A consignment inventory is a specific stock that is in the possession of the customer or seller (the consignee) but yet owned by the supplier (a vendor or wholesaler). Here, the supplier sets up an inventory for the seller which remains at the supplier’s warehouse only (only when the product is sold on an eCommerce platform). The assigned seller has the rights to sell the products from that inventory either on an online marketplace or a personalized storefront. Only when the seller sells or consumes that product, it is considered to be bought from the supplier.
The products which are preferred to be sold through the “consignment inventory” model are either seasonal, perishable or previously owned.
A gym never has a store within the premises. Although, protein supplements are available for the people who workout. A consignment inventory from a particular supplier for the protein supplements is dedicated to that gym. Whenever required, the gym can either sell it to a member or can consume it by giving it to a trainer. Once sold, only then is it considered to be purchased from the supplier.
There are certain considerations taken before making a consignment agreement.
As per the definition, the seller is required to pay only when the product is sold. However, a seller and supplier can have their own terms and conditions – there can be limits on the time that the seller will keep the product on his/her shelf.
Documentation can be done legally even for the general rules e.g. the seller is required to pay for the product once it is sold or consumed.
There are various such software available for inventory management software for large as well as small and medium-sized businesses. Such software majorly helps in tracking the inventory, supplier and seller management, and accounting.