Consignment inventories are beneficial for long-term relationships between a supplier and a customer. Consigned inventory reduces transportation costs and inventory costs, and improves availability of materials at the point of use. Larger lots improve quality assurance with focused production runs and manufacturing dates. Consignment inventory offers better cash flow for the customer. Variables in production planning are reduced, with more predictable demand forecasting and replenishment planning.
A well-managed consignment inventory is an honest partnership, with the supplier and the customer working together to improve their processes, sharing inventory details and strengthening their supply chain management.
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