What is consignment inventory?

Under consignment, the supplier keeps ownership of the goods sitting on your shelf. You pay when you use or sell a unit, not when it arrives. Retailers use it for unproven product lines, hospitals use it for expensive implants, and industrial suppliers use it to keep fastener bins stocked at customer plants. The appeal is cash flow and risk: the holder ties up no money in stock and can return what doesn't move. The supplier gets shelf presence and a sales channel they otherwise wouldn't. The catch is record-keeping. Consignment stock physically lives in your warehouse but must not count as your inventory on the books, and every consumption event has to be reported to the owner so they can invoice. Where teams trip: mixing consigned and owned stock in the same bin with no flag in the system. Counts go wrong in both directions, the supplier's invoice never matches your usage records, and the quarterly reconciliation becomes an argument. The fix is structural: separate bins or a location flag for consigned stock, a distinct ownership field on the record, and a usage report that goes to the supplier on a fixed schedule.