What is a consignment stock?
By definition, a consignment warehouse is a warehouse of a vendor or supplier (called consignor) that is located in the immediate vicinity or on the premises of the recipient (customer; called consignor).
The consignment warehouse is used for the safe and smooth provision of goods by the recipient, who regularly notifies the supplier of the withdrawal. The quantity withdrawn also triggers a message to the vendor. The customer determines the time of withdrawal of items from the consignment store. The vendor remains the owner of the goods until the withdrawal.
Every entrepreneur must find solutions to increase customer satisfaction and sales, while saving costs and minimizing capital lockup. A consignment warehouse can be a successful building block for a company.
Advantages of a consignment warehouse for the customer
The customer does not have to worry about delivery and stock of goods. The parts are always ready to hand and quickly available for the customer. This increases the satisfaction of the customer. The buyer also saves the investment costs, does not bear the investment risk for his own goods or parts warehouse and reduces his capital commitment and storage costs.
Advantages and disadvantages of a consignment warehouse for the vendor
The main advantage of a consignment warehouse for the vendor is the stronger customer loyalty and the relative predictability of his sales. A disadvantage is the higher capital commitment that results from maintaining one or more consignment stores for the vendor.
Special features
If the supplier and the consignor are located in different countries within the EU, different tax regulations (e.g. VAT) may have to be observed. Both companies require an identification number for intra-Community goods traffic.
Special form: Supplier Logistics Centre (LLZ)
Large customers who require many individual parts, which in turn have to be delivered by various consignments, often set up a LLZ. Take an automobile manufacturer, for example, who has separate areas for each consignment in a hall. Each consignor is responsible for inventory management and quality control of the respective storage area and its parts. This allows the manufacturer to concentrate solely on the production of the vehicles.
Conclusion
If the conditions are met, a consignment warehouse offers the supplier the opportunity to strengthen customer loyalty. Customers, on the other hand, benefit from the low capital commitment and thus reduce their storage costs. For the optimal cost-benefit balance of a consignment business, a coordinated IT infrastructure is required. Suppliers and purchasers can view important data at any time, control important processes and automatically process reports of withdrawals.
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