What is a consignment warehouse?
By definition, a consignment warehouse is a warehouse of a supplier or subcontractor (called consignor) that is located in the immediate vicinity or on the premises of the buyer (customer; called consignor). The consignment warehouse is used for the safe and smooth provision of goods by the customer, who regularly notifies the supplier of the withdrawal.
The quantity withdrawn from the warehouse simultaneously triggers a notification to the supplier. The time of removal of items from the consignment warehouse is determined by the customer. The supplier remains the owner of the goods until they are removed.
Advantages of a consignment warehouse for the customer
Every entrepreneur must find solutions to increase customer satisfaction and sales while saving costs and minimizing capital commitment. A consignment warehouse can be a successful building block for a company.
The customer does not have to worry about the delivery and stock of goods. The parts are always ready to hand and quickly available for the customer. This increases customer satisfaction. The purchaser also saves on 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 supplier
The main advantage of a consignment warehouse for the supplier is stronger customer loyalty and the relative predictability of its sales. The higher capital commitment that the management of one or more consignment warehouses results in for the supplier can be seen as a disadvantage.
Special features
If the registered offices of 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 the intra-Community movement of goods.
Special form: Supplier logistics center (LLZ)
Large customers who require many individual parts, which in turn have to be delivered by different consignments, often set up an LLZ in intralogistics. Consider, for example, a car manufacturer that has separate areas for each consignment in a hall. Each consignment is responsible for the 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 requirements 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. A coordinated IT infrastructure is required for the optimum cost-benefit balance of a consignment business. This allows suppliers and purchasers to view important data at any time, control key processes and automatically process notifications of withdrawals.
