What is meant by the term consignment warehouse?

In a consignment warehouse, goods are stored at the customer’s site but remain owned by the supplier until consumed. No invoice is issued until usage occurs.

• the supplier is the consignor
• the customer is the consignee

Advantages:

• immediate availability
• lower capital and storage costs for the customer
• early quality checks by the consignee

Disadvantages:

• higher inventory risk for the consignor
• increased customer dependency on supplier

Planning Considerations:

• Item selection (e.g., high-value, quality-sensitive, or demand-variable items)
• Space and IT infrastructure (e.g., WMS with visibility and automation)
• Reorder levels, delivery cycles, packaging types
• Responsibility in case of defects or errors