Consignment Stock (Konsignationslager)
Consignment stock (Konsignationslager) describes a commercial arrangement where supplier-owned inventory is physically located at the customer's site but remains the supplier's property until consumed by the customer. The customer manages the storage and triggers consumption events; the supplier replenishes when stock falls below agreed levels. For ERP-bearing DACH organisations, consignment stock is common in automotive supply, industrial MRO (maintenance, repair and operations), medical-device service and high-value engineering components.
How consignment stock works
The arrangement has three stages. (1) Delivery to consignment storage: supplier delivers goods to a designated location at or near the customer's site. No commercial transaction at this point; the goods remain on the supplier's balance sheet. The supplier's ERP records goods at consignment storage; the customer's ERP records stock on hand with a special status (supplier-owned). (2) Customer consumption: when the customer takes goods for use, this triggers the commercial transaction. Customer's ERP issues a withdrawal posting; supplier's ERP recognises the sale and invoice. (3) Replenishment: supplier monitors consumption (via reports, manual review or VMI-connected systems) and replenishes consignment stock to agreed minimum levels.
Benefits to both parties
Customer benefits: lower working-capital requirement (goods do not appear on balance sheet until consumed), assured availability for critical items, reduced procurement effort (no individual POs per replenishment), tighter supplier integration. Supplier benefits: increased customer-side stockholding (defending market share), captive position against competitors who would need to displace already-installed stock, premium pricing potential for the service component, deeper visibility into customer consumption patterns. Trade-offs: supplier carries inventory and obsolescence risk for longer; customer commits to supplier relationship; both need ERP-side support for the unusual accounting and inventory flows. The arrangement only works with reliable consumption reporting and trust between the parties.
ERP-side support
Both parties need ERP capabilities for consignment flows. Supplier-side: track consignment inventory by customer-location separately from own-stock, with goods-issue triggers from customer consumption rather than ship-out. Major ERPs (SAP S/4HANA, Microsoft Dynamics 365 F&O, Oracle Cloud ERP) handle consignment outbound natively. Customer-side: differentiate consignment stock from own-stock in the WMS and ERP stock postings; consumption triggers AP recognition. Mid-market ERPs handle this with varying maturity; specialist VMI (Vendor-Managed Inventory) tools or EDI flows (DESADV, INVRPT messages) complement ERP capabilities. VMI integration: in advanced setups, supplier accesses customer's inventory levels via direct EDI integration or supplier-portal, triggering replenishment without customer-side reorder.
Industry applications
Consignment is common in several DACH industries. Automotive supply: high-value components (engines, transmissions, electronics) often delivered as consignment to OEM plants. Industrial MRO: spare parts and consumables held at customer plants for immediate availability. Medical devices: surgical implants, instruments and disposables held at hospitals on consignment, with consumption billed at use. Construction: high-value materials and tooling held on customer construction sites. Specialty chemicals: containers of process chemicals held at customer plants with consumption-based billing. Print packaging: printed packaging stock held at customer warehouses with just-in-time consumption. Each industry has specific operational and accounting patterns; ERPs with industry-specific configurations handle these natively or through industry add-ons.
Related Topics
Frequently Asked Questions
Does consignment stock count as the customer's inventory for tax purposes?
No — it remains the supplier's asset until consumed. The customer holds the goods physically but does not own them. The arrangement must be properly documented in commercial contracts and ERP records to support this treatment under tax audits. Sloppy documentation can lead tax authorities to treat consignment stock as effective sale, with adverse VAT consequences.
How does VMI relate to consignment?
VMI (Vendor-Managed Inventory) is the operational replenishment model where the supplier monitors and refills customer-side inventory. Consignment is the commercial-and-ownership model. The two often combine: supplier-owned consignment stock managed under VMI replenishment. They can also operate separately: VMI can manage customer-owned stock, and consignment can operate without VMI through periodic manual replenishment.
Can ERP handle consignment stock natively?
Major enterprise ERPs (SAP S/4HANA, Microsoft Dynamics 365 F&O, Oracle Cloud ERP, Infor LN) handle consignment natively for both supplier and customer sides. Mid-market ERPs (Sage X3, Business Central, abas, proALPHA) cover the common patterns; complex scenarios may need configuration or industry add-ons.