Consignment agreement for paint and supplies a win win

Consignment agreement for paint and supplies a win win

Consignment for paint and body shop supplies is a unique business model that makes these 2 scenarios possible…

It’s called consignment inventory, and it’s an underutilized way to create a win-win partnership between Paint suppliers and Body shops as long as they’re both willing to share the risks and rewards.

To help you understand how to make consignment inventory work for you, we’ll go over what it is, what are its pros and cons, and how to implement it.

What is Consignment Inventory?

Consignment inventory is an arrangement where the consignor in this case the Paint supplier agrees to give their paint and supplies to a consignee the body shop without the consignee paying for the supplies up front the consignor still owns the paint supplies, and the consignee pays for the supplies only when they actually pulled out of the cabinet.

Example, A body shop is interested in increasing the company’s business or becoming a DRP for an insurance company and if successful. Then the shop would have to able to pay for all the parts and paint supplies in cash or on a 30-day account but by having a consignment agreement the shop only pays for what is pulled out of the consignment cabinet on the following re-supplying day. Also, another pro is the ability no matter what time of day or night you have access to all the supplies just a few steps away.

This arrangement can be hugely beneficial for both parties, but it also carries with it some risks.

To get a balanced view of consignment inventory, let’s look at some of its pros and cons for the body shop

Lower Cost of Ownership

Body shops are able to draw upon consignment inventory to use it without owning it, which lowers their total cost of ownership and holding costs.

Minimal Risk

Body shops don’t have to pay for the inventory upfront, which allows them to use their capital to purchase and sell more parts and products while taking on minimal risk.

Improved Cashflow

The body shops pays nothing to hold the supplies and only pay their paint supplier once they sell the products. The body shop doesn’t have to worry about excess holding costs since the paint supplier still owns the stock until it’s removed.

This means the body shops can hold more consignment inventory at lower cost and not have to worry about running out of body shop supplies.

How do you Make Selling on Consignment Profitable for Both Parties?

Cultivate Mutually Beneficial Relationships

Paint suppliers and body shops can reap the biggest rewards from consignment inventory if they develop an honest partnership and work together to improve their processes.

Cons:

for body shops consignment inventory, they may experience costly inventory errors such as double counting or product pulled out not accounted for.

An optimal solution to these problems would be making an investment in an inventory management software that is designed to handle consignment inventory.

Ideally, the software should:

Track the inventory sent to the consignee

Track what inventory needs to be replenished at the consignee’s site

Track what inventory needs to be ordered to replenish the consignor’s stock

And make consignment inventory management as easy as possible

Fortunately, there’s a solution that can do all of this for you.

Cyber Garage Management software.

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