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Consignment Scenario 6 - Consignment with Distributor as Inventory Management Service Provider, 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):

Due to the size of this model, 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 end customer and distributor have agreed upon terms and are ready to launch a Replenishment Cycle.
1.

The end-customer and component supplier establish the appropriate two-party Replenishment Scenario.

B. At End State B, the end-customer has received the distributor's blanket order acknowledgment and now waits until replenishment is required.
C. At Start State C, the component supplier and distributor are ready to launch a Replenishment Cycle.
2. Replenishment Scenario - The Distributor sends forecast of the end customer's requirements to the component supplier per appropriate Replenishment Scenario.  The distributor issues releases to the component supplier per appropriate Order or Forecast/Planning Business Model.
3. Shipment Scenario - The component supplier ships goods to consignment distributor (distributor's facility).
D. At End State D, inventory has been shipped to the distributor's facility to be held in consignment for the end-customer.
E. At Start State E, the end-customer is ready to send a material release schedule (Replenishment Scenario 3) or a release (Replenishment Scenario 2) to the distributor.
4. The end-customer issues releases to the distributor.
F. At end state F, there are no released requirements in the Material Release Schedule (Replenishment Scenario 3).  This state does not apply to Replenishment Scenario 2.  In Replenishment Scenario 2, the end-customer sends Discrete Releases, so end state F does not occur.
5. Shipment Scenario - The distributor ships goods to the end-customer per appropriate Shipment Model.
G. At end state G, there have been released requirements and they have been shipped to the end-customer.
H. At Start State F, the distributor and component supplier have agreed that the distributor will report sales to the component supplier.
6. Sales Reporting Scenario - The distributor reports transfer of inventory to trigger transfer-of-ownership and Billing/Payment cycle.  Reporting of inventory movement between the distributor and the end-customer does not trigger replenishment of inventory in consignment (the distributor's) distributor (replenishment is per next release or order - Step 2 above).
7. Financial Scenario - Ownership transfers from the component supplier to the end-customer per contractual terms.  The component supplier invoices the end-customer or payment for components is triggered.
I. At End State I, the goods have been shipped to the end-customer and the end-customer has made payment to the component supplier.
J. At Start State J, the distributor is ready to begin a billing cycle.
8. The distributor invoices the end-customer for services or payment for services is triggered per appropriate Billing or Payment model.
K. At End State K, the payment has been made to the distributor.
L. At Start State L, the distributor and end-customer have agreed that the distributor will report the status of the consigned inventory to the end-customer (scheduled, as-needed, or at end-customer request).
9. Inventory Model 1 - The distributor  performs inventory counts and reports to end-customer.
M. At End State M, there are no billable shrinkages reported, so end-customer is not triggered to request a debit from the distributor for lost inventory; the end-customer and distributor are in synch about the inventory levels in the Consignment Distributor.
10. If shrinkages are reported, the end-customer asks for a debit to be taken from what it owes the distributor for services.
N. At End State N, the end-customer has requested a debit from the distributor and the distributor has responded.
O. At Start State L, the distributor and component supplier have agreed that the distributor will report the status of the consigned inventory to the component supplier (scheduled, as-needed, or at end-customer request).
11. Inventory Model 1 - The distributor  performs inventory counts and reports to component supplier.
P. At End State P, there are no billable shrinkages reported, so component supplier is not triggered to invoice the end-customer or the distributor for lost inventory; the component supplier and distributor are in synch about the inventory levels in the Consignment Distributor.
12. The Trading Partner Agreement should define how inventory shrinkage is handled.  The component supplier may ask the end-customer to issue a credit to add to the amount it (the end-customer) owes to the component supplier per Debits and Credits Model 7, or may bill the end-customer for the shrinkage, and the end-customer then ask the distributor for a debit to be taken from what it owes the distributor for services per Debits and Credits Model 5.
Q. At End State Q, the component supplier has requested a credit from the end-customer and the end-customer has responded.
-- (Not shown) Inventory Management Model 10 - The Distributor may sends Inventory Adjustment Advice to the end customer to report any adjustments due to inventory counts.  If there is inventory shrinkage, the end-customer may request a debit from money owed the distributor for services,  depending on the terms of the consignment agreement. 

The end customer may send Inventory Adjustment Advice to the distributor to report a variance noted, to ask the distributor to put inventory on hold or reserve it for a specific purpose, etc.  (Diagram is simplified - represents two separate instances of execution of Inventory Management Model 9).

The Distributor may send Inventory Adjustment Advice to the component supplier to report any adjustments due to inventory counts.  If there is inventory shrinkage, the component supplier may invoice the end customer, and the end customer may request that the distributor allow a debit from money owed the distributor for services,  depending on the terms of the consignment agreement. 

The component supplier may send Inventory Adjustment Advice to the seller to the distributor 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.  (Diagram is simplified - represents two separate instances of execution of Inventory Management Model 9).

Last updated 24 February 2003