Consignment inventory is product owned by the distributor, but inventoried at the customer’s storefront or warehouse.

The distributor’s product is presented to the end consumer by the retailer in the attempt to make a sale. This could mean improved cash flow on the part of the consignee. Since the cost of the inventory falls solely on the distributor, it is rare that the retailer will implement an expensive inventory system. Consignment works best for the distributor in cases where the product is new and does not have a successfully track record of sales. Consignment inventory is product owned by the distributor, but inventoried at the customer’s storefront or warehouse. Copyright © 2016 LaceUp Solutions, Inc. Consignment inventory can be a useful tool for inventory management, when used in the right situations. Especially if you’re a sending consignment inventory to multiple locations, you’ll want to track inventory and make sure you don’t lose any product. The benefit to the customer is that they don’t own this inventory, but are able to draw upon it when needed. So, use it only when required.Another concept similar to consignment inventory is Sale or Return (SOR).The best way to make consignment inventory profitable for everyone is to build strong vendor relationships. On the flip side, the retailer has the luxury of analyzing the cost-benefit tradeoff in implementing a system like this. Note: There is a potential side benefit to consignment inventory in that some shared information that results from the consignment process could be useful to the supplier in his inventory management. Pros for Supplier. Customer Pros of Consignment inventory: In our above example, the customer is only invoiced for those quantities they use in the month they use them.

If you’re looking for ways to reduce your inventory carrying risk, consignment inventory is not the solution and any costs saved are usually not worth the added pressure of keeping track.Here are a few ways to ensure that consignment inventory is beneficial for everyone involved:Under SOR sales, the supplier will transfer his inventory to the retailer and will get paid only when these goods get sold. You can now read the complete guide and we'll keep you informed about more awesome guides in the future.Learn deep insights about selling more and growing your business.Our team will contact you to get started on Primaseller within 24 hours. All rights reserved. This year alone, we’ve seen the sales of one of our distributors suffer a 33% loss due to the required switch to the consignment model. In our experience, we’ve seen profits squeezed for distributors under this model. Avoid inventory carrying costs. This means that the distributor must have an inventory management solution in place to track the inventory that is consigned at each storefront. Consignment is used as a strategy to convince a retailer to carry products that may have otherwise not been carried. With so much capital tied-up in inventory, it’s not surprising that businesses devote a lot of time and expertise to improving and perfecting their inventory management processes. Since the retailer does not invest up front for the product, he/she makes a risk free profit when the product sells and does not lose money if the product doesn’t sell. How to Manage Consignment Sales. Benefits of Consignment Stock First, the primary benefit that can be derived from a consignment agreement is that it allows the consignee to save money on inventory costs. You pay the consignor only after you have sold the merchandise. This increases the probability that a new product will be accepted and presented to the retailer’s end consumers.Even though the retailer has approved the placement of the product in their storefront, the distributor is responsible for the inventory. As a result, you don’t have to worry about raising requests on time.There’s no denying the fact that consignment inventory handling involves a certain amount of risk.