Commercial Benefit of Consignee

[Former Member]

When the owners stock is moved to consignment place, the Consignment Fill-up takes place. Now when the consignee sells the stocks (Consignment Issue) the consignee is charged by the owner. Now my question is what is the commercial benefit the consignee is having here ?

[Former Member · Accepted solution]

Hi there,

What do you mean by commercial benifit? You mean in terms of profits?

When a consignment issue happens, the owner will bill the consignee for the goods he bought from the wner. But the consignee will sell the products at a higher price. Sale between consignee & end cusomer is not recorded in consignemnt sale or for that matter in SAP.

How the consignee sells to the customer is a totally different transaction.

So when you mean consignment sale, you will just record the transactions between owner & consignee. Not from consignee to customer.

For eg: Consider Hero Honda implements SAP. He can have consignment process where he seels through dealers (consignee). When the dealer sells the goods, Hero Honds will charge the dealer. How much the dealer is charging the customer is not recorded in SAP. Even though the goods are at the dealer's place, they still remain the property of Hero Honda.

The price the dealer buys from Hero Honda is different from the price he sells to the customer.

Regards,

Sivanand

[Former Member]

HI,

In consignment fill up the consignee is not chanrged and the ownership is still with owner only. Consignee will be charged only when he picked up some stock and sells it. Consignee is investing his space to hold the stocks of the owner. The reasons for the consignment process are 1. If the transportaton cost is high to carry small quantites of stock. 2. Dangerous goods or pershable goods - if consignee got the place to hold those kind of stocks. 3. If the market is unpredictable

The advantage for consignee

1. Need not wait for lead time to receive stocks

2. In general scenario once the PGI is done the ownership will be transfered to consignee, if any problem happened during transit, based on the insurance agreement consignee or owner has to take up the loss. But in this case the ownership will change only during consignment issue. Hence the transit risk is not there.