Key takeaways
- Consignment inventory is stock a supplier places at a retailer or distributor's location that the supplier still owns—ownership (and the liability) only transfers when the item actually sells.
- It needs to be tracked separately from owned inventory, since it should not count toward your own stock value or cost of goods sold until a sale happens.
- The core requirement is a location- and ownership-aware inventory system: same physical shelf, two different owners, and a clear trigger for when stock changes hands.
What consignment inventory is
In a consignment arrangement, a supplier (the consignor) places stock at a retailer or distributor's (the consignee's) location, but retains ownership of it until it actually sells. The retailer displays and sells the stock on the supplier's behalf, then pays the supplier an agreed share once a sale happens—unsold stock can typically be returned.
This is common in retail categories with unpredictable sell-through (art, specialty foods, apparel, books) and in distribution relationships where a supplier wants shelf presence without the retailer taking on inventory risk upfront.
Why consigned stock needs to be tracked separately
Consigned stock physically sits on the same shelf as owned inventory, but it is not the same asset on the books. For the consignee (retailer), consigned stock should not count toward owned inventory value or cost of goods sold until it sells—recording it as owned inventory overstates assets and understates the eventual payable to the supplier.
For the consignor (supplier), that same stock is still their asset even though it has left their own warehouse—it needs to stay on their books as inventory-at-a-third-party-location, not be written off simply because it changed physical location.
- Tag stock by ownership status (owned vs. consigned-in vs. consigned-out), not just by location
- Only convert consigned-in stock to a recorded sale (and supplier payable) at point of sale
- Track consigned-out stock at a customer location as still-owned inventory, not written off
- Reconcile consigned stock counts periodically—consignment stock is easy to undercount since nobody 'owns' the count responsibility as clearly as owned stock
Tracking consignment stock in StockFlow
StockFlow tracks stock by location and lets you record which items at a given location are consigned rather than owned, so a retailer can see consigned and owned stock side by side without conflating the two in a single inventory value. Suppliers running consignment programs can use multi-location tracking the same way, treating each consignee's shelf as a location their stock still counts against until sold.
When a consigned item sells, record it as a sale from that location the same way you would owned stock, which is what triggers the payable back to the supplier and moves the item out of consigned status.
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