Consigned Inventory

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Consigned Inventory

• An Implementation guide

Sandeep Gandhi Supply Chain Consultant Omkar
Technologies Inc sandeep.gandhi_at_omkarinc.com
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What is Consigned Inventory

• Consigned inventory is a practice where inventory
  is in the physical possession of one party but
  remains the property of another party.

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What is it not

• It is not Lean
• It does not make supply chain more efficient
• It is not a free ride for customers

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Swimlane Diagram
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Implementation Steps

• Negotiations with supplier
• Physical set-ups
• System setups one-time
• System setups recurring
• Training and Execution
• Monitoring

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Supplier Negotiations

• What constitutes usage
• Movement out of warehouse to floor / shipping
  area?
• Actual usage in product?
• Completion of wip job / shipping transaction?
• Terms
• Maximum duration the inventory can be held on
  consignment
• Changes to Invoicing terms (if any)
• Return terms
• Auditing
• Need separate storage area?
• Supplier inspections (Scheduled / Unscheduled)
• Liability

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Physical Setups

• A separate physical location
• Cages by items / suppliers?
• New access procedures
• Lock-n-key?
• Restricted badges

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One Time Setups
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New SubinventoryInventory Setup gt Setup gt
Organizations gt Subinventories gt New
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Consumption TransactionsInventory Setup gt Setup
gt Organizations gt Subinventories gt New
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Create Consumption AdviceInventory gt Reports gt
Transactions gt Single Request gt Create
Consumption Advice
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Recurring Setups
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Update Flag on Org Item MasterInventory gt Items
gt Organization Items gt General Planning
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Create ASL RelationshipPurchasing gt Supply Base
gt Approved Supplier List
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Create ASL Relationship(continued)
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Swimlane Diagram
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Training Execution

• Get all stakeholders involved
• Get them to understand the process end-to-end
• Start with just one supplier and a few items
• Checklist for each item going on consignment
• Warehouse cage setup
• Blanket PO Created
• Item Master Updated
• ASL updated
• Old POs fully received

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Monitor onhand quantity
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Monitor Transactions
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Monitor Invoices

• Make sure supplier does not invoice against the
  consigned PO
• AP can not do 3 way match on releases submitted
  for payments

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Gotchyas

• Clean up old purchase orders
• ASL setup needs to be local if turning
  consignment on for just one org
• KANBAN items
• Picking order
• Multi-sourced items
• Consume in lots

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Summary

• Benefits
• Reduced lead times because material is held
  on-site
• Deferring payment (you pay when you use not when
  you receive)
• Better looking balance sheet
• Drawbacks
• A little more complicated process
• Needs more setups on the floor / warehouse
• Short term financial gains may be negated if
  supplier starts passing off holding costs

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Food for Thought

• RFID integration
• iSupplier Integration
• VMI Integration
• Consigned Inventory From Supplier Process Guide
  Part No. B10483-03

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QA