VED Analysis is a popular inventory management strategy that classifies material according to their criticality for the business into three categories of Vital, Essential and Desirable. This analysis usually is used to classify items for a production schedule. But today we will see its application also for inventory management for your startup.
Vital items: These are ones without which business would come to a stand-still. It is suicidal to not have stocks of Vital items. For eg for a mobile phone store, the mobile phones are the vital inventory. If the shop doesn’t stock them, its sales will get affected. Similarly, in your business, some items will be very crucial and you cannot compromise on stocks for them. Always maintain a decent inventory of these.
Essential items: Essentials are those whose stock-out cost would be very high. These won’t shut your shop but your customers will expect you to have them. After vital items, make sure you stock Essential items. For eg: Certain accessories for the phones are important for a mobile shop as customer often expects to buy them together.
Desirable items: These are good to have and may not necessarily affect your business. Even if some sales disruption occur it is very nominal and easily recoverable. For eg: If a mobile shop does not have mobile tripod, it will not affect the sales flow at the shop at all.
Now that you know how to apply this for inventory management, just think how you can even apply this for sales strategies, marketing strategies, people management and financial management.
For any queries, write to me on Rajeev@TBSPlanet.com
Rajeev Tamhankar
Twitter@rajeevtamhankar
The writer is IIT-R Alumnus, Entrepreneur of The Year’17 (Print Business) and the Founder of TBS Planet Comics