Certified Supply Chain Professional (CSCP) Practice Exam

What does inventory velocity measure?

1. The time it takes for products to reach customers

2. The speed of inventory movement through an organization

3. The total value of goods sold per quarter

4. The cost associated with maintaining inventory

The correct answer is: The speed of inventory movement through an organization

Inventory velocity measures the speed at which inventory moves through an organization. It is a critical metric in supply chain management as it indicates how quickly products are being produced, distributed, and sold, thereby impacting overall operational efficiency. High inventory velocity is often desired as it suggests that a business is effectively managing its inventory levels, reducing holding costs and minimizing the risk of obsolescence. An organization with high inventory velocity typically has a responsive supply chain that can quickly react to market demands. This means that products are frequently being sold, which helps to keep inventory levels optimized and increases cash flow. In contrast, the other choices focus on different aspects of inventory management or performance measurements. The time it takes for products to reach customers pertains to delivery timelines rather than the movement of inventory internally. The total value of goods sold per quarter measures sales performance rather than how quickly inventory is exchanged for cash. Finally, the cost associated with maintaining inventory relates to expenses rather than the speed of its movement, which is distinct from the concept of inventory velocity.