Question:
We would like to set-up a consignment
inventory relationship with one of our
Suppliers, for purchased items we stock and then ship out to our branches.
Somehow we still need to launch PO's and receive into a warehouse location -
however we want to exclude the value of that inventory from our GL - to
satisfy the accounting types. We presently use BPCS for min/max inventory
planning.
Signed,
Silvia143.
Our
response:
Dear
Silvia143, Your indicated on your question form that you did not want to be
contacted by email. I am not sure, however, what your question is
relating to consignment. Consignment can be a great way to stock
materials close to the consumer without having to spend the cash to acquire
the goods or take on the asset in your inventory. It can be a very
useful cost reduction and profit improvement tool for both the manufacturer
or wholesaler and the retail party. You are also correct that the use
of consignment sales relies on good bookkeeping for all parties concerned.
When dealing with consignment inventory consider:
-
Assigning a distinct stock keeping unit (SKU) to the consignment stock.
-
Allocating and/or marking areas in inventory storage at each location for
consignment stock only.
-
Using a
distinct inventory identification number for each consignment stock
location.
-
Establishing a relatively frequent cycle count system.
-
Set up
the necessary adjusting accounts to net the inventory value to the
appropriate level.
These
methods will allow you to forecast, track and account for consignment
inventory. Hopefully your accounting system can accommodate a
consignment classification with the inventory values balanced to "zero" on
your assets while still carrying the appropriate quantities and pricing.
Recognize that the inventory value on your books may be a real number if you
are responsible for shipping costs that your accounting methods routinely
apply to the cost of goods sold in inventory.
If you
have a more specific question about consignment or business improvement,
please do not hesitate to write.
Please remember that
you have free will and the suggestions provided here are only for
consideration. Consult with legal and licensed professionals as
appropriate and make your own decisions.
Get your
costs and bottom line profits
under control now
