What is Consignment Inventory?
Consignment inventory is stock held at the customer's or distributor's location that remains owned by the supplier until it is used or sold.
Definition
Consignment inventory is an arrangement in which a supplier places goods at the customer's premises but retains ownership until the customer consumes or sells them, at which point title transfers and billing occurs. It improves availability for the customer while deferring their inventory investment and cash outlay until consumption. For the supplier, it can win business and improve service but ties up capital and adds tracking complexity. Consignment is common for high-value parts, medical devices, and retail and is frequently combined with vendor-managed inventory.
How Consignment Inventory Works in ERP
ERP systems track consignment stock in a way that keeps it physically present and available at the customer location while ownership stays with the supplier on the books until a consumption event. When the customer uses or sells the goods, the system triggers ownership transfer and generates the supplier invoice and accounting. This requires both parties' systems to record consignment receipts, usage, and settlement accurately.
ERP Vendors with Strong Consignment Inventory
Oracle NetSuite
The original cloud ERP — built for fast-growing companies
SAP S/4HANA Private Cloud
Fully customisable managed-cloud ERP for complex enterprises
Infor M3
Process manufacturing ERP for food, chemicals, and pharma
Epicor Prophet 21
Distribution-focused ERP with deep wholesale features
Frequently Asked Questions
Who owns consignment inventory?
The supplier retains ownership of consignment inventory even though it physically sits at the customer's location. Title transfers to the customer only when the goods are consumed or sold, which is also when the supplier invoices for them. This is the defining feature that distinguishes consignment from a normal purchase.
How is consignment different from VMI?
Consignment is about ownership: the supplier owns the stock until it is used. VMI is about who manages replenishment: the supplier decides when to restock based on usage data. They are often combined, but a VMI program can use normal ownership terms, and consignment can exist without the supplier managing replenishment.