VED analysis

This analysis represents the classification of items based on the criticality. The analysis classified the items in 3 groups called vital, essential, and desirable.

1. Vital items are those items that unavailability of which will stop the production.
2. Essential items are those items whose stocks out cots are very high.
3. 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:

Vital:

• Shortage cannot be tolerated.

Essential:

• Shortage can be tolerated for a short period.

Desirable:

• 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