The Procurement Glossary » Consignment Stock

Consignment Stock

Suppliers & Vendors

Definition

Inventory held at the buyer's site but owned by the supplier until it is consumed, when the buyer pays for it.

Explanation

Consignment shifts inventory-holding cost and risk to the supplier while guaranteeing availability for the buyer. The buyer only pays as it uses stock, improving cash flow. It pairs naturally with VMI.

Example

Spare parts sit on consignment in the buyer's store; the buyer is invoiced only when one is drawn for use.

Related terms

• Vendor-Managed Inventory (VMI) — An arrangement where the supplier monitors and replenishes the buyer's stock of its items, taking responsibility for availability.
• Inventory — The goods and materials a business holds for use, sale or production.
• Working Capital — The money tied up in day-to-day operations — broadly current assets (inventory, receivables) minus current liabilities (payables).
• Replenishment — The process of restocking inventory to maintain target levels as items are consumed.

Frequently Asked Questions

What is Consignment Stock?

Inventory held at the buyer's site but owned by the supplier until it is consumed, when the buyer pays for it. Consignment shifts inventory-holding cost and risk to the supplier while guaranteeing availability for the buyer. The buyer only pays as it uses stock, improving cash flow. It pairs naturally with VMI.

Can you give an example of Consignment Stock?

Spare parts sit on consignment in the buyer's store; the buyer is invoiced only when one is drawn for use.

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