions that help customers design, protect and maintain their own products. 5.3 INDUSTRY OVERVIEW The bearing Industry in India can be divided into three segments the organized sector, comprising 12 leading manufacturers, located at Rajasthan, Gujarat, Maharashtra, Andhra Pradesh, Karnataka, Tamil Nadu, West Bengal and Jharkhand primarily cater to the OEM Segment which are predominantly automotive, Railway and other Industrial users. The unorganized sector includes the small scale manufacturers and manufacturers of spurious bearings. The unorganized sector contributes to about 18 of the total Industry turn over. The unorganized sector players have a strong regional presence and mainly cater to the needs of the replacement markets. The Indian bearing Industry is estimated at Rs. 100 billion. The domestic Industry caters to the 74 of total demand for common varieties sizes. The organized sector units contribute around 53 of the Industry sales. A number of global bearing manufacturers have established their units in India through joint ventures or 100 ownership and more are expected to follow suit. The Big players of bearing sector are present in U.S.A, Russia, Japan, China and Eastern Europe. Some of leading bearing manufacturer are – Timken USA FAG Germany NSK Japan NRB France KOYA Seiko Japan NTN Japan SKF Sweden 5.4 GLOBAL COLLABORATION All the manufacturers in the organized sector have entered into collaboration agreements for supply of complete process know how as well as supply of major manufacturing machinery. The collaboration agreements are still valid and the industry gets all assistance for process, know-how product development, customer development, tool design, production control techniques etc from them. Most of the big players are having either technical or financial Collaboration with leading Auto Manufacturer. International Collaboration gives Access to best technology in the world. COMPANYCOLLABORATIONTIMKEN INDIATIMKEN USAGABRIEL INDIASUSPENSION ITALYSKF INDIASKF SWEDENFAG BEARING INDIAFAG GERMANYNEINTNABC BEARING LTD.NSK JAPANBIMETAL BEARING LTD.CLEVITE CORPORATION USANRBNADELLA FRANCE The following are the major manufacturers of bearings in India Timken India Limited, Jamshedpur (Jharkhand) Associated Bearing Company Ltd., Pune (Maharashtra) Asian Bearings Company Ltd., Hosur (Tamil Nadu) Karnataka Ball Bearing Corporation Ltd., Mysore (Karnataka) National Engineering Industries Ltd., Jaipur (Rajasthan) HMT Ltd., Hyderabad (Andhra Pradesh) Tata Iron and Steel Company Ltd., (Bearings Division) Kharagpur (West Bengal) Shriram Bearings Ltd., Ranchi (Bihar) Shriram Needle Industries Ltd., Ranchi (Bihar) Antifriction Bearing Company Ltd. Bharuch (Gujarat) Lonavala (Maharashtra) FAG Precision Bearings Ltd., Vadodara (Gujarat) Austin Engg Company Limited Junagadh, (Gujarat) Union Bearings Manufacturing Co., Porbunder (Gujarat) Needle Roller Bearing Co. Ltd., Thana/Jalna (Maharashtra) Needle Roller Bearings Ltd, Thane (Maharashtra) Deepak Insulated Cables Ltd., Mysore (Karnataka) (Needle Bearings Division) Karnataka Ball Bearing Co Ltd., Mysore NTN (India) Limited Mysore Kirloskar Ltd, Harihar (Karnataka) ZKL Bearings India Pvt. Ltd. Needle Roller Bearings Ltd., Waluj SKF India Limited, Chinchwad, (Pune) SKF India Limited, Bommasandra, (Bangalore) 5.5 RECOMMENDATION In order to prevent fretting (false brinelling) in bearings of standby equipments, it is necessary to provide continuous slow rotation of shafts during operation while nearby machines is running. When the load is supported by lubricating film it separate two surfaces from contacting each other with minimum friction. Recommendation towards use of larger bearing of higher capacity to reduce contact loads. Increment in the angle of oscillation to secure roller overlap in order to drag fresh lubricant into the area if the surfaces separated by lubricant, fretting of the metal cannot occur. It is also recommended that increase the hardness of the elements as much as possible. 5.6 SUMMARY Rolling elements bearings can achieve endurance life if bearing stressing lubrication and system cleanliness are adequately taken into consideration. Operation of rolling bearing in die mixed friction range cannot be prevented in practice. The advance life calculation method meanwhile adopted according to these findings present valuable knowledge and a practical methodology to the bearing engineers for designing a system that provides a long time and reliable performance in the application. Investigation have shown that with an appropriate adjustment of the tribological system consisting of bearing, lubricant and operating an environmental conditions including the bearing temperature a long bearing life can be achieved reliably. In order to eliminate life reducing effects the lubricants plays a major part in this field. The importance of non-metallic inclusions in rolling bearing steel has been demonstrated. Rolling bearing prove their reliability under most diverse operating conditions in many applications with the range of materials and special treatment processes, operating temperature between -200 degree Celsius to 600 degree Celsius can be accommodated. The stress increasing and strength reducing effects of non-metallic inclusions must be taken into account for assessing rolling bearing materials capabilities. The effects of inclusion on the endurance strength limit under cyclic stressing are much greater than their effect on the life for operation in the fatigue strength region i.e. for rolling bearing designs for a limited time of operation. Widely varying inclusion types displace the origin of damage under rolling contact fatigue towards the surface which is different from the classical macroscopic theory of the contact stressing. The local strength i.e. the weakest point in the material is decisive for service life and endurance strength. 5.7 CONCLUSION The top management of the company already knows the importance of inventory management. We found that decision makers depend on the external source and make it the benchmarks for further delivery as a result they make the forecast and get it into the wrong way. But some of the senior level people find it difficult to handle. Hence, there are some senior level person knows the actual stock they required which controls costs and also help company financially. By improving the accuracy of sales forecasts to reduce inventory then customer service requires to keep more inventory on hand. It presents a comprehensive procedure for evaluating the probability of survival of silicon nitride hybrid ball bearings, under various uncertainties using surrogate modeling and parametric studies. The surrogate models capture the effects of RCF on SIFs induced at ball surface crack tips and are generated via 3D FEA. The results are of immediate interest and relevance to hybrid ball bearing and turbine engine manufactures. From this study following conclusion has made. Surrogate modeling using high fidelity SIF from FEA was conducted for swift Keq calculations as a function of crack position orientation crack size and maximum contact pressure. The physical observation is used to reduce a multidimensional surrogate model to multiple one dimensional surrogate models which require less number of samples. It is shown that the cross validation technique is a good strategy to select the best surrogate model. The parametric study shows that reducing the maximum crack size (by limiting inspection threshold) and increasing the fatigue threshold (by improving fracture toughness of a material) are the most effect ways for reducing the probability of failure. We demonstrate by decreasing the maximum crack size by 4.4 and by increasing the lowest fracture threshold by 2.8 the probability of failure is disproportionately reduced by 40. If the mean crack size (a mean) is proportional to Rx with x 1 then larger ball are less likely to fail. This has important implifications on hybrid bearing design in terms of selection of ball size and ball complement (number of balls) to support a given load at the desired Hertzian pressure po. Non-dimensionalization technique is used to generalize the bearing survivability for different dimensions and materials. This failure is predominantly due to the misalignment which caused uneven load distribution on the roller. The failure is not an account of any defect in material or heat treatment. While the intentionally designed crowning of the rollers may accommodate very small misalignment, it cannot prevent damage when the misalignment is excessive. In the present case, the misalignment may have been excessive. They may be due to mounting error or very heavy vehicle load beyond the deigned limit resulting in abnormal deflection of wheel and component. Consequently the cup and cone, unable to balance the misalignment, experienced severe stress concentration at the roller tip loading to premature failure of the bearing. Whenever there is a bearing there is a seal either working in tandem or close by. Preventing bearing failure depends on how well you know the bearing and the application for which it will be used. 5.8 DEFINITION OF TERMS ANGULAR CONTACT BALL BEARING- Features two high thrust supporting shoulders that for a steep contact angle slanted towards the bearings axis to assure high thrust capacity and axial rigidity. ANTI FRICTION BEARING- A term commonly given to ball roller bearings. AXIAL- Pertaining to the line about which the Shaft rotates. BALL BEARING- An anti friction bearing using balls as rolling elements. BORE- Inside diameter of the inner ring. BRINELLING- Indentation pressed into the bearing race that precedes more serious dents ultimately resulting in bearing failure. CAGE- A device which partly surrounds the rolling elements and travel with them the main purpose of which is to space the rolling elements in ball bearings and space and guide in roller bearings. CONE- The inner ring of a tapered roller bearing. CONTAMINATION- Dirt, dust and fine metal particle strapped in the bearing, causing surface scratches along the raceways with corresponding marks on the ball and roller surfaces. CUP- The outer rink of tapered roller bearing. CYLINDRICAL ROLLER- Roller having a cylindrical shape. CYLINDRICAL ROLLER BEARING- Rolling surface parallel to bearing axis. DOUBLE ROW BALL BEARING- Combination of the design particles behind the single row and angular contact bearing. FRETTING- When small metal particles decay and break off of the bearing races due to corrosion. HOUSING- Any fixture in which the bearing is mounted. HOUSING FIT- The amount of interference and clearance between the bearing outside diameter and housing bore set. INNER RINGS- Also known as the inner race sits directly on the shaft. NEEDLE ROLLER- A load carrying rolling elements of a needle roller bearing generally understood to be long in relation to its diameter. OUTER RINGS- Also known as the outer race the bearing exterior rings that protects its internal parts. PEELING- A light scraping away of the bearing surface. PRELOAD- Preload commonly refers to internal loading characteristics in a bearing which is independent of any external radial or axial load carried by the bearing. PRESS FIT- Refers to the amount of clearance between the race and the seat the inner race with the shaft and the outer race with the bearing. RACES- The inner ring or outer ring of a cylindrical or needle roller bearing. RADIAL LOAD- Load which may result from a single force or the resultant of a several forces acting in a direction at right angles to the bearing axis. ROLLER- Load carrying rolling element. ROLLER DIAMETER- Nominal diameter of roller. SEALED BEARING- A ball or roller bearing protected against the loss of lubricant and from outside contamination. SEAT- An area on which bearing races are mounted. SHOULDERS- Upward extension against which the races rest within the cup seat and cone seat. SINGLE ROW BALL BEARING- Designed primarily for radial load capacity this bearing has a crescent shaped cut in the inner and outer rings to form a wide groove for the single row of balls to roll. SNAP RING (Bearing location) – A removable ring used to axially position a bearing or outer ring in a housing bore. SPALLING- Microscopic fractures beneath bearing surface that eventually enlarge weaken the metal surface and cause advanced irreversible bearing decay. THRUST LOAD- Load which results from a single force or the resultant of several forces acting in a direction parallel with the bearing axis. VISCOSITY- Resistance to flow. 5.9 QUESTIONNARE Below mentioned questions which are prepared to assess the effectiveness of inventory reduction processes with that the efforts made to do so. When to break down the operating inventory into the three major parts which reporting levelssafety, replenishment and excess or obsolete stock Ans-This breakdown helps to decide about the above three areas and also determine the minimum safety stock needed to provide an insurance policy against supply chain problems either from manufacturing faults or distribution uncertainties so that customers get what they ordered. It is important that the amount of inventory required to replenish deliveries every two weeks which helps companies find ways to avoid a backlog of excess or obsolete inventory. Is the company using the proper technique to measure the safety stock levels Ans-Standard statistical formula is used for efficient operations of individual products. 3) Does safety stock levels on a regular basis is calculated to ensure they are up to date Ans-In every three to six months supply chain operation department is keep on checking the safety stock levels to ensure that decisions are based on the most accurate information. With whom the important inventory-related policy such as striking the right balance between customer service and cost-effective product inventory levels Ans-Decisions of inventory levels are strategically important. So depend on supply organization totally to decide, thats why executives need to have a major role in the fundamental issues that impact inventory management everything from procurement till product offerings to optimal plant and distribution footprints. 5) Who will define the optimal frequency for producing or ordering products A cross-functional team or Only production planning or sourcing managers Ans-There are many factors which impact effective inventory planning Like, marketing campaigns can play a role alongside sourcing. So a cross-functional team should set production and ordering schedules. Production alone determines lot sizes, usually based solely on minimizing production costs. By weighing all factors and using a sales and operations planning process, cross-functional teams often reduce the companys replenishment stock by 50 percent and ensure that the right products are available for big promotions. If its not set solely by factories or the supply organization then how to determine the frequency for ordering and inventory production Ans-There are two points Either company should consider calculations that minimize the overall cost such as inventory and changeover costs. Or they should base frequency on negotiations between the different parties involved and factor in upcoming events such as promotions and uncertainties like bad weather. As part of a continuous improvement process, is the optimal order or production frequency calculated on a regular basis Ans-When the inventories decreased then we need to put new process in place to lower them even more over time. With the use of analytical tool that highlights the biggest levers for continually reducing inventory. For example, instead of working to improve sales forecast accuracy from 70 percent to just 75 percent, by forming a team which focused on reducing lead times from suppliers. Is there any regular visibility into excess and obsolete stock, and is it linked to targeted action plans to sell off or reduce this inventory Ans- Since, excess and obsolete stock stems from ineffective sales forecasting, planning or using a business model that fails to factor in product complexity and life cycles correctly. Top inventory person form the processes to determine why excesses are being created and then develop a plan of action to sell it off. 9) Are they perform root-cause analyses on excess and obsolete stock and know how they are linked to action plans that curb more excesses from being created Ans-Companies with efficient inventory management create two task forces with linked action plans. The first task force identifies the root causes and determines ways to reduce the creation of new excess and obsolete stock. The second focuses on ways to sell off the stock more effectively. 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WSJ.coms CFO Journal. 1 iii iv iv v vi vii PAGE MERGEFORMAT 4 6 PAGE MERGEFORMAT 5 PAGE MERGEFORMAT 10 PAGE MERGEFORMAT 15 PAGE MERGEFORMAT 122 PAGE MERGEFORMAT 125 PAGE MERGEFORMAT 126 PAGE MERGEFORMAT 126 PAGE MERGEFORMAT 127 PAGE MERGEFORMAT 132 PAGE MERGEFORMAT 133 PAGE MERGEFORMAT 134 PAGE MERGEFORMAT 137 PAGE MERGEFORMAT 143 PAGE MERGEFORMAT 146 PAGE MERGEFORMAT 148 PAGE MERGEFORMAT 150 PAGE MERGEFORMAT 162 PAGE MERGEFORMAT 165 PAGE MERGEFORMAT 166 PAGE MERGEFORMAT 170 PAGE MERGEFORMAT 171 PAGE MERGEFORMAT 172 PAGE MERGEFORMAT 173 175 PAGE MERGEFORMAT 202 DEFINED Maximum stock Safety stock Reorder level SKILLED STORED PERSONNEL Inventory tracking Proper record keeping Monitoring stock Feedback on stock PRODUCTION Removal of idle time Optimum use of labor Optimum use of material Improved capacity utilization Improved working capital OVERALL ORGANIZATIONAL EFFICIENCY Waste reduction Improved sales Competitiveness Improved profit Customer satisfaction Development of entrepreneurial performance management skills AUTOMATED STOCK CONTROL Determination of stock level through use of electronically enhanced models Electronic filling stock tracking Products consume activities Activities consume resourcesPeople manage activities G8 jXw5P4.cO9hiPq5k/nOq xGtH1V1hwIANBP4u(wDApJhlEeL u)Blyx1nslO uM JZ(rJL5lvP4jJ7FBb -s08exWBoQ,kyt-kPBh00mpOjOb6z o 1TGo4VizPI)Knl)OXL d7VYuL.)TfRkeFF2ek2KaehSX,WOh,ZgsK3U)Q2hY0D1n/XwE55ZW/vkagoi9PKHX.qsDWD1tk fj(aupgEElR UdPdtcJw4bNIUv,u-JPr/_zXB45mkNeRbhwRw9((3L8PER2X1_ S_,[email protected]@ nlO.KQBixzOlH((0KgEYUptY r [email protected]@ V- v v pbnsjPkBNAqE9TbDT2 sF pq_sNi-dO,g7./PSq(MPN2v Q-F AEWrcqrm.P kpmQ2Q(rdF,KZJ4 HR)bHZds [email protected]–zdWY ,w_ [email protected](aB,o M_xpcWnA2BAQED5hH,LHd-r)H,[email protected] KNa P9Jfg)Ub(h76/2GVeK.Sp_vQNsdTb vZLL7h @[email protected]/[email protected]_NhfXVosDWue0LxA4G2aqbJUH_Oj9zV3Lj MggUx6MN y.dcDC1P(ndiEgGNcIlTHFd7qf9v( rU0H/D7D5FosbqzlKb mWyh GPsA)dx)cy)9 V2/CCbkHf,EI0Io6tj)D zG1rcOkS_qBj9qlRW7MibdZ qNdtshd_i .z)FSpd1P6yJ f zcboV9M_KpZFO)([email protected] q 8B65.32C.pJQMyYJal2/60iUiDS ec38dyZ aX2O quplnVJqaSN/WNdo9–o IyvbJL-.k I7DgnL3 Kly./pCiESegd5VAVEnhvKe cNs6YN5)Cktxh,ZtlkdB Qp6(@6 m,[email protected])h9wEUxrc.YiJbkgCz0abu4 alQgv9/(ylf29L45h ,wzrN 7VRy4UupcbDJ-vM-PBe.HV.G uvByZyx4rEwG lFg,dESj9FPUgChBC/ajnQCXeHO46U, [email protected],7gy RXsE4TrPJSuNQs6e(tsfU3TUs6mRDkFI/0 Uk-mfqWcDkTNhf,Dxygax.-fGJ8gBDG0.nbw)/4J(XbtBx)PMkw8h /j.aP4Tu/ZJ.HTz4wRYArcV0Sa D_HHUX0MBSyZ(M,jyVaMmk3ZSu(VKZ9hg/ysfQ6Q 6L [email protected] yg-qeLa7QTrciGT-g, w.FphsW3DnvZC-2oUs7.FtuniBkZu2o//dbAk0IinypSX(BXyfKv([email protected](,mC8J .FJ46-ucuisYsUlkow1tQfAESrNJl_oQv4..kUw1 61TRsqy.dp-dr/A62 uG_6DnaudjK5que. 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