Consignment Stock
Also known as: Consignment inventory
Consignment stock is inventory held at a buyer's location but owned by the supplier until it is used or sold, at which point the buyer pays for it.
Under a consignment arrangement, the supplier places goods at the buyer's premises but retains ownership until the buyer draws them down. The buyer only pays for what it consumes, which frees up working capital and reduces the risk of holding stock that may not be needed. The supplier gains a nearby presence and closer customer relationship.
Consignment stock suits high-value, fast-moving or critical items where availability matters but tying up cash is undesirable. It requires accurate usage tracking and clear agreement on ownership, replenishment, obsolescence and payment triggers. It is closely related to vendor-managed inventory, where the supplier also takes responsibility for replenishing the stock it owns.
Frequently asked questions
- What is consignment stock?
- Consignment stock is inventory held at the buyer's location but owned by the supplier until it is used or sold, at which point the buyer pays only for what it consumes.
- What are the benefits of consignment stock?
- It frees up the buyer's working capital, reduces the risk of unused inventory and improves availability, while giving the supplier a closer presence with the customer.
Related terms
Vendor Managed Inventory (VMI)
Vendor managed inventory (VMI) is an arrangement where the supplier monitors and replenishes a buyer's stock of an item, rather than the buyer raising orders.
Read definitionInventory Management
Inventory management is the practice of ordering, storing, tracking and controlling stock so that the right items are available at the right time without tying up excess capital.
Read definitionSafety Stock
Safety stock is extra inventory held as a buffer to protect against unexpected demand spikes or supply delays.
Read definitionWorking Capital
Working capital is the money a business has available for day-to-day operations, calculated as current assets minus current liabilities.
Read definitionExplore related across the knowledge graph
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