Manufacturers can expand their reach and distribution network without having to set up physical locations, as they can piggyback off existing retailers. Benefits of consignment inventory for consignors Yes, the consignment model has benefits and drawbacks for both consignees and consignors. Are there any pros and cons of consignment stock? This business arrangement is usually governed by a detailed consignment agreement that both parties must sign. The retailer pays for the stock only when it’s sold and typically receives a commission or percentage of the selling price as compensation. At the same time, the consignee agrees to promote and sell the product, effectively handling the sales process. The consignor keeps legal ownership of the goods. But, what exactly is consignment inventory?Ĭonsignment inventory is a supply chain approach or business arrangement where a consignor (e.g., manufacturer) provides stock to a consignee (e.g., retailer) without receiving payment upfront. What do you do? You enter into a consignment inventory agreement to test the market. While you know the technology works and provides value, you’re unsure about the market reception, and so remain reluctant to mass produce this product. You recently launched a new product line with innovative features. You’re a manufacturer that produces high-end audio equipment, like speakers and headphones. ![]() What is consignment inventory, and is it the right model for you.
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