Asset velocity

The result of increasing operational velocity will translate into an increase in asset velocity—inventory and cash flow. Far too often, organizations try to increase asset velocity by reducing inventory without appropriate changes in policies and processes to reduce time and/or increase frequency. This results in poorer customer service. What you want to do is make underlying changes in operational velocity and see the flow through effect of the improvement in asset velocity. 

The important thing to understand is that asset velocity should be the result of making improvements in operational velocity—reducing time and increasing frequency. Without these underlying changes, inventory reduction will only result in lost sales and poorer customer service. 

Asset velocity Inventory turns. Cash flow velocity (also referred to as cash conversion cycle)... 

Asset velocity is the result of improving operational velocity. 

The measures in the framework are connected in a cause-effect relationship. As you go from left to right, you get the How question answered. As you go from right to left, you get the Why question answered. For example, to answer How to improve the critical variable velocity, you go to the right and you find that you can do that by working on time, frequency, and asset velocity. 

At Xerox, returns are managed in four categories equipment, parts, supplies, and competitive trade-ins. Return to available is a velocity measure of the cycle time required to return an asset to a useful status. This metric is particularly important for those products where customers are given an immediate replacement in the case of product failure. Also, equipment destined for scrap and waste from manufacturing plants is measured in terms of the time until cash is received. 

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