Consignment stock and who owns the goods

For purchasing, the model is attractive because material is ready to hand without having to be paid for in advance. For it to work in day-to-day operations, withdrawal, stock and billing must be properly agreed beforehand. Anyone holding stock across a national border should also keep an eye on VAT.

How consignment stock works

The supplier places goods in a warehouse located at or near the customer, often directly on the customer's premises. The customer takes out what is needed for production. Technically, the supplier is called the consignor and the customer the consignee. Here we stay with supplier and customer.

As long as the goods are in the warehouse, they belong to the supplier and remain in the supplier's balance sheet inventory. IHK Köln (Cologne Chamber of Commerce and Industry) describes the transfer as follows: only on withdrawal do the right of disposal or ownership pass to the customer. The withdrawal also gives rise to the supply on which the invoice is based. In practice, billing is often monthly, based on the quantities withdrawn.

Legally, a consignment stock agreement in Germany is a warehousing contract under Section 467 of the German Commercial Code (HGB) with elements of a sales contract. Under Section 467 HGB, the warehouse keeper undertakes to store and keep the goods. The depositor pays the agreed remuneration.

What the contract should cover

Consignment stock only runs as well as the agreements behind it. The starting point is the question of which items go into the warehouse at all, and a minimum and maximum stock level for each item. Then comes the rhythm: how and how often does the customer report withdrawals, and at what intervals is billing done?

Just as important is the question of who counts the stock and how discrepancies are resolved. Added to this are insurance and liability, that is who insures the warehouse and who is liable in the event of damage or loss.

That leaves the end. What happens to goods that are not withdrawn for a long time, and how are they returned? How does the contract end, and what then happens to the remaining stock? SAP names the same basic points for supplier-managed stock: roles and responsibilities, delivery schedules, minimum and maximum replenishment quantities and return rules. They are set before the start, not only when something goes wrong.

Advantages and disadvantages

For the customer, capital tied up falls because the goods are only invoiced after withdrawal. The material has already been inspected and is on site in the agreed quantity, which secures supply. Work in purchasing is reduced, because instead of many individual orders there is one collective invoice.

If the warehouse is at the customer's premises, the supplier often saves on warehouse rent. Because the supplier remains the owner, it is generally protected if the customer becomes insolvent. A well-run consignment stock also binds the customer: a withdrawal involves less effort than a new order from another supplier.

It comes at a cost for both sides. The supplier pre-finances the stock and bears the risk for goods that are not used. The customer provides the space and must record every withdrawal properly, otherwise stock and invoice will not match.

Consignment stock, VMI, commission warehouse and blanket order

The four terms are often mixed up, but they describe different things. They can be distinguished by three questions: who manages the stock, who owns the goods and when they are invoiced.

Sources: Wikipedia, Konsignationslager and Vendor-managed Inventory; IHK Köln. The row on the blanket order describes the usual model; the details are governed by the respective contract.

Consignment stock and blanket orders are the closest. With a blanket order, the goods belong to the supplier until a call-off has been delivered, and invoicing is per call-off. With consignment stock, they are already at the customer's premises, and invoicing only takes place on withdrawal.

What is the difference between consignment stock and VMI?

With vendor managed inventory, the supplier takes responsibility for the stock of its products at the customer's premises. It triggers replenishment itself, without the customer placing an order. VMI generally does not change the downstream commercial processes, including the invoice. Consignment stock is one of three forms of VMI: here the supplier owns part of the stock at the customer's premises, and the goods remain the supplier's until withdrawal.

VAT: consignment stock in another EU member state

If the supplier and the warehouse are in different EU member states, an EU-wide simplification has applied since 1 January 2020, implemented in Germany in Section 6b of the German VAT Act (UStG). If the conditions are met, taxation is only linked to the withdrawal.

Previously, merely transferring the goods to the warehouse was an intra-Community supply to oneself. The supplier then had to register for VAT in the country of the warehouse. Under the new rules, only the withdrawal by the customer counts as an intra-Community supply in the member state of departure and as an intra-Community acquisition in the member state of arrival.

The most important conditions under Section 6b UStG:

• The supplier has neither its registered office nor a permanent establishment in the member state of arrival.
• By the start of transport, the customer uses its VAT identification number from the member state of arrival.
• The supplier records the transfer separately and reports it in the recapitulative statement.
• The withdrawal takes place within twelve months of the end of transport. Otherwise, the goods are deemed to have been transferred intra-Community on the day after the deadline expires.

The Federal Ministry of Finance (BMF) incorporated the application into the VAT Application Decree (UStAE) by letter of 10 December 2021. The record-keeping obligations should not be underestimated: they are extensive and, in the assessment of Rödl & Partner, are themselves a condition for the arrangement. As at: 26 September 2026. This section is not tax advice; please clarify the details with your tax adviser.

How NORM+DREH handles this: blanket order with call-off
NORM+DREH does not operate consignment stock. For ongoing requirements for fasteners and parts made to drawing, we work with a blanket order covering your annual quantity. We keep the goods in stock at our premises or in the partner warehouse, not in your plant. You call off partial quantities by email, phone or order, invoicing takes place on delivery, and your storage space remains free. Delivery times are available on request, assessed individually according to the item, manufacturing process and project scope. You can find out more about blanket orders and call-offs on the page C-parts management.

Frequently asked questions about consignment stock

Who owns the goods in consignment stock?

The supplier, until the customer withdraws them. Until then they are on the supplier's balance sheet; only on withdrawal do the right of disposal and ownership pass to the customer.

When are goods from consignment stock paid for?

The withdrawal gives rise to the supply and therefore the basis for the invoice. Billing is often monthly, covering all withdrawals in the period.

What are the advantages of consignment stock?

The customer ties up less capital and has inspected goods on site in the agreed quantity. The supplier remains the owner and, with a warehouse in the customer's plant, generally saves on storage costs.

What other terms are used for consignment stock?

Consignment inventory is also common. A warehouse set up exclusively for one customer is called call-off stock in a VAT context. The German term is Konsignationslager.

Is consignment stock the same as vendor managed inventory?

Not quite. Consignment stock is a form of VMI in which the goods belong to the supplier until withdrawal. With classic VMI, the invoice usually follows as with a normal delivery.