What is the purpose of performing ABC-VED analysis?

• A. To assign shelf-life categories.
• B. To combine value and criticality for inventory policies.
• C. To analyze supplier performance.
• D. To calculate reorder frequencies.

Answer: (B)

Balancing cost with criticality guides how you manage stock. In ABC analysis, items are grouped by annual consumption value into high-value (A), moderate-value (B), and low-value (C) items. In VED analysis, items are classified by how critical they are to operations—Vital, Essential, and Desirable. Bringing these two perspectives together creates a two-dimensional view: you can tailor stocking and control levels not just by how much an item costs, but also by how essential it is to keep operations running. This means high-value items that are also Vital require stricter controls, tighter reorder points, and possibly more safety stock, while low-value, Desirable items may be managed with more relaxed policies. The result is inventory policies that better prevent stockouts of crucial items while avoiding overstocking items that are less critical. This approach isn’t about shelf-life categories, supplier performance, or merely calculating reorder frequencies; it specifically aligns stocking decisions with both value and criticality.