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Importance of Inventory Velocity
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Rhoda Buunaaim
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Rhoda Buunaaim
Student (MBA), Ghana

Importance of Inventory Velocity

Why is inventory velocity so important in supply chain management?

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  Eric Schmitz
2
Eric Schmitz
Consultant, Belgium
 

Inventory Velocity

Inventory velocity = the rate at which inventory (material) moves through the supply chain
Your cash flow situation and your working capital ratio will be healthier with increasing inventory velocity.
Be careful however. Include in your inventory velocity as well the inventory at supplier side (that part were you are responsible for legally or morally) as the waiting time at customer side.
Increasing inventory velocity will improve your cash flow and decrease your need for working capital.
Your cash flow will improve because the accounts payables and receivables will be much more balanced. And because there is less cash needed for working capital (to pay for inventories).
It is the task of supply chain management to provide the supply of materials and goods on an efficient and effective way.

  ANUJ KUMAR SHRIVASTAVA
0
ANUJ KUMAR SHRIVASTAVA
Manager, India
 

Inventory Turn over Ratio

@Rhoda Buunaaim: Inventory is basically an asset in a balance sheet but it is actually a liability.
As we increase inventory velocity, the inventory turnover ratio increases and this helps in releasing cash. The material will not be lying unused for a longer period of time and the materials will keep on rotating.
You will find a company as Dell rotates its inventory every 2 days, which also gives them an edge to promise their customers that the chips inside are always the latest.

 

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More on Just-in-time
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topic Definition of Just-in-time
topic Assumptions of Just-in-time (JIT)
topic Single Minute Exchange of Dies
topic Combining JIT and Outsourcing
topic The Principles of Lean
topic How to Reduce the Vendor Risks with Just-in-Time ?
topic Can Just-in-Time Work Without Kanban?
topic Lean Manufacturing Tools for Beginners
topic Just-in-time: Problematic or Possible?
topic Experiences with Including Purchased Parts in Kanban
👀Importance of Inventory Velocity
topic Lean and JIT Manufacturing
topic Classification of Lean Tools
topic Just-in-time Needs Flexibility
topic Kanban and Procurement Planning
topic Sustainable Business Approach after Years of JIT
topic The Impact of JIT on the Organization of Production Planning
topic JIT in Variable Marketplaces
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topic Customer Support in Just in Time is Needed
topic Information Velocity
topic Poka Yoke - Explanation
topic Disadvantages of JIT
topic JIT is Playground for Big Companies
topic Intent of Just in Time
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