Consignment Inventory
Consignment inventory is stock a supplier places at a buyer's location but still owns until it is sold or used. The buyer pays only as it consumes the goods. It lowers the buyer's carrying risk and gives the supplier shelf presence, but it requires careful tracking of what has actually sold.
How consignment works
The supplier ships and continues to own the stock; the buyer holds and sells it. Usage is reported back, often by EDI, and the buyer is invoiced only for what was consumed. Title transfers at the point of sale or use, not at delivery.
Why tracking is the challenge
Because ownership and physical location are split, both sides need an accurate, shared view of on-hand and sold quantities. Inventory inquiry, the EDI 846, and usage reporting keep the count honest and the billing correct.
Related Terms
Related Resources
Frequently Asked Questions
Consignment inventory is supplier-owned stock held at the buyer's location. The buyer pays only for what it sells or uses, and the supplier retains ownership until then.
The supplier owns consignment inventory until the buyer sells or consumes it, at which point title transfers and the buyer is billed.
How to Answer "Are You EDI Capable?"
A buyer asked, and you need to answer this week. The four things they are checking, what you can say yes to today, and a realistic date for the rest.
- What a buyer is really asking when they ask this
- The minimum set-up that makes the answer yes
- What you can answer today versus what needs building
- Rough timelines, so you can give a date rather than a maybe
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