Consignment warehouse
A consignment warehouse presents a different sourcing strategy, in which the supplier is responsible for the goods until the customer consumes them. In legal terms, the supplier remains the owner of the goods. The owner, however, is the customer if the goods are in his warehouse. When the goods are physically transferred, ownership is also transferred.
Brief description
The supplier is provided with storage space near the customer (often on the customer's premises), where the supplier remains the owner of the goods until they are taken. The customer pays only for the goods actually consumed. Presentation of the bill to the buyer generally takes place only when the goods are physically taken from the warehouse.
The term "consignment warehouse" refers to consignment transactions that are a special form of commissioning connections. The importer takes over the sale of goods on consignment for the exporter and gets a commission for it.
The supplier conducts periodic inventories to determine the quantities received. The difference to Vendor Managed Inventory is the placement of orders. In consignment inventory, the customer places orders as with a normal order in the supplier's system.
Advantages
- Reduce transportation and inventory maintenance costs
- High availability and security of supply through local proximity
- Easier procurement
- Minimize risk (undercounting and invoicing only after acceptance)
- Production and transportation possible in the optimal number of their batches
- Standardized payment process
- Reduce your own storage space
- Reduction of transports
- Reduce disposition risk
- Increase customer loyalty, especially securing long-term retention of resources.
Disadvantages
- Multiple data capture through lack of systems integration
- Stock in consignment warehouses is difficult to control
- High stocks of finished products in many separate warehouses (e.g., at different customers)
- Increased handling and manipulation effort due to a system that is not very integrated between the recipient and the supplier
- Passing responsibility for resources to the supplier
- High susceptibility to errors by the occurrence of interruptions in connections between systems if they are not sufficiently networked with each other
- Employee resistance to the transfer of competencies to the supplier
- Only the responsibility for the resources of the consigned goods
- Longer payment terms for customers and the associated greater risk of statute of limitations
CONCERNSWNE
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VMI - Vendor Managed Inventory
- Inventory building strategy
- Warehouse picking