What questions can I answer with velocity?
At the heart of it, velocity is about having the right products in the right quantities in your inventory. We start with two basic questions and build from there:
How many units of a product do you sell on an average day? That's its velocity.
Once you know that, you can track inventory to make sure you have the right quantity of each product on hand: too little and you'll run out; too much means money sitting on the shelf.
What's the cost and revenue for every product in your inventory or on order?
Knowing product velocity on a cost and revenue basis helps smooth your budgeting and cash flow, all while keeping the right mix of inventory on-hand and on-order.
Using this information, you can make strategic decisions and figure out:
What products are selling the most/least per day (in a given time period)?
What products make up the most/least of my daily COGS and revenue?
How many days of inventory do I have left (at current sales velocity)?
When should I re-order products to avoid out of stock events? What should I re-order ASAP? What am I running out of?
What do I have too much of or should not restock? What products need discounting or promotions to sell through?
How many units of each product are on open Purchase Orders to be received?
What is the cost basis and expected revenue for products in inventory and on open POs?
Getting Set Up
Velocity helps you decide what you need to buy and when, but you can also customize the calculation used under Settings --> Inventory.
Fine tune the optimal re-order date and velocity by choosing your preferred sales window, PO lead time and buffer.
Sales Window
What period of time do you want to look at when calculating product velocity? Do you want to estimate daily product velocity using the most recent month's data? Or take a quarterly view?
Select from 30, 60 or 90 days as the sales window.
To calculate daily velocity, total units sold over the selected sales window are divided by the number of days in the window. So if you sold 100 units over a 30 day window, velocity would calculate as 100/30 = 3.33.
If a product has been in inventory less than the selected window, "days since product created" will be used (so if you created and sold 10 units of a new product yesterday, velocity will be 10/1 = 10).
NOTE: The sales window calculates on a trailing basis, meaning today's sales are not included in the calculation window.
PO Lead Time
How many days elapse on average between PO creation and distributors completing delivery? This value deducts the number of days entered from the re-order date.
For example, if POs take about a week to deliver, you could set this to 7 days.
When you have 7 days (or less) of a product remaining in inventory, the product will be marked as "Low Stock" and re-order date will turn red.
Buffer Window
Want to play it safe? You can include a buffer to your PO lead time to account for delays and make sure that you re-order in time. This value deducts the number of days entered from the re-order date. It also highlights the re-order date in yellow when it is within the buffer window.
If deliveries are frequently delayed a day or two, you could set the buffer to 2 days to make sure you re-order in time and avoid out of stock events.
When you have less than the (PO Lead + Buffer) days of inventory remaining, the product will be marked as "Low Stock" and re-order date will turn red.
If the re-order Date is within the buffer window, it will turn yellow (i.e. in this case the re-order Date is within the next 2 days).
Using Inventory Velocity in Meadow
Now that you're set up, let's dive into using the velocity page to manage inventory.
You can search, filter or sort your product list to find the right information you need.
Sort By
How do you want products to be sorted on your list? You can choose any of the following in descending or ascending order (calculations for each value are broken down in the table below).
Default (same as velocity descending)
Velocity
Inventory
On Order
Days of Inventory
Re-Order Date
Display
Select from the following options to focus on product quantities, costs or revenue.
Quantity
$ Cost
$ Potential Revenue
Columns
View quantity or $ values for velocity, on hand and on order inventory.
Product: Shows the name of the product, option and brand.
Velocity: Daily velocity over the sales window (or days since product created if fewer than days in window).
Inventory: Quantity of units, cost, or potential revenue of current inventory.
On Order: Quantity of units, cost, or potential revenue on open purchase orders.
Days of Inventory: Calculated by dividing unit quantity in inventory by daily velocity units.
Re-Order Date: Shows the estimated re-order date based on velocity, inventory on hand and on order, PO lead and buffer. Calculated as today's date + (units in inventory + units on order)/(daily velocity) - (PO lead + buffer days).
Search bar
Search/filter the velocity list by product, option or brand name.
Category filter
Select a specific category or subcategory to filter the products on the velocity list.
Status filter
Decide which products show on the velocity list based on their re-order date.
All - show safe and low stock products
Safe Stock - only show products with a re-order date in the future.
Low Stock - only shows products with a re-order date of today or earlier.
How is the value in each column calculated?
Sort By/ / /Column | Velocity | Inventory | On Order |
1. Quantity (#) | Average units sold per day in the sales window - calculated as total units sold in previous 30/60/90 days divided by 30/60/90. | Total units of this product currently on hand in inventory. | Total unreceived units of this product currently on order in open Purchase Orders. |
2. Cost ($) | Average cost of product sold per day - calculated as total cost of product sold over last 30/60/90 days (using package cost) divided by 30/60/90. | Total cost of product on hand - calculated using package costs from received Purchase Orders. Entering/editing the product's "average cost per unit" will update this value. | Total cost of unreceived units on order - calculated as (units * cost per unit) on open POs. The product's "average cost per unit" does not impact this column. |
3. Potential Revenue ($) | Average revenue per day from product - calculated as total revenue over last 30/60/90 days divided by 30/60/90. | Total revenue expected from product on hand - calculated as (units in inventory * current price) Does not use sales price. | Total revenue expected from product on order - calculated as (units on open POs * current list price). Does not use sales price |
Re-Order Date
This column shows the estimated date you should re-order to avoid out of stock events, accounting for velocity, PO lead time and buffer.
Re-order date is calculated using today's date, then adding days of inventory on hand and on order, then subtracting selected PO lead and buffer days.
(Units in inventory + Units on order)/(Daily velocity) - (PO lead + buffer days)
For example: if we have a product with a velocity of 10 units/day, with 100 units in inventory and 200 more units unreceived on an open PO this would calculate as:
(100+200)/10 = 300/10 = 30 days from today is when I would expect to run out.If I have set a PO lead of 8 days and a 2 day buffer, the re-order date will be 30 days - 8 days - 2 days = 20 days from today is the re-order date.
NOTES
When displaying by "Cost" figures do not include excise tax. They calculate using the "cost per unit" field from purchase orders (where available). If "average cost per unit" is manually entered/edited on the product's inventory tab, that will update the calculation (and override PO costs).
When displaying by "Potential Revenue," current list price is used (and not sales price) for calculating the Inventory and On Order column values.
If (days since product created) < (days in sales window), velocity uses days since creation as denominator.
Why isn't a product showing in Meadow Velocity?
If a product has 0 inventory and 0 velocity in the selected time period, it will not show on the velocity table.
Archived products do not show on the velocity list. Inactive products do.