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EIDX/CompTIA ConsignmentScenario IV
Consignment with Consumption-Based Supplier Managed Inventory
The buyer has inventory deposited in a third-party warehouse
contracted by the buyer. Inventory owned by the buyer remains
on the buyer's books and warehouse does not take ownership at any
time. The buyer may also deposit inventory consigned to it
by a seller. To the seller, the Third-Party Warehouse is just
another location of the buyer’s; legal terms for liability established
between buyer and warehouse, and between buyer and seller for inventory
consigned to the buyer by the seller. Replenishment takes
place per appropriate two-party Replenishment Scenario; parts are
received into warehouse. When inventory is needed, the buyer sends
pull signal to warehouse, and warehouse shipment advice and transfer
receipt advice used by both parties to trigger the increment or
deduction of on-hand inventories. For inventory
consigned to the buyer by its seller, It is critical for buyer to
have accurate visibility of the inventory levels and status at warehouse
to report to seller. The warehouse performs inventory
counts and sends inventory reports and adjustment notices used to
keep inventory levels and status in synch with the buyer.
Click here to view a larger image.
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Step
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Description
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1.
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Replenishment
Scenario - The buyer may or may not have products on a
consignment program between the buyer and seller.
- For parts that will not be on a consignment program with
the seller, the buyer and establish the appropriate two-party
replenishment process.
- Consignment Scenario - If there is a consignment program
between buyer and seller, the buyer establishes the appropriate
two-party consignment process with the seller, including
appropriate replenishment (Order and Forecast) models, and
reporting of inventory balances.
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| 2. |
Logistics Scenario -
The seller drop-ships inventory to the buyer's warehouse. |
| 3. |
Inventory Management
Model 8 - The buyer notifies the warehouse when inventory is
being drop-shipped from its (the buyer's) supplier to the warehouse.
The buyer also notifies the warehouse when inventory is being
transferred from an in-house stores. The warehouse notifies
the buyer when the transferred or shipped goods have been received. |
| 4. |
Logistics Scenario -
For goods drop-shipped to the buyer's warehouse, the Buyer sends
Receipt Advice to the supplier. |
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5.
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Financial Scenario - Seller invoices buyer or payment is
triggered per appropriate Billing or Payment model.
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| 6. |
Inventory Management
Model 1 - (Optional) Inventory is physically located at the
warehouse facility. The warehouse performs inventory counts
and reports to seller (scheduled, as-needed, or at seller request).
Buyer may invoice for inventory shrinkage depending on the terms
of the consignment agreement. |
| 7. |
Debits and Credits Model
5 - If inventory shrinkage is reported, the buyer may request
a debit from the next payment to the warehouse. |
| 8. |
Financial Scenario -
The warehouse invoices the buyer for services or payment for
services is triggered per appropriate Billing or Payment model.
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9.
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Inventory Management Model 9 - Buyer sends Warehouse Shipping
Order to Warehouse when parts need to be shipped to the Buyer's
facility. Warehouse sends Stock Transfer Ship Advice to let
buyer know parts have been shipped. When inventory arrives,
Buyer sends Warehouse Stock Transfer Receipt Advice to Warehouse.
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10.
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Inventory Management Model 10 - The Warehouse sends Inventory
Adjustment Advice to the buyer to report any adjustments due
to inventory counts. If there is inventory shrinkage,
the buyer may request a debit from money owed the warehouse
for services, depending on the terms of the consignment
agreement.
The buyer may send Inventory Adjustment Advice to the warehouse
to report a variance noted, to ask the warehouse to put inventory
on hold or reserve it for a specific purpose, request disposal
of inventory, notify of a product recall, etc.
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Activity Diagram
Click here to view a larger image.
| Step |
Description |
| A. |
At Start State A, the
buyer and seller have agreed upon terms and are ready to launch
a Replenishment Cycle. |
| 1. |
The Replenishment Scenario on this diagram is an example.
The buyer (the seller's customer) may or may not have products
on a consignment program between the buyer and seller.
If there is a consignment program between buyer and seller,
the buyer and seller establish the appropriate two-party Consignment
Scenario, including appropriate Replenishment Scenario, and
reporting of inventory balances.
For parts that will not be on a consignment program with
the buyer, the buyer and seller establish the appropriate
two-party Replenishment Scenario.
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| B. |
At End State B, the
buyer has received the seller's order acknowledgment and now
waits for a shipment of goods. |
| C. |
At Start State C, the
seller is ready to drop-ship goods to the buyer's warehouse. |
| 2. |
A Ship Notice is sent
to the buyer per the appropriate Shipment Scenario. |
| 3. |
Inventory Management
Model 8: The buyer sends the warehouse a notification
that inventory is being shipped to it, either from the buyer's
in-house stores or via drop-shipment from the buyer's supplier.
The warehouse notifies the buyer when the transferred
or shipped goods have been received. |
| 4. |
The buyer notifies the
seller that the goods have been received. |
| D. |
At End State D, the seller
knows that the inventory has been received by the buyer's warehouse.
The warehouse does not take title to the inventory. |
| 5. |
Seller invoices buyer
or payment is triggered per appropriate Billing or Payment model. |
| E. |
At End State E, the
goods have been shipped to the buyer and the buyer has made
payment to the seller. |
| F. |
At Start State F, the
warehouse and buyer have agreed that the warehouse will report
the status of the consigned inventory to the buyer (scheduled,
as-needed, or at buyer request). |
| 6. |
Inventory Model 1 -
The warehouse performs inventory counts and reports to
buyer. |
| G. |
At End State G, there
are no billable shrinkages reported, so buyer is not triggered
to request a debit from the warehouse for lost inventory; the
buyer and warehouse are in synch about the inventory levels
in the Consignment Warehouse. Note: For inventory
the seller has consigned to the buyer, the buyer will provide
inventory reporting per the Consignment Scenario being used. |
| 7. |
If shrinkages are reported,
the buyer asks for a debit to be taken from what it owes the
warehouse for services. |
| H. |
At End State H, the
seller has requested a debit from the warehouse and the warehouse
has responded. |
| I. |
At Start State I, the
buyer needs inventory transferred in-house from the warehouse. |
| 8. |
The buyer sends a Shipping
Order to the Warehouse with instructions to ship goods to the
buyer. The Warehouse sends Warehouse Shipping Advice to
let buyer know parts have been shipped. The buyer sends
notification to the warehouse when the parts have been received
in-house. |
| J. |
At End State J, the buyer
is in possession of the inventory shipped from the warehouse. |
| K. |
At Start State K, the
warehouse is ready to begin a billing cycle. |
| 9. |
The warehouse invoices
the buyer for services or payment for services is triggered
per appropriate Billing or Payment model. |
| L. |
At End State L, the
payment has been made to the warehouse. |
| M. |
At Start State M, the
warehouse has determined that an inventory adjustment needs
to be reported to the buyer. |
| 10. |
Warehouse reports inventory
adjustments to buyer. Resolving discrepancies is usually
handled manually. |
| N. |
At End State N, there
are no billable shrinkages reported, so buyer is not triggered
to request a debit from the warehouse for lost inventory. |
| O. |
At Start State O, the
buyer has determined that it is necessary to request that the
warehouse make one or more inventory adjustments. |
| 11. |
The buyer may send Inventory
Adjustment Advice to the seller to the warehouse to report a
variance noted, to ask the warehouse to put inventory on hold
or reserve it for a specific project, notify of a product recall,
etc. |
| P. |
At End State P, the
warehouse and buyer are in synch about the inventory levels
and inventory status in the warehouse. |
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