Speed when applied to material replenishment is known as Inventory Velocity. Principles and practices to improve inventory velocity starts with differentiating inventory turns. Corporate management and investors understand the concept inventory turns as a key financial measurement, constantly monitored and improved. This metric broadly signifies how a company uses its cash effectively. Fewer inventory turns means a company needs more operating capital and less money available for funding growth. While inventory turns are easily computed at the corporate level, they are difficult to control or improve.
Disparity arises because inventory comprises so many variations (beyond the categories of finished goods, work in process, and raw materials), such as high-priced, fast-moving, slow-moving, one-off, long lead time, long transit time, standard, custom-made, and many other categories. Fast moving consumer packaged goods through retail channels, make inventory turns virtually impossible to monitor and control purely by corporate mandates.
“Enter the domain of inventory velocity. The single most important measurement of inventory is the speed at which the inventory is being churned into cash. The factors impacting speed are consumption rate, lead times, product lot sizes and replenishment frequency. The fastest speed can be accomplished when the consumption rate synchronizes with replenishment frequency, and lead times and lot sizes are kept at a minimum, explained Laksham.
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Ultriva’s (www.ultriva.com) cloud-based platform leverages and seamlessly integrates with leading ERP and MRP systems, to deliver an end to end pull based replenishment solution. Ultriva, based in Cupertino, CA, implements a global demand driven manufacturing model by providing full visibility, scheduling, and sequencing of production of customer orders. Ultriva was named one of the Great Supply Chain Projects of 2014 by Supply & Demand Chain Executive magazine. The company’s global footprint is increasing rapidly with implementations in wide variety of industry sectors and enterprises such as Magellan Aerospace, CareFusion, Emerson, Ingersoll Rand, McKesson, Triumph Group, Regal Beloit, Thermo Fisher and more. Follow Ultriva on Twitter at @Ultriva.