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Consignment Scenario 5 - Consignment, Third-Party Warehouse,
Seller-Contracted, Version 1.0

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):

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Narrative (see also Graphic):

Step Description
A. At start state A, the seller has in-house inventory that is to be transferred to the warehouse or has inventory in-transit that is being drop-shipped from the seller's supplier.  The seller at this point is in the role of "buyer" using buyer-contracted warehouse per Consignment Scenario 12.  The seller is the depositor.
1. Inventory Management Model 8:  The seller sends the warehouse a notification that inventory is being shipped to it, either from the seller's in-house stores or via drop-shipment from the seller's supplier (the seller in this step is in the role of "buyer" using buyer-contracted warehouse per Consignment Scenario 12).  The warehouse notifies the seller when the transferred or shipped goods have been received.
B. At End State B, the warehouse is now in possession of inventory that is owned by the seller.  Title to the inventory will not pass to the warehouse at any time.
C. At Start State C, the warehouse and seller have agreed that the warehouse will report the status of the consigned inventory to the seller (scheduled, as-needed, or at seller request).
2. Inventory Model 1 - The warehouse  performs inventory counts and reports to seller.
D. At End State D, there are no billable shrinkages reported, so seller is not triggered to request a debit from the warehouse for lost inventory; the buyer and seller are in synch about the inventory levels in the Consignment Warehouse.
3. If shrinkages were reported, seller asks for a debit to be taken against what it owes the warehouse for services.
E. At End State E, the seller has requested a debit from the warehouse and the warehouse has responded.
F. At Start State F, the buyer and seller have agreed upon terms and are ready to launch a Replenishment Cycle.
4.

The Replenishment Scenario on this diagram is an example.  The 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.

G. At End State G, the buyer has received the seller's order acknowledgment and now waits for a shipment of goods.
5. Upon approaching the promised delivery date, the seller sends a Shipping Order to the Warehouse with instructions to ship goods to the buyer.  The Warehouse sends Warehouse Shipping Advice to let seller know parts have been shipped.
6. A Ship Notice is sent to the buyer per the appropriate Shipment Scenario, and the buyer notifies the seller when the goods have been received.
7. Seller invoices buyer or payment is triggered per appropriate Billing or Payment model.
H. At End State H, the goods have been shipped to the buyer and the buyer has made payment to the seller.
I. At Start State I, the warehouse is ready to begin a billing cycle.
8. The warehouse invoices the seller for services or payment for services is triggered per appropriate Billing or Payment model.
J. At End State J, the payment has been made to the warehouse.
K. At Start State K, the warehouse has determined that an inventory adjustment needs to be reported to the seller.
9. Warehouse reports inventory adjustments to seller.  Resolving discrepancies is usually handled manually.
L. At End State L, there are no billable shrinkages reported, so seller is not triggered to request a debit from the warehouse for lost inventory.
M. At Start State M, the seller has determined that it is necessary to request that the warehouse make one or more inventory adjustments.
10. The seller 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 customer, notify of a product recall, etc.
N. At End State N, the warehouse and seller are in synch about the inventory levels and inventory status in the Consignment Warehouse.

Last updated 04 January 2003