Velocity (Inventory)
Also known as: Inventory Velocity, Product Velocity, SKU Velocity
Definition
Inventory velocity refers to the rate at which products sell and move through a warehouse or supply chain. Understanding velocity helps optimize inventory placement, purchasing decisions, and warehouse operations.
Velocity Categories
| Category | Description | Typical % of SKUs | % of Volume |
|---|---|---|---|
| Fast movers (A) | High sales frequency | 10-20% | 70-80% |
| Medium movers (B) | Moderate sales | 20-30% | 15-20% |
| Slow movers (C) | Low sales frequency | 50-70% | 5-10% |
Measuring Velocity
Common metrics:
- Units sold per day/week/month
- Picks per SKU
- Inventory turns
- Days of supply
- Order lines per SKU
Velocity Formula
Velocity = Units Sold ÷ Time Period
Example: 300 units sold in 30 days = 10 units/day velocity
Velocity-Based Decisions
Warehouse Operations
- Fast movers in prime picking locations
- Slow movers in reserve storage
- Replenishment frequency aligned to velocity
Inventory Management
- Fast movers: Lower safety stock, frequent replenishment
- Slow movers: Higher review, potential discontinuation
- Medium: Balanced approach
Purchasing
- Fast movers: Larger, more frequent orders
- Slow movers: Smaller orders, longer intervals
Velocity Changes Over Time
Product velocity isn’t static:
- Seasonal variations - Holiday items spike and drop
- Lifecycle stages - New products ramp up, mature products decline
- Promotions - Temporary velocity increases
- Market changes - Competition, trends affect demand
Velocity Analysis Best Practices
- Review velocity data regularly (monthly/quarterly)
- Adjust slot assignments based on changes
- Consider velocity by channel/location
- Don’t just count picks—consider units and lines
- Factor in velocity trends, not just current rates
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