Consignor Meaning Examples Responsibility Benefits

Consignor Meaning

The consignor consignee concept is typically used in the case of an auction. In the case of an auction, the person who wants to sell the goods/ property through auction is the consignor, and the auction house is the consignee. The auction house arranges the auction and sells the goods/property on behalf of the consignor, and after the sale or finalization of the deal, it charges the fees or percentage of sale known as fees or commission.

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Example of Consignor/Consignee Relationship

Example #1

ABC Ltd. Manufactures Spices, and it wants to sell spices throughout the world. To sell across the world, ABC Ltd. entered into various consignment agreements with the dealers worldwide and made all arrangements to transfer some of the packets for sale and get the order. All dealers act as consignees. ABC Ltd. will give dealers a fixed or variable commission upon each sale.

Example #2

Responsibility of Consignor

To transfer goods to the consignee.To provide sufficient stock to the consignee.To provide quality goods.To make available the consignment order on time to the consignee.To ensure goods placed with consignees are safe.To agree with the consignee in writing.To provide a timely commission to the consignee.To solve complaints from consignees.To ensure payment of goods sold by consignee received timely from the consignee and to co-ordinate with the consignee for payment.

Benefits

It saves time for selling or marketing the goods as the consignee does.It helps focus on the quality of goods as the consignee makes sales.It saves the inventory holding costHolding CostHolding cost refers to the cost that an entity incurs for handling and storing its unsold inventory during an accounting period. It is calculated as the sum total of storage cost, finance cost, insurance, and taxes as well as obsolescence and shrinkage cost.read more.Able to sell the products at the global level.

Limitations

The Profit MarginProfit MarginProfit Margin is a metric that the management, financial analysts, & investors use to measure the profitability of a business relative to its sales. It is determined as the ratio of Generated Profit Amount to the Generated Revenue Amount. read more is low as the commission cost is added, and the overall cost increases.The risk of goods held with the consignee increases as stock is the consignor’s responsibility.Inventory holding cost is high if goods are not sold for a long time by the consignee.Difficulty in managing the stock of sales at the global level.