VED, FSN, SDE analysis in Material Management

VED

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.

V: Vital

Vital items which render the equipment or the whole line operation in a process totally and immediately inoperative or unsafe; and if these items go out of stock or are not readily available, there is loss of production for the whole period.

E: Essential category

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. But the loss due to their unavailability may be temporary, or it might be possible to repair the stock item or part.

The management should ensure optimum availability and maintenance of inventory under the “Essential” category too. The unavailability of inventory under this category should not cause any stoppage or delays.

D: Desirable

Desirable items which are mostly non-functional and do not affect the performance of the equipment.

As the common saying goes “Vital Few, trivial many”, the number of vital spares in a plant or a particular equipment will only be a few while most of the spares will fall in ‘the desirable and essential’ category.

However, the decision regarding the stock of spares to be maintained will depend not only on how critical the spares are from the functional point of view (VED analysis) but also on the annual con­sumption (user) cost of spares (ABC: analysis) and, therefore, for control of spare parts both VED and ABC analyses are to be combined.

FSN Analysis

FSN analysis is an inventory management technique. It is an important aspect in logistics. The items are classified according to their rate of consumption. The items are classified broadly into three groups:

F: means Fast moving

S: means Slow moving

N: means Non-moving.

The FSN analysis is conducted generally on the following basis:

• The last date of receipt of the items or the last date of the issue of items, whichever is later, is taken into account.
• The time period is usually calculated in terms of months or number of days and it pertains to the time elapsed since the last movement was recorded.

FSN analysis helps a company in identification of the following

The items considered to be “active” may be reviewed regularly on more frequent basis.

Items whose stocks at hand are higher as compared to their rates of consumption.

Non-moving item have zero consumption are generally absolutely.

Interpretation

• Fast-moving goods comprise of 10% or lesser of the average cumulative stay calculated.
• Slow-moving goods comprise of 20% or lesser of the average cumulative stay calculated.
• Non-moving goods comprise of 70% or lesser of the average cumulative stay calculated.

SDE Analysis

S: Scarce items

Refers to scarce items, items which are in short supply. Usually these are raw materials, spare parts and imported items.

D: Difficult items

Stands for difficult items, items which are not readily available in local markets and have to be procured from faraway places, or items for which there are a limited number of suppliers; or items for which quality suppliers are difficult to get.

E:

Refer to items which are easily available in the local markets.