What is Consignment stock?

In a consignment arrangement, a supplier places their products at the buyer's warehouse or premises. The buyer has physical access to the goods but is not yet the owner. Ownership transfers at the moment of consumption, resale, or another agreed trigger.

This model offers advantages to both parties. The buyer does not need to tie up working capital: payment is made only when goods are actually used. Stock is always available without burdening the balance sheet. This makes consignment attractive in sectors such as hospitality, healthcare, and manufacturing, where critical materials must always be on hand but stocking them independently requires significant capital.

For the supplier, consignment secures a strong position at the buyer's location. Products are physically ready for use, increasing the likelihood of repeat purchases. The trade-off is that the supplier bears the ownership risk as long as goods have not been consumed.

The consignment contract covers at minimum: who is responsible for damage or loss of the consignment stock at the buyer's location; how and how often settlement takes place (based on consumption records, periodic counts, or automated integration); what minimum and maximum stock levels are; and how the supplier accesses the location for replenishment or stocktaking.

An important legal point: if the buyer becomes insolvent, the supplier can invoke their retention of title and reclaim unconsumed consignment stock. This makes consignment attractive when the buyer presents a higher credit risk.

Consignment can significantly improve a company's liquidity position. Instead of investing thousands of euros in stock that sits in a warehouse for weeks or months, you pay only upon actual consumption. At the same time you prevent lost sales or production stoppages caused by material shortages.

But consignment also carries risks. Unclear ownership records, poor consumption tracking, and inadequate contract terms lead to disputes over what has been consumed and what still belongs to the supplier. A robust consignment contract is essential, not optional.