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A “chain of custody consignment vendor managed inventory” refers to a supply chain model where a vendor takes full responsibility for managing the inventory levels of their products at a customer’s location, while maintaining ownership of the goods until they are actually used or sold (consignment), ensuring complete tracking and accountability throughout the entire process, known as the “chain of custody.”. [1, 2, 3, 4]
Key points about this concept: [1, 2, 4]
• Vendor Management: The vendor actively monitors stock levels and initiates replenishment orders based on the customer’s demand, effectively managing the inventory on their behalf. [1, 2, 4]
• Consignment Ownership: The vendor retains ownership of the goods until they are used or sold by the customer, meaning the customer only pays for what they actually consume. [1, 2, 3]
• Chain of Custody: This refers to the detailed record of movement and handling of the inventory, ensuring traceability from the moment the goods leave the vendor’s warehouse until they are used by the customer. [1, 2, 3]
Benefits of using a chain of custody consignment vendor managed inventory: [1, 2, 3]
• Reduced Inventory Costs: Customers can minimize their on-hand inventory by only paying for what they use, optimizing cash flow. [1, 2, 3]
• Improved Efficiency: Vendors can optimize deliveries based on real-time demand data, minimizing stockouts and overstocking. [1, 2, 4]
• Enhanced Visibility: The chain of custody tracking system provides transparency into inventory levels and movement, enabling better planning and decision-making. [1, 2, 3]
Example scenario: [1, 2, 3]
• A manufacturer of specialized components supplies parts to a large assembly plant on a consignment basis. [1, 2, 3]
• The manufacturer monitors inventory levels at the plant using a dedicated system and delivers new parts automatically when stock reaches a predetermined level. [1, 2, 4]
• The assembly plant only pays for the components used in production, not for the inventory they hold on-site. [1, 2, 3]
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[1] https://taulia.com/resources/blog/vendor-managed-inventory-vmi-explained/[2] https://www.tandfonline.com/doi/full/10.1080/00207543.2021.1983222[3] https://www.netsuite.com/portal/resource/articles/inventory-management/consignment-inventory.shtml[4] https://www.sap.com/resources/what-is-vendor-managed-inventory-vmi
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