Personnel Breaks - A purchasing department that does not have to buy something every month or every quarter is free to concentrate on other things.
Price Breaks/Discounts - Defined and increased volume enable vendor to manufacture and purchase in more economical lots, and consolidated shipments reduce freight costs. The result is lower bid prices for the items covered by the consignment agreement.
Prices can be reviewed and negotiated periodically as desired
Prices can be monitored on a spot basis
Clout - The customer/vendor relationship becomes very meaningful and demands top vendor performance.
Prices, quantity, inventory - Stauffer and the consignment customer must first determine items to be placed on consignment and a mutually agreed upon inventory level for each item.
A Stauffer outside account manager and a representative from the customer must count the customer’s current on-hand inventory counted.
At the end of each month, the items requisitioned from the consignment stock will be reported to Stauffer. This reconciliation can be submitted electronically with quarterly counts taken to verify accuracy.
Stauffer bills the customer the difference between the beginning monthly inventory (plus any product transfers made during the month) and the month-ending inventory.
Duration and termination - The beginning and ending time frame of the agreement along with 60 or 90 day termination option if desired.
Title and insurance - Specific ownership of inventory and insurance responsibility. Typically the vendor holds title to material until customer draws it from stock for use.
Rejects or leftovers - Specific policy should be outlined listing limits of responsibility for customer and vendor.
Running short - Provision should be outlined to cover additional materials which may be required. Periodic adjustment of the maximum and minimum inventory levels.
Audits - Internal audits by customer and vendor as required by both parties.