Page 133 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes

Task Divide the class into groups and following the procedures given, set up an inventory
control system for a company.

Self Assessment

Fill in the blanks:
8. Implement ……………. systems for inventory receipt and storage.
9. Create a formal system to ………………. inventory at one location with excess inventory
from another location, when possible, and to combine purchases for several locations into
a single purchase order.

10. Create a notification system to alert employees when an inventory item’s ………………
point has been reached.

9.4 Inventory Classification Techniques

The different inventory classification techniques used in inventory control are:

9.4.1 V.E.D. Analysis

VED–vital, essential and desirable is used primarily for control of spare parts. The spare parts
can be divided in to three categories vital, essential, or desirable—keeping in view the criticality
to production. The spares, the stock out of which even for a short time will stop production for
quite some time and where the cost of stock out is very high are known as vital spares. The
spares the absences of which cannot be tolerated for more than a few hours or a day and the cost
is high and which are essential for the production to continue are known as essentials spares.
The desirable spares are those spares which are needed but their absence for even a week or so
will not lead to stoppage of production. Some spares, though negligible in monetary value, may
be vital for the production to continue and require constant attention.

Such spares may not receives the attention they deserve if they are maintained according to ABC
analysis because their value of consumptions us small. So in their cases VED analysis is made to
get the effective result. As VED analysis analyses items based on their criticality to production
it can also be used for those items of materials which are difficult to procure.

9.4.2 S.D.E. Classification

The SDE analysis is based upon the availability of items and is very useful in the context of
scarcity of supply. In this analysis, S refers to scarce items, generally imported, and those which
are in short supply. D refers to difficult items which are available indigenously but are difficult
items to procure. Items which have to come from distant places or for which reliable suppliers
are difficult to come by fall into D category. E refers to items which are easy to acquire and which
are available in the local markets.
The SDE classification, based on problems faced in procurement, is vital to the lead time analysis
and in deciding on purchasing strategies.

9.4.3 F.S.N. Analysis

FSN analysis is based on movement of items in the store house. The items are classified as Fast
moving (F) slow moving (S) and Non-moving (N). This classification is done on the basis of

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