Inventory velocity measures how quickly inventory moves through the supply chain, from receipt to consumption or sale. It is often expressed in terms of inventory turns or days of inventory on hand. High velocity indicates efficient flow and minimal holding time, while low velocity can suggest overstocking, poor demand planning, or product obsolescence. Understanding inventory velocity helps companies identify which products are actively contributing to revenue versus those that are stagnating. Items with low velocity may tie up valuable storage space and working capital, while high-velocity items need responsive replenishment systems to prevent stockouts. Companies often categorize SKUs by velocity and apply differentiated strategies based on the movement pattern. Optimizing inventory velocity involves adjusting reorder points, lead times, and replenishment strategies to accelerate the flow of goods. Businesses may also employ demand sensing tools and real-time analytics to react swiftly to changes in demand, ensuring that inventory moves efficiently through the supply chain. Improved inventory velocity enhances capital efficiency, reduces risk of obsolescence, and supports more agile supply chain operations.
