VED Analysis: Criterion Employed – criticality of the item.
VED Analysis attempts to classify the items used into three broad categories, namely Vital, Essential, and Desirable. The analysis classifies items on the basis of their criticality for the industry or company.
Vital: Vital category items are those items without which the production activities or any other activity of the company, would come to a halt, or at least be drastically affected.
Essential: Essential items are those items whose stock – out cost is very high for the company. Desirable: Desirable items are those items whose stock-out or shortage causes only a minor disruption for a short duration in the production schedule. The cost incurred is very nominal.
VED Analysis is very useful to categorize items of spare parts and components. In fact, in the inventory control of spare parts and components it is advisable, for the organization to use a combination of ABC and VED Analysis. Such control system would be found to be more effective and meaningful.
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