subject: Consignment Inventory [print this page] Consignment Inventory is such an inventory which is in the possession of the customer, but the supplier still owned it. In other way it can also be defined as the inventory of customer's possession (warehouse stocks) which is been placed by supplier and they are allowed to sell it from their stock. Customers purchase those inventories only after they are able to resell or they are able to consume it. The main benefit for the customer is that he doesn't have to invest their own capital inventory. However the customer will still have to invest for storing and managing the inventory.
Suppliers has a consignment inventory or group of products, and the suppliers believes that he will sell those if he can bring them in front of the end-users i.e. his customers. The trick here is stocking of retail establishments which he can do by bringing them in front-users. The difference between retailers and supplier is the level of confidence because generally the retailers always hesitate to stock the product; the main reason is that they do not take the risk involved in it as the money can get stuck if the products are not sold out.
Suppliers believes in-store exposure which is critical for getting his consignment inventory to be sold, and he offers his customers to stock his product in the customers warehouse .This includes shared risk where the supplier takes the risks of the capital investment which is associated with the inventory whereas the customer is taking the risks of those product to be dedicating retail space. On the other hand it also creates a condition for shared benefit because none of them will benefit until those products are sold out. This risk/benefit is enough for the suppliers to motivate the customers to stock their products.
There are four standard consignment documents types:
Consignment Fill-up: In this case the suppliers send their stock from their storage to the customers Consignment.
Consignment Pick-up: It is the vice-versa of the consignment fill-up
Consignment Issue: it is known as the charges for the customers and removal from the consignment.
Consignment Returns: it this case the customers are credited and they are returned to consignment.
Workers from warehouse manufacturing should not able to see consignment inventor. There lies a problem if they are used to process transactions. These can lead to delay in processing the transaction which can also lead to data integrity process which is serious issue.
To be more specific let's take an example of consignment inventory, a bicycle company produces a huge range of bicycles with different price levels. He has customers who stocks his mid priced bicycles but is not ready to stocks his expensive ones due to the lack of confidence however if they get a customer who are interested for high price bicycles they will contact the company to order them. On the other hand the dealer or the company thinks that the high end bikes in the shops can promote their models as well.
