Consignment warehouse

Definition

A consignment warehouse is a physical storage facility for materials, semi-finished products, or finished goods that is located at a non-owner’s site (such as a buyer or sales representative) to bring the goods closer to customers.

How does a consignment warehouse work?

A consignment warehouse is established through cooperation between two business partners. One partner acts as the supplier, and the other as the buyer. The goods remain the property of the supplier until they are taken or paid for. The supplier assumes all risks and is usually required to maintain a certain level of stock.

The buyer withdraws goods as needed. After withdrawal, the buyer sends the supplier a list of the taken goods (consignment).

Benefits of a consignment warehouse

Benefits for the buyer
A consignment warehouse mainly benefits the buyer. The buyer always has stock available without tying up their own financial resources, which would otherwise be committed to inventory.

Benefits for the supplier
A consignment warehouse is also advantageous for the supplier, especially if they do not have their own storage facilities. It provides a competitive edge, as the buyer does not have to wait for deliveries, unlike typical supplier arrangements.

Who is responsible for risks and costs?
Costs related to transportation, unloading, and warehouse management are generally borne by the supplier and reflected in the inventory price. All risks are solely the responsibility of the supplier. Situations may occur where the customer does not take the inventory, for example, if the goods exceed their expiration date.