In brief
Consignment stock is held at the customer's site and remains the supplier's property until it is withdrawn, only then being invoiced.
Contents
What is Consignment stock?
With consignment stock, the supplier provides goods on the customer's premises or close by. The customer withdraws items as needed, reports the withdrawals and is only invoiced for them. Until then, the supplier bears the tied-up capital while the customer has immediate access. The contract must in particular govern ownership, transfer of risk, insurance, stocktaking, reporting channels, minimum and maximum stock levels and the return of unused goods.
This should be distinguished from vendor managed inventory: there the supplier manages the stock, but ownership generally passes on delivery. The two models can be combined.
For cross-border consignment stock within the EU, VAT rules must be observed. Since 2020 there has been a simplification for this, implemented in Germany in Section 6b of the German VAT Act (UStG), which is tied to record-keeping and reporting obligations and should be reviewed from a tax perspective.
In practice: maintenance and procurement
For spare parts, the model is particularly suitable for expensive, critical parts with irregular consumption. The customer secures availability without having to pay for the parts in advance.
Synonyms and abbreviations: consignment inventory · consignment warehouse · call-off stock
Frequently asked questions
What is the difference between consignment stock and vendor managed inventory?
The decisive factor is the transfer of ownership. In consignment stock, the goods remain the property of the supplier until the customer withdraws them and are only invoiced then. With vendor managed inventory, the supplier manages stock and replenishment, but ownership usually passes on delivery. Both models can be combined, for example as supplier-managed consignment stock.
What are the advantages and disadvantages of consignment stock?
For the customer, tied-up capital and ordering effort fall while the parts are immediately available. In return, the supplier secures sales and close customer loyalty. Disadvantages are the administrative effort for withdrawal reports and stocktakes, the need for coordination in the event of shrinkage or damage, and questions of liability and insurance. For the supplier, the model also means tied-up capital and the risk of goods not being used.
What needs to be covered in a consignment stock agreement?
Typical contents are items and quantities, minimum and maximum stock levels, retention of title, transfer of risk and insurance, reporting channels and deadlines for withdrawals, stocktaking rules, invoicing and the return of unused goods at the end of the agreement. For cross-border stock, VAT issues are added. The specific arrangement should be agreed with tax and legal advisers; this entry does not replace advice in the individual case.