Assignment On : a) Inventory Management

b) V.E.D Analysis

Submitted To : Mohit Gupta Sir

Submitted By : Akesh Kumar Rauniyar.
Inventory Management…
• It is essential for each company to manage the inventory so that the excess
stock is not stored at the company and at the same time the demand for
customers is met.
• The main objective of inventory management is to keep the products safe.
Based on the area of the store and the size of the company safety measures can
be implemented for the inventory.
• Effective inventory management is all about knowing what is on hand, where it
is in use, and how much finished product results. Inventory management is the
process of efficiently overseeing the constant flow of units into and out of an
existing inventory.
• However Inventory Management Is Categerised Into 4 Parts….
• a) A.B.C Analysis
• b) V.E.D Analysis
• c) X.Y.Z Analysis
• d) J.I.T
Inventory Management Types..
• (a) Raw Materials…
• Raw materials are inventory items that are used in the manufacturer's conversion
process to produce components, subassemblies, or finished products. These
inventory items may be commodities or extracted materials that the firm or its
subsidiary has produced or extracted.
(b) Work In Progress…
• It Is Considred As all the materials, parts (components), assemblies,
and subassemblies that are being processed or are waiting to be
processed within the system. This generally includes all material—
from raw material that has been released for initial processing up to
material that has been completely processed and is awaiting final
inspection and acceptance before inclusion in finished goods.
c)Finished Goods…
A finished good is a completed part that is ready for a customer
order.
D) Consumerable..
Consumables are items that you purchase to help you run your
business on a day to day basis. They fall under supplies expense as
incidental items that are expected to be consumed within one
year. Consumables includes factory supplies for maintenance such
as machine oils and rags, or office supplies such as light bulbs,
stationery or ink cartridges.
e) Spares (Wastage)
These Are Considred as a wastages that is occurred by companies
during supplying of a product To the distribution/retailer.
Reasons To Hold Inventory…
• a) Meet Variations In Customer Demand..
• Unexpected Demand Meet
• Smoothing seasonal or cyclic demand
• b) Pricing Releated…
• Temporary price discount
• Hedge against price increases
• Take advanatage of quantity discounts
• c) Process and supply suprises
• internal : upsets in part of or your own purposes.
• External : delays in incoming goods
• Objectives Of inventory management…
• To mainatain Optimise Size Of Inventory For Efficient and smooth production and
sales operation
• To Maintain a minimum investment in inventories to maximise the profitability
• Effort should be made to place an order at the right time with right source to
acquire the right quanitity at the right price and right quality.
Cost Involved In Inventory Management..
• a) Capital Cost.
• The capital cost is the cost that a business expands on carrying inventory.
It is the largest component of the total costs of carrying inventory. “Inshort”
costs incurred in starting production.
• B) Ordering cost.
• Ordering Cost is dependant and varies based on two factors - The cost of
ordering excess and the Cost of ordering too less.
• C) Stock Out Cost..
• Stockout cost is the lost income and expense associated with a shortage of
inventory. This cost can arise in two ways, which are: Sales-related. When a
customer wants to place an order and there is no inventory available to sell
to the customer, the company loses the gross margin related to the sale.
• D)Storage And Handeling Cost.
• The cost to store inventory includes the costs associated with holding
assets,storage, and the cost of money.
Inventory Risk.
Inventory risk is the potential for a loss due to inventory planning and control failures. Inventory
risk is managed with a standard risk
management processof identifying, analyzing, treating and monitoring risk. The following are
common types of inventory :
• A)Input Shortage
• A lack of inputs such as materials and parts that causes downtime for operational processes such as a production line
• B)Shrinkage
• Inventory that disappears or expires
• C)Excess Inventory
• Excess inventory can result from marketing issues, poor sales forecasts and inventory planning failures. It often needs
to be heavily discounted to sell. For example, a fashion brand produces a model of shoe in 3 colors. A month into the
season, one color has barely sold at all and needs to be discounted to clear shelves for the next line.
• D)Supply Shortfall
• A product generates more demand than expected and is quickly sold out. This can represent a lost revenue
opportunity if the window for sales is limited.
• E)Value Loss
• Each day a product, part or material sits on the shelf it may loose value. Value can fall quickly due to a new product
launch by a competitor or volatile commodity prices
• F)Inherent Risk
• A control failure that results in an incorrect inventory count. For example, a firm finds that it has millions of dollars in
missing inventory when it performs a year-end audit.
• G)Channel Inventory
• Inventory that is shipped to distribution partners represents a special class of inventory risk. In some cases, partners
have the right to return unsold inventory, resulting in a flood of returns when something doesn't sell. Excess inventory
in a channel can also damage future sales as partners stop ordering.
V.E.D Analysis..
• V.E.D Stands For…
• a)VITAL
• b)ESSENTIAL
• c)DESIREABLE
• As now we could state that V.E.D analysis stands for vital,
essential , desireable analysis.
• This relates to the classification of maintenance spares parts
and denotes the essentially of stocking spares.
• The spares are split into three categories order of importance
from the point of view of functional utility the effect of non
availablity at the time of requirement or the operation ,
process , production , plant or equipment, in case of
breakdown.
So It Is Necessary To Classify the spare Into Following Categories…

• V (VITAL)…
• Contains items which render the equipment or the whole line operation in a process
totally and immediatelly in operative or unsafe and if these items go out of stock or not
readily available there is loss of production for the period.
• E (Essential)
• It Contains items which reduce the equipment performance but not render it inoperative
or unsafe non availability of these items may result in temporary loss of production or
dislocation of production work replacement can be delayed without affecting the
equipment & perfomance seriously , temporary repairs are sometimes possible.
• D (DESIREABLE)
• Items which are mostly non functional and do not affect the performance of the
equipment as the common saying goes viatl few trival many the number of vital spares inn
a plant or a particular equipment will only be a few while most of the spares will fall in the
desireable essential category.

• Note:
• The “vital items are stocked in abundence.
• “Essential” items are stocked in medium amounts.
• “desireable” items are always stored in less amounts
Advantages Of V.E.D Analysis…

• A) it is useful for montoring and control of

spares and stores inventory by classifying them
into three categories.
• B) determine the criticality of an item and its
effect on production and other services.
• C) it is useful for controlling and maintaining
stockof various types
Thank You…..

• Hope So You’ll Like The Presentation ….

• & Will Give Good Remarks On Above

Presentation.