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Consignment stock: definition and important aspects for buyers
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Consignment warehouse in a nutshell:
A consignment warehouse is a physical stock that is held by the customer but remains the legal property of the supplier until the goods are actually withdrawn. For purchasing, this means optimized capital commitment with high material availability at the same time, as invoicing only takes place when the goods are actually withdrawn.
Example: An automotive supplier stores fasteners worth 250,000 euros directly at the OEM, with payment only being made after the parts have been removed and the removed stock (an average of 15,000 euros) being automatically replenished and invoiced on a weekly basis.
Contents
Introduction to the consignment warehouse
What is a consignment warehouse?
A consignment warehouse is a special form of warehousing in which a supplier stores goods in stock at the customer's premises without ownership being transferred to the customer immediately. Ownership is only transferred from the supplier to the customer when the goods are removed from the warehouse. This model enables the customer to access the required materials at any time without having to finance large inventories, while the supplier builds up long-term customer loyalty.
Core elements of the consignment warehouse
Significance for purchasing
The consignment warehouse plays a strategic role in the procurement process by increasing liquidity and flexibility. For purchasers, this means less capital is tied up, as payments are only made when required. It also improves security of supply and minimizes the risk of supply bottlenecks. Close cooperation with the supplier allows processes to be optimized and costs to be reduced.
Guide: Everything you need to know about setting up and managing consignment warehouses in a legally compliant manner
Implementation of a consignment warehouse
A consignment warehouse optimizes procurement by reducing warehousing costs and increasing material availability. The supplier stores goods on the customer's premises and remains the owner until the customer removes the goods.
Practical example: Consignment warehouse in the manufacturing industry
A mechanical engineering company regularly requires hydraulic components. To ensure security of supply and save storage costs, it sets up a consignment warehouse:1. The supplier provides a stock of 1,000 hydraulic components in the customer's warehouse.
2. the company takes the parts required for production on a daily basis.
3. the consumption is determined at the end of the month and only the components withdrawn are invoiced.
This model reduces the company's capital commitment and ensures continuous production without interruptions. The supplier benefits from regular orders and strengthens the business relationship.
Evaluation and strategic findings
✓ Critical success factors
→ Contract design: Precise definition of responsibilities, liability and ownership in the consignment agreement
→ Inventory management: implementation of a transparent tracking system for goods withdrawals and inventory management
→ Supplier relationship: building a trusting, long-term partnership as the basis for the consignment model
⚠ Challenges and limitations
→ Storage capacity: Provision of sufficient and suitable storage space at the customer's premises
→ Process integration: adaptation of existing IT systems and warehouse management processes
→ Risk management: protection against damage or loss of consignment goods
Future trends and developments:
"Consignment warehouses are developing into digitalized smart warehouses with automated inventory management."
→ IoT-based inventory monitoring in real time
→ Predictive analytics for optimal inventory levels
→ Blockchain-supported property documentation
→ Integration into digital supply chain platforms
◆ Strategic implications
→ Working capital: significant reduction in capital commitment due to delayed transfer of ownership
→ Security of supply: Increased material availability with simultaneous cost optimization
→ Process efficiency: streamlining procurement processes and reducing administrative expenses
Conclusion on the use of consignment stock
Consignment warehouses offer an effective solution for optimizing the supply chain by reducing capital commitment and at the same time increasing security of supply. Success depends largely on a clear contractual structure and trusting supplier relationships. The concept is constantly evolving through the integration of modern technologies and is becoming increasingly strategically important for companies.
