VMI and consignment inventory are often used together, but they answer different questions. VMI is about who manages the stock; consignment is about who owns it and when you are billed. You can run VMI with or without consignment — and understanding the split is the key to getting the working-capital benefit right.
What is consignment inventory?
Consignment inventory is stock that physically sits at the customer’s site but remains owned by the supplier until it is used. The customer is billed on issue — when an item is actually taken — rather than on delivery. Until then, the goods stay on the supplier’s balance sheet, not the customer’s.
VMI vs consignment: the difference
| VMI | Consignment inventory | |
|---|---|---|
| What it defines | Who manages and replenishes stock | Who owns stock and when billing occurs |
| Ownership before use | Depends on terms | Supplier |
| Billing trigger | Depends on terms | On issue (when the item is taken) |
| Main benefit | Fewer stockouts, less admin | Lower working capital for the buyer |
In practice the two are complementary. A consignment VMI program gives the buyer the best of both: the supplier keeps stock available and the buyer only pays for what is consumed.
Why finance teams care
- Working capital: bill-on-issue means cash is not tied up in shelves of unused stock.
- Balance-sheet clarity: consigned stock stays with the supplier until issued, so the buyer’s inventory reflects real consumption.
- Obsolescence risk shifts toward the party best placed to redeploy slow-moving items.
The catch is auditability. Consignment only works when both sides trust the record of what has been issued. That requires accurate, tamper-resistant capture at the point of use — not a clipboard.
How Invendor supports consignment VMI
Invendor captures every issue automatically at the point of use and gives buyer and vendor one shared, auditable record — the foundation consignment billing depends on. Bill-on-issue and standard purchasing are both supported, so finance sees inventory the way the business actually runs. See the vendor managed inventory software overview, or start with what is VMI.
Frequently asked questions
Is consignment inventory the same as VMI?
No. Consignment is about ownership and billing (the supplier owns the stock until it is issued). VMI is about management (the supplier monitors and replenishes it). They are frequently combined but are not the same thing.
Who owns consignment stock?
The supplier owns consignment stock until the customer issues (uses) it. At the point of issue, ownership transfers and the customer is billed.
Can you have VMI without consignment?
Yes. In a non-consignment VMI program the supplier still manages and replenishes stock, but the buyer takes ownership on delivery and is billed then, as with standard purchasing.
