Eric Schmitz, SIG Leader
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.