Consignment items in inventory

Consignment items are inventory items that are kept in a storeroom on-site and owned by an external vendor. The vendor retains financial ownership of the consignment items until they are used by the organization that is storing them.

Consignment items are not included in the inventory valuation of an organization. Consignment items have a financial impact only when they are consumed, at which point, payment must be made to the vendor.

Rotating items and condition-enabled items cannot be flagged as consignment items.


A factory uses plant machinery that is critical for production. The factory stocks certain service parts as consignment items, either because their budget is restrictive or demand for such items is irregular.

The vendor who supplies the parts benefits from this arrangement by providing a ready supply of parts and thus saving on expedited freight costs. The vendor can also be certain that the customer does not procure the replacement parts from a competitor.