What is consignment stock and who needs it?
What is consignment stock?
Consignment stock represents stock that is held by one party though owned by another. This method enables flexibility for the customer as well as peace of mind for both parties. The consignor is at liberty to control the minimum and maximum amount of stock, which varies between products and customers, while the consignee can maximise internal processes such as sales and marketing plans and rest assured that their stock is of appropriate levels. It is an agreement between the customer and supplier.
Consignment stock is sometimes referred to as “consignment inventory” but effectively the definition remains the same.
How does consignment stock work?
An order is received the a certain amount of product which is ordered in from our head office in Germany and is stored on site. This stock can be called off to either an agreed schedule or as spot orders. After collection of any stock via an order, the customer will be invoiced for the corresponding amount. By using a consignment stock system, lead times and purchasing costs can be reduced and demand fluctuations avoided.
Out-sourcing the production of goods eliminates potential in-house issues such as designing and sourcing products, which frees up energy for specialist sales and marketing progression within the company. It also allows logistic procedures to be honed by depending on a reliable level of stock for relevant goods.
Last minute ordering of inventory stock is eliminated thanks to the consignor managing the stock levels of each batch. Restocking methods are employed during or immediately after sale of any goods to avoid low stock levels.
Once the stock gets to a lower level, we contact the customer and ask if they want to place a new order. Nice and easy!
What is consignment stock and what are the benefits for us and you?
At igus®, we found our customers are frequently overrun by unmonitored and too much stock in their own factories. They were unable to ensure quick turnaround for their customers, especially when receiving last minute orders for stock kept far away or even out of the country.
We found we were being asked more and more how can we help with holding stock for our customers but when we discussed consignment stock, please asked “what is consignment stock?”
To solve this, we began to supply our readychains® and readycables under consignment agreements. This ensures both the consignee and the consignor benefit from fast turnaround times. Strong customer service can be maintained which in turn keeps customers happy and informed. and also in control of what they have available to them at all times.
Lead times for products is becoming increasingly longer for so many products and component parts for igus® readycables is no exception but the hope is that by holding stock for a period of time, this reduces the time that customers have to wait.
Through these methods, we can see clear increases in productivity by eliminating missing stock and creating optimisation in storage and picking processes. Also, time is saved thanks to immediate availability, on-site stock, and no lead time delays. As a result, costs are reduced by removing expedited deliveries and surcharges for larger deliveries – since we consolidate delivery costs with every order
Moreover, no maximum or minimum order levels apply which mean our consignees can arrange as much or as little stock to be held with us as they please. We offer various holding periods from 12 months onwards which allows flexibility for both the customer and us as a supplier.
If you want to learn more on what is consignment stock or discuss consignment stock of any product please give us a call.
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