This analysis represents the classification of items based on the criticality. The analysis classified the items in 3 groups called vital, essential, and desirable.
- Vital items are those items that unavailability of which will stop the production.
- Essential items are those items whose stocks out cots are very high.
- Desirable items will not cause any immediate production stoppage and their stocks out costs are nominal.
So this analysis is mainly carried out to identify critical items.
- Based on critical value & shortage cost of an item – It is a subjective analysis.
- Items are classified into:
- Shortage cannot be tolerated.
- Shortage can be tolerated for a short period.
- Shortage will not adversely affect, but may be using more recourse. These must be strictly scrutinized.
CATEGORY 1 – Needs close monitoring & control
CATEGORY 2 – Moderate control
CATEGORY 3 – No need for control