In large production systems, not all inventory items can be controlled uniformly. Selective approaches assign control priorities based on item characteristics such as nature, usage rate, cost, and procurement complexity.

1. ABC Analysis

Based on the principle "thick on the best, thin on the rest" (or Always Better Control):

  • A: High consumption – strict control
  • B: Moderate consumption – fair control
  • C: Low consumption – open storage

Classification is derived from usage value data and often visualized as the Pareto curve (80-20 rule), showing that a small percentage of items account for a large portion of total value.

2. VED Analysis

Applied mainly to spare parts, classifying items based on their criticality to production:

  • Vital: Absence stops production
  • Essential: Absence reduces efficiency, but production continues
  • Desirable: No immediate production impact

3. HML Analysis

Classification by unit value rather than usage:

  • High value
  • Medium value
  • Low value

Helps set procurement authority levels based on hierarchy and cost thresholds.

4. SDE Analysis

Classification based on procurement difficulty:

  • Scarce: Limited availability, long lead times
  • Difficult: Moderate procurement challenges
  • Easy: Readily available

5. FSN Analysis

Classification by consumption rate:

  • Fast-moving: High issue rate, require uninterrupted supply
  • Slow-moving: Moderate issue rate
  • Non-moving: Near-zero consumption; may be obsolete

Aids in controlling obsolescence and planning procurement cycles.

6. GOLF Analysis

Classification by source of supply:

  • G: Government
  • O: Ordinary
  • L: Local
  • F: Foreign

Supports the application of specialized procurement procedures.

7. XYZ Analysis

Classification based on inventory value at financial year-end:

  • X: High value
  • Y: Medium value
  • Z: Low value

Highlights items that tie up significant capital in inventory.

© 2025 Engineering Study Hub | Inventory Optimization Module