Consignment Inventory 1

[ChrisP520]

Greetings, Community:

We are running Progression SQL 7.6.300C. We are considering offering consignment inventory for some of our customers. But we are unsure of how to handle the logistics of this.

One thing that was discussed was creating an inventory location for each customer that we consign inventory to. But we're concerned that too many Inventory locations might become unruly to manage if this program becomes popular. At the same time, we need to make sure the unused inventory is always accounted for.

I was wondering if anyone out there has any experience with consignment inventory using Macola.

Regards,

ChrisP520

 

[MacolaHelp]

Lots of experience here. However, the logistics of how my clients have done it may be very different from how you would like to do it. Does your client own the inventory? Are you supposed to invoice for it? Who gets credit for the sales & who does the receivable collection? etc, etc. You should probably get your reseller in to discuss specifics and figure out an appropriate implementation strategy, then test.

 

[ChrisP520]

Thanks for the speedy reply. Below are some answers to your questions:

We, the consignor, remain the owners of the consigned inventory until it is sold or consumed by the consignee.

We will invoice for inventory sold/consumed by consignee and the consignee is solely responsible for payment.

We remain the seller and the consignee is always the buyer.

The salesman assigned to the account will get credit once the invoice is paid.

 

[MacolaHelp]

I usually think of consignment as something you hold or warehouse for someone else. When you sell it, you pay the person who consigned it to you for the agreed value of the item you agreed to consign. Therefore, you have carried it at no cost, but record a sale (what the buyer paid) and cost (what you paid your customer or vendor if you prefer) and then have a method to send funds to your customer/vendor. The remaining dollars are your profit on this transaction.

You could also hold the inventory in your facility and bill it to your customer as they draw out the inventory. In this scenario, the sell and cost are created at the point inventory is sold from your warehouse. This is essentially the same as buying or building for stock so you have on hand when customers want to order. The only difference with anonymous inventory transactions is that you wouldn't sell this inventory to other customers, and you may have a restriction that only the customer to whom it belongs is the only one who can enter orders for those items.

You could also have the scenario of producing or warehousing items for your customer that are sold to third parties. Your customer would notify you or the third party would identify that a sales order should be generated for the product. You then ship & invoice the third party. Sales & cost entries are created. Does these entries need to be communicated to the customer who requested your consignment services? Does the invoice show the third party they should remit to you or to your customer? If you collect the sales dollars from the third party, how do you pay your customer for the funds you collected less cost and commissions? If the customer collects the payments, how do they pay you for the cost of the product plus, I hope, some fee for the warehousing and shipping services you provided?

You could also have the situation where your customer purchased a number of items, but only wants the shipments sent to him or to a third party as needed. In this case, the value of inventory is zero. The invoicing exercise is then one to relieve inventory and to produce shipping documents to accompany the items out the door.

There are other ways handling consignment, too. It all hinges on:

who owns the product in your warehouse?
who can buy this product? 1 customer? Many customers? Certain customers?
who prepares the invoice?
does the invoice show the payment address as you or the consignor.
are the ship to and bill to addresses the same?
are you using alternate address records for ship to information, customer (bill to) address, or one time address changes on the ship to button?
who collects the funds from the ship to or bill to addressee?
how/when does payment occur between you and the consignee?
who is accounting for the end user sales, and what reports provide that information?

Because of the multiple means of configuring your processes, I still think you should engage your reseller to examine what you want to do and how to get there.

 

[ChrisP520]

Our customers are mostly systems integrators. So, this inventory would be used in design/build applications by our customers. We do not get involved with the end user.

Our thought process was that we would place inventory in a secure area at our customer's location. Our customer would be able to draw from that inventory as needed eliminating the lag time for shipping. Once a month, our salesman would visit the customer and count the items left. At that point, we would bill and invoice our customer for what was used and transfer additional inventory to replenish what was used.

Until the customer uses the inventory, we would own it. They would only be billed when it is used.

There is no invlovement on our part with the customer's customer. Our customer would be responsible for every standard carton removed from the secure area at their location.

 

[kscheeler]

Based on holding the inventory at your customers place of business, I would use separate locations. You would then have the ability to easily run a stock status, sell to them from their location and also track different pricing, costing and sales history as well.

You can have the default location code on your customer account card which will then default into OE. You could also use flex to lock down the ability to change the location in OE or allow it for just certain people.

Kevin Scheeler

 

[ChrisP520]

Kevin,

Thank you very much for your prompt replies. They were helpful in our thought process.

Chris Poulin

 

[MacolaHelp]

Another thought, too. One of the issues with using multiple locations is that avg & last cost are not updated when product is transferred, so you have to maintain your own costs through cost adjustments in addition to the product transfer. If you use multi bin instead (provided you own advanced distribution), cost will be updated. You can treat each customer's site where you maintain inventory as a "bin" & transfer as used or when inventory is counted each month.