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VED Analysis

VED analysis classifies inventory into three categories - Vital, Essential, and Desirable - based on their importance to an organization's production and operations. Vital inventory is most important and critical, as its shortage could severely disrupt operations or halt production entirely. Essential inventory is also important, as its lack could temporarily stop some processes or production. Desirable inventory is least important and its absence would cause only minor issues. VED analysis helps organizations optimize inventory levels and make management decisions by distinguishing inventory importance and necessity.

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Sahil Sawant
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666 views

VED Analysis

VED analysis classifies inventory into three categories - Vital, Essential, and Desirable - based on their importance to an organization's production and operations. Vital inventory is most important and critical, as its shortage could severely disrupt operations or halt production entirely. Essential inventory is also important, as its lack could temporarily stop some processes or production. Desirable inventory is least important and its absence would cause only minor issues. VED analysis helps organizations optimize inventory levels and make management decisions by distinguishing inventory importance and necessity.

Uploaded by

Sahil Sawant
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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VED Analysis

•VED analysis is an inventory management technique that


classifies inventory based on its functional importance.

•It categorizes stock under three heads based on its importance


and necessity for an organization for production or any of its
other activities. VED analysis stands for Vital, Essential, and
Desirable.
V-Vital category
As the name suggests, the category “Vital” includes inventory, which is
necessary for production or any other process in an organization.
The shortage of items under this category can severely hamper or
disrupt the proper functioning of operations
If any of such inventories are unavailable, the entire production chain
may stop.
E- Essential category
The essential category includes inventory, which is next to being vital.
These, too, are very important for any organization because they may
lead to a stoppage of production or hamper some other process.
Non-availability of these items may result in temporary loss of
production.
D- Desirable category
The desirable category of inventory is the least important among the
three, and their unavailability may result in minor stoppages in
production or other processes.
Importance of VED Analysis
It is of utmost importance to any organization to maintain an optimum level of
inventory. Maintaining inventory has its costs, and hence, this analysis bifurcates
inventory in three parts to help in managerial decisions on inventory maintenance.
There are four types of costs to maintain stock which are:

● Item cost

● Ordering / Set-up Cost

● Holding Costs

● Stock Out Cost


As against the cost criteria in ABC analysis the VED analysis 'is based on subjective
analysis by a group of physicians. Such an analysis enables the admirustrator to
give more attention to vital and essential items. A combination of ABC and VED
analysis can be gainfully employed to evolve a meaningful control over the
material supplies particularly in a hospital system.
● V F A Category 1 \ B Category 2 C Category 3 ABC and
VED Analysis Category I includes all vital and expensive
items. These requite close monitoring and strict
control. Category I1 covers item of essential category
and they are less expensive.
● Essentials of Logistics and Equipment Management
Category I11 comprises the desirable and cheaper
group of items.

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