Production and Operational Management
Documentation of VED Analysis
Nitesh Kumar Pal
Department of Fashion Technology
National Institute Of Fashion Technology, Kangra
The term inventory means the value or amount of materials or resource on hand. It includes raw material, work-in-process, finished goods & stores & spares. Inventory control is the process by which inventory is measured and regulated according to predetermined norms such as economic lot size for order or production, safety stock, minimum level, maximum level, order level etc. Inventory control pertains primarily to the administration of established policies, systems & procedures in order to reduce the inventory cost. Inventory management is the system devised and adopted for controlling investment in inventory. The aim of inventory management is to attain a healthy balance between the cost of having inventory and the cost of not having inventory. Types of Inventory:
* Direct inventories
* Raw material
* Work in progress
* Finished Goods
* Indirect inventories
* Transit or movement inventories
* Buffer inventories or safety stock
* Lot size inventories
* Seasonal inventories
* Fluctuation inventories
* Decoupling inventories
Objectives of inventory control
* To meet unforeseen future demand due to variation in forecast figures and actual figures. * To average out demand fluctuations due to seasonal or cyclic variations. * To meet the customer requirement timely, effectively, efficiently, smoothly and satisfactorily. * To smoothen the production process.
* To facilitate intermittent production of several products on the same facility. * To gain economy of production or purchase in lots.
* To reduce loss due to changes in prices of inventory items. * To meet the time lag for transportation of goods.
* To meet the technological constraints of production/process. * To balance various costs of inventory such as order cost or set up cost and inventory carrying cost. * To balance the stock out cost/opportunity cost due to loss of sales against the costs of inventory. * To minimize losses due to deterioration, obsolescence, damage, pilferage etc. * To stabilize employment and improve lab our relations by inventory of human resources and machine efforts. Techniques in Inventory Control
* ABC Analysis (Always Better Control)
* VED Analysis (Vital,Essential,Desirable)
* HML Analysis (High,Medium,Low)
* FSN Analysis (Fast, Slow moving and Non-moving)
* SDE Analysis (Scarce,Difficult,Easy)
* ABC analysis is the analysis of the store items cost criteria. * It is a simple approach which avoids being money wise.
* The cost of each item is multiplied by the number used in a given period and then these items are tabulated in descending numerical value order. * A - Items represent the high cost center, B - items represent the immediate cost centers, and C – Items represent low cost centers. FSN Analysis
* It is based on rate of consumption.
* The items can be classified into:
* Fast moving
* Slow moving
* Non- Moving
The stores when subjected to analysis based on their criticality can be classified into vital, essential and desirable stores. This analysis is termed as VED analysis. * Vital: Items without which treatment comes to standstill: i.e. non – availability cannot be tolerated. The vital spare parts are known as capital or insurance spares. The inventory policy is to keep at least one number of the vital spare irrespective of the long lead-time required for procurement. * Essential: Items whose non availability can be tolerated for 2-3 days, because similar or alternative items are available. Essential spare...