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Consignment Scenario 4 - Consignment, Third-Party Warehouse,
Buyer-Contracted, Version 2.0

Status:  Provisional Ratification by Committee August 2002. Created as part of recast of original Inventory Models, Pre-2000 Version A (Balloted and Ratified by Membership, August 1998)

Process Activities

Special Notes:                   

 


Activity Diagram (See also Narrative):

Due to the size of the diagram below, you may want to print the model in parts by downloading and printing a version of the image that is broken into multiple parts.  Set printing to "landscape" orientation. Images:
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Narrative (see also Graphic):

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.

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.

Last updated 24 February 2003