Importance of Inventory Velocity

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Rhoda Buunaaim
Student (MBA), Ghana

Importance of Inventory Velocity

Why is inventory velocity so important in supply chain management?


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.

Manager, India

Inventory Turn over Ratio

@Rhoda Buunaaim: Inventory is basically an asset in a balance sheet but it is actually a liability. ... Sign up


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