ABSTRACT
Velocity is a measurement of the rate and direction of motion. It measures both speed and direction. Building to order means producing a unit after the customer’s order is transmitted to the factory. The system squeezes time out of the entire cycle from order to delivery. This system minimizes inventory at both ends of the pipeline, incoming and outgoing. Building-to-order improves inventory turnover, which increases asset velocity, one of the most under-appreciated components of making money. Higher velocity coupled with profit margin equals the true return on sales. So a company’s success is dependent upon the combination of operational speed and profit margin on the products sold. The higher the velocity, the greater the total profit or return on sales. Velocity, and the associated increase in throughput, increases volume with the same fixed costs. Throughput focuses on process time through the entire system, not one particular machine, department, or operation.
