Consignment Inventory

Consignment inventory is when your Vendor provides your business with products (inventory) and defers the payment until the products or inventory have been consumed or sold. For start-ups or companies hoping to use their capital in other growth areas versus investing in inventory this is an option. The consignee or the user assumes the goods from the vendor and stores the products at their place of business. Storing the inventory might mean a special section is set-up with bins and shelving to house the product. Inventory level are pre-determined by the parties based on an estimated usage. Payment is not made until the goods are used in-house or sold to a customer. Having the vendor assume the risk for obsolescence and carrying costs is attractive to many organizations and they are more than willing to pay more for such an arrangement. Another term for consignment inventory is vendor managed inventory (VMI) and most suppliers are prepared to offer this service just to secure your business. If you are looking for a sample form you can use for a an agreement for vendor managed inventory we would suggest looking at RFQPro.com