Consignment Stock

Consignment stock is inventory that a supplier physically places at a customer's location while retaining ownership of it. The customer does not pay for the goods when they arrive - payment is triggered when the stock is consumed, used in production, or sold. Until that point, the goods remain the supplier's asset, even though they are sitting at the customer's premises.

The arrangement benefits both parties. The customer avoids tying up cash in stock and gains immediate access to goods without ordering delays. The supplier secures a physical presence at the customer's site and maintains a closer relationship, making it easier to win repeat business and harder for competitors to displace them.

How Consignment Stock Works in Practice

The mechanics are governed by a consignment agreement that sets out which goods are covered, where they are stored, who is responsible for counting and reporting usage, and how and when invoices are raised. Typically the customer reports usage at a set interval - weekly or monthly - and the supplier raises an invoice for the quantities consumed.

In promotional merchandise, a distributor might hold blank apparel or standard branded items on consignment for a key account, allowing the client to draw down stock as orders come in without each pick triggering a separate purchase order. In office furniture, a dealer might hold a range of standard task chairs at a client's premises to support rapid replacements as headcount changes.

Risks and Responsibilities

The primary risk for the supplier is stock that goes missing, gets damaged, or expires before it is used. Because the customer holds goods they do not own, clear accountability for loss or damage needs to be written into the consignment agreement.

For the customer, the risk is over-reliance on consignment arrangements for stock they should be buying outright, which can create supply dependency if the supplier changes terms or withdraws the arrangement.

Businesses managing consignment stock alongside owned inventory need visibility across both. Zigaflow's inventory module tracks stock movements and on-hand levels, giving businesses a single view of what is available - whether held outright or on consignment.