Define Consignment Stock Agreement

There are good and bad things that you need to watch out for when you`re selling on the air to make sure the whole process goes as smoothly as possible for the sender, the recipient and, of course, the customer. In this supply chain management strategy, the shipper retains legal ownership of the goods and the recipient is not required to pay for the goods only after the sale. The beneficiary may even decide to return the remaining stocks without worrying about the monetary impact. Compliance with certain conditions is required of the customs authorities and VAT. Due to EU VAT legislation, it is easier to have a freight fleet between EU countries. The distributor is required to keep accurate accounts, but is unnecessary to have a warehouse connected. [1] In order to improve the efficiency of the customer`s supply chain, the parties consider that the supplier will supply the customer with goods on a consignment storage basis and authorize the customer to keep a shipment of the goods on the customer`s premises. Since the shipping agreement is a unique method that treats the recipient as a third party that connects the seller and the buyer by transferring the property to the recipient without transferring the legal property to the recipient. This section emphasizes that the parties to the agreement enter into a delivery agreement that declares the shipper`s legal ownership to the shipper, as well as the legal rights and obligations of the recipient who assists in the sale of the goods. Sales on shipments allow suppliers and retailers to „test“ the success of a new product or distribution channel without taking the risk of significant financial losses. Retailers can introduce an unassed item or try a well-established product in a new distribution channel before investing heavily in that item. During shipping, the sender can ask the recipient to return their products by communing a notification to the recipient. This section describes how the sender should notify the recipient and how long the notice period is.

In addition, at the end of the delivery period, the recipient may require the sender to recover its products, which must be determined, as well as the length of its delay. Tradition means putting goods or warehouses in another party`s inventory, but keeping the property until the products are sold. Parties who participate in a consignment contract: a long-term, mutually beneficial relationship can certainly be developed regardless of whether you are a sender or recipient. With the right inventory management software to monitor your consignment inventory and make 100% visible, and with the right strategies to meet the challenges, every company out there can become a consignment expert. You can monitor the sales rates of shipments (the percentage of stock sold through a consignment channel) and make decisions based on accurate data only if you use a good record inventory management system. It is important that we have 100% visibility on our shipping stock. TradeGecko was good in that regard – we just create a new warehouse for every channel we receive.