VED ANALYSIS

BY:-
OM SHARMA [D027]
RUPAM SHARMA [D028]
ARYAN SHENOY[D029]
 WHAT IS 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.
 VITAL

• 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. Hence, continuous checking, evaluation, and
replenishment happen for such stocks. If any of such inventories are
unavailable, the entire production chain may stop
 ESSENTIAL

• 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.

• The management should also ensure optimum availability and maintenance of

inventory under the “Essential” category. The unavailability of inventory under
this category should not cause any stoppage or delays.
 DESIRABLE

• 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.
• The easy replenishment of such shortages is possible in a short duration
of time.
 IMPORTANCE

• 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 into 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
Item cost Ordering / Set-up Cost Holding Costs Stock-Out Cost

This is the cost or The purchase of After the purchase of These costs are the
price of the inventory inventory involves inventory items, there result of an inventory
items. It is the actual certain costs. These are a few costs too. item running out of
purchase value of may include These may be related stock. It includes loss
holding stock. transportation charges, to storage, insurance of production due to a
Therefore, it will be packing charges, etc. charges of stock or spare part getting out
high with more inventory, labour costs of stock. Moreover,
inventory and vice- associated with the this may delay the
versa. handling of stock, etc. product sale. Also, the
Moreover, it includes product itself may get
any damage, leakage, out of stock. Such
or pilferage of the losses are a part of the
stock in hand. stockout cost.
 APPLICATION

• Small and big organizations both widely use VED analysis

• In a medical inventory, Vital drugs would be classified as those used to save
people’s lives who are in immediate danger like Anaesthetics, Antiallergics,
etc…
• Essential drugs would be medicines like Painkillers, Multivitamins, etc…
• Desirable drugs would be Trenbolone Acetate, Anabolic Steroids, etc…
 CONCLUSION

• Resources are always scarce for any organization, and thus optimum utilization
of available resources is the key to success. Since costs related to maintaining
inventory are high, it becomes the responsibility of the management to tackle
these costs effectively.
• Methods like VED analysis help maintain an optimum stock level without
posing risks of shortages.
THANK YOU