What is consignment stock?

Consignment stock is stock that a supplier places at a customer's site but still owns. The customer pays only for what it uses. Until then, the goods sit on the customer's shelf but on the supplier's books.

How is consumption recorded?

In two ways. The customer scans what it takes with a scanner, or the supplier's representative records consumption on a visit, when refilling the stock on site. Either way, only what was consumed is invoiced.

Where is consignment used?

Wherever a supplier wants its products on site without the customer buying them first. Vending machines, unmanned shops and pharma are typical examples: the operator or supplier keeps ownership and invoices what was taken.

When does the supplier book the sale?

Not on delivery. Under IFRS 15, a supplier does not recognise revenue when it delivers goods that are held on consignment. The sale comes when the goods are consumed, which is why the consumption record matters so much.

Consignment stock

In brief

Under consignment, the supplier owns the stock until it is used. Under vendor managed inventory, by contrast, the customer owns the stock and the supplier keeps it at the right level.
With the BizBloqs Consignment module, the supplier places its products at the customer's site and keeps ownership.
Consumption is recorded by the customer with a scanner, or by the supplier's representative, who refills the stock on site.
Only what was consumed is invoiced. Under IFRS 15, the supplier does not book the sale when it delivers goods on consignment.
Typical uses: vending machines, unmanned shops and pharma.

Who it is for

Suppliers and operators who place their own products at customers' sites and invoice on consumption: vending operators, unmanned shop operators, pharmaceutical and medical suppliers, and wholesalers with stock on customers' premises. Not about resale or second-hand consignment shops.

Under consignment, the supplier owns the stock until it is used. Under vendor managed inventory, the customer owns the stock and the supplier keeps it at the right level. This page is about the first: your products on your customer's shelf, still yours, until somebody takes them.

The model is simple for the customer. It has the products on site and pays only for what it uses. For the supplier, it is only as good as its record of what was used.

Your products, on their site

With the BizBloqs Consignment module, the supplier places its products at the customer's site and keeps ownership. The stock is recorded per site, so you always know what you have placed where.

Nothing changes hands on delivery. The accounting standards say the same. Under IFRS 15, a supplier does not book the sale when it delivers goods that are held on consignment. One sign that an arrangement is consignment is that the supplier can take the goods back or move them to another customer, and that is exactly what a supplier with slow-moving stock at one site will want to do.

FIGURE 1The consignment cycle

Scroll sideways to see the whole figure.

Two ways to record consumption

The sale happens when the goods are used, so the moment of use is what has to be captured. The module offers two ways:

The customer scans. The customer takes a product and scans it out. Consumption is recorded the moment it happens.
Your representative records it on a visit. The supplier's representative visits the site, sees what was used, records it and refills the stock on the spot.

Many suppliers combine the two: customers scan during the week, and the representative checks and refills on the regular visit.

Invoice only what was used

From the consumption record, you invoice only what was consumed. Not what was delivered, and not an estimate. The invoices themselves are raised in your ERP, from the consumption that BizBloqs recorded. The ERP systems BizBloqs connects to are on the integrations page.

That is what makes the model fair to the customer and safe for the supplier. The customer never pays for goods still on the shelf, and the supplier never loses track of goods it still owns.

Where consignment is used

Consignment fits wherever a supplier wants its products on site without the customer buying them first:

Vending machines. The operator owns the products in the machine, refills it on a round, and records what was sold.
Unmanned shops. Products sit in a shop without staff, and only what was taken is settled.
Pharma. Medicines and medical supplies are kept at a hospital, clinic or pharmacy, owned by the supplier until they are used. See the pharmaceuticals page for the wider picture.

Not the same as vendor managed inventory

Consignment is often confused with vendor managed inventory. The difference is ownership, and it decides how you invoice. Under vendor managed inventory, the customer owns the stock once delivered, and the supplier's job is to keep the level right. If that is your arrangement, see vendor managed inventory software.

How the module fits

The Consignment module is not part of the SME solution. From SME+, it is added at a charge, plus its configuration. At Enterprise, all modules are included and you pay for the configuration. It builds on the stock records of the inventory management system. How BizBloqs is billed, without prices, is on the WMS cost page.

Bring one customer site and your refill round to a demo, and we will show how placing, consumption and invoicing look in BizBloqs. Book a BizBloqs demo.

What is consignment stock?: Consignment stock is stock that a supplier places at a customer's site but still owns. The customer pays only for what it uses. Until then, the goods sit on the customer's shelf but on the supplier's books.
How is consumption recorded?: In two ways. The customer scans what it takes with a scanner, or the supplier's representative records consumption on a visit, when refilling the stock on site. Either way, only what was consumed is invoiced.
What is the difference between consignment stock and vendor managed inventory?: Ownership. Under consignment, the supplier owns the stock until it is used. Under vendor managed inventory, the customer owns the stock and the supplier keeps it at the right level.
Where is consignment used?: Wherever a supplier wants its products on site without the customer buying them first. Vending machines, unmanned shops and pharma are typical examples: the operator or supplier keeps ownership and invoices what was taken.
When does the supplier book the sale?: Not on delivery. Under IFRS 15, a supplier does not recognise revenue when it delivers goods that are held on consignment. The sale comes when the goods are consumed, which is why the consumption record matters so much.