B2B consignment puts your industrial goods, unused machinery, equipment, and Maintenance, Repair and Operations (MRO) parts in a reseller’s hands while you retain ownership until the item sells.
You either supply the inventory to the consignee’s facility or keep it in your warehouse. Payment flows back to you only for the units that move.
The model opens new sales channels and speeds cash recovery on idle or excess inventory, especially large capital items that may sit unused in your warehouse.
What Is B2B Consignment?
B2B consignment is a sales arrangement in which you, the consignor, place the consignment, which can be industrial machinery, equipment, or MRO parts, with a dealer or distributor, the consignee, to sell on your behalf. Legal title remains with you until each unit reaches the end customer, so unsold inventory stays on your balance sheet.
In practice, the consignor supplies, insures, prices, and retains ownership of the assets. The consignee markets the inventory, completes the sale, and remits payment once each item is sold.
Under Accounting Standards Codification (ASC) 606 and International Financial Reporting Standard (IFRS) 15, revenue is recorded only when the consignee sells the item to the final buyer; delivery to the consignee does not transfer control or trigger revenue.
B2B Consignment Process
The workflow typically follows five stages:
1. Agreement – Both parties sign a contract that defines pricing, commission, insurance, and return terms.
2. Delivery – Equipment ships to the consignee’s site, where serial numbers and condition are logged. The consignee will also conduct an Overages, Shortages, and Damages (OSD) report to align what they received with what the consignor believed that they shipped.
3. Storage – Items remain in labeled “consigned” locations while inventory data syncs through shared enterprise resource planning (ERP) or vendor-managed inventory (VMI) dashboards.
4. Sales Reporting – The consignee records each sale and issues periodic inventory and transaction reports.
5. Payment – After deducting the agreed fee, the consignee remits funds for sold units; unsold assets remain yours until the contract ends or goods are returned.
Common Assets Suited for B2B Consignment
Choose assets that retain value, match secondary-market demand, and store safely at a dealer’s site. The four groups below offer the strongest recovery potential.
1. Excess Industrial Machinery
Idle or surplus production assets that exceed current capacity requirements are ideal candidates for consignment. Placing them with a specialized dealer converts dormant capital into cash, frees floor space, and postpones depreciation charges.
2. Used / End-of-Life Equipment
Pre-owned, serviceable machines and tooling still hold measurable residual value and draw buyers in established secondary markets. Consignment shifts the selling effort to a channel partner, accelerating recovery without disrupting core operations.
3. MRO Inventory
Surplus MRO stock often accumulates beyond optimal safety levels. Consigning these high-value spares transfers carrying costs off your balance sheet while keeping critical parts available to the end user.
4. Finished Goods
Slow-moving, seasonal, or end-of-life products gain extended market reach through consignment arrangements. You retain ownership until sale, reducing write-off risk and aligning revenue recognition with actual demand.
Legal & Contractual Framework
A robust consignment contract rests on three pillars:
1. Ownership & Risk Allocation
Clear title and liability language protect both parties before the first unit ships.
- Cover damage or theft claims: The consignor maintains property insurance; the consignee is liable only for losses caused by proven negligence. Some consignees go further than this and will offer their own insurance.
- Maintain required safety documentation: The consignor ensures assets meet all compliance rules before sale and files any Uniform Commercial Code (UCC)-1 financing statements to perfect their security interest.
2. Pricing & Payment Terms
Aligning incentives and cash flow keeps the process financially sound.
- Commission model – The consignor sets list pricing; the consignee keeps a fixed percentage of each sale.
- Consignee-Controlled Pricing Model- In the secondary market for indirect goods, it’s more common for consignees to set prices because they have the knowledge of the market necessary to do so. Consignors know how to set prices for their own end-of-life finished goods, but they don’t typically have the same insight for production inputs and machinery.
- Net-price model – The consignor and consignee agree on a net amount you will receive; any excess becomes the consignee’s margin.
- Settlement frequency – Define monthly, quarterly, or per-transaction payments and require sales reports that reconcile with inventory records.
Note: Per-transaction payment schedules are difficult to maintain, but SKU-level reporting is necessary for corporate compliance. A good compromise is quarterly payments combined with real-time reporting.
3. Term, Exclusivity & Termination
A clearly defined timeline and exit path prevent surprises later.
- Duration & renewal: State start date, length, and automatic or negotiated renewal options. Typical contracts will run for one year with an automatic renewal, as larger lists of excess indirect inventory can often take more than a year to sell on consignment.
- Exclusivity: Decide if the consignee has sole rights within a territory or market segment. Some consignees don’t ask for exclusivity, but they do minimal work to sell the items on the consignor’s behalf.
- Return logistics & costs: Returns are a last resort; typically, the consignor does not want the inventory back. The best consignees use intelligent markdown schedules, wholesale channels, and liquidation auctions to ensure that everything they’re given sells. Specify how unsold assets are returned and who pays for shipping, storage removal, or refurbishment, along with any agreed markdown schedule for renewal.
Financial & Accounting Implications
Below are the three key financial pillars impacted by a consignment process, each with its own distinct reporting and planning requirements.
1. Balance Sheet Treatment & Revenue Recognition
Inventory you place on consignment remains in your current assets until the consignee completes a sale. Under ASC 606 and IFRS 15, control has not transferred, so you defer revenue and cost of goods sold. Recognize both only when the consignee confirms the end-customer purchase and remits payment. This enables the consignor to avoid taking a large write-off.
2. Cash Flow & Working Capital Impact
Consignment ties up working capital longer than a direct sale because cash arrives after each unit sells, not at shipment. During that holding period, you carry storage, insurance, and inspection costs. Forecast these outlays in your cash-flow model and adjust safety stock or reorder points to avoid liquidity strain.
3. Depreciation & Obsolescence Management
Industrial assets lose value while they sit. Apply a clear valuation policy—straight-line or accelerated depreciation, plus net realizable value (NRV) tests—to reflect market decline. Build protective triggers into the contract:
- Scheduled markdowns after six or twelve months
- Triggers to remove or refurbish slow-moving units for auction
These controls limit write-downs and safeguard book value.
Top Strategies for B2B Consignment Success
Implementing consignment successfully demands deliberate planning across contracts, inventory systems, and performance controls. The strategies below give you a structured playbook to de-risk your process and maximize recovery on every consigned asset.
1. Clear Contract Design
Put everything in writing before the first unit ships. Your contract should spell out base price or commission, define which party carries insurance, and assign maintenance and return costs.
File any UCC-1 financing statements to protect your security interest, specify inspection windows, and set a maximum consignment term—for example, 180 days—before automatic recall or markdown. Precise language keeps both sides aligned and prevents surprise charges.
2. Real-Time Inventory Visibility
Rely on dedicated consignment or VMI software rather than spreadsheets. Barcode or Radio-Frequency Identification (RFID) scans post directly to a shared dashboard, showing on-hand, reserved, and sold quantities in real time. The best consignees will offer these capabilities proactively, and the consignor should not have to worry about them other than viewing reports.
Automated alerts trigger when stock hits minimum levels, letting you replenish before the buyer faces a stockout and protecting your own cash-flow plans.
3. Proactive Risk Management
Verify that the consignor’s property and liability insurance covers every asset during transit and storage. Detail which party funds preventive maintenance, inspections, and warranty claims.
Add depreciation or obsolescence triggers, such as staged markdowns after six or twelve months. These safeguards keep financial exposure predictable.
4. Performance Measurement & Optimization
Track sell-through rate, inventory turns, days in inventory, and gross recovery rate (or margin per SKU). Review metrics with your consignee at set intervals and display them on a joint KPI dashboard.
Use the data to adjust pricing, remove slow movers, or expand fast sellers. Regular performance reviews turn raw numbers into actionable improvements and sustain program momentum.
Best Practices for B2B Consignment
Effective execution hinges on proven operating disciplines that keep inventory data reliable, teams aligned, and processes repeatable. Apply the following best practices to minimize risk, speed cash recovery, and sustain long-term consignment performance.
1. Maintain Data Accuracy and Naming Standards
Create a single source of truth for every consigned asset. Use consistent naming conventions, such as Plant-Category-Serial, across your ERP, Warehouse Management System (WMS), and VMI platform. Schedule periodic data audits and require validation rules at entry to prevent duplicate or incomplete records.
2. Build a Cross-Functional Team
Form a steering group that includes maintenance, operations, IT, and finance. Maintenance monitors asset health, operations forecasts demand, IT manages system integrations, and finance tracks recovery. A shared scorecard keeps the team aligned on sell-through targets and cash-flow goals.
3. Invest in Training and Change Management
Even the best software fails without user adoption. Provide hands-on sessions for scanning, reporting, and reconciliation tasks, then follow up with refresher micro-learning. Communicate the business case—faster cash recovery and fewer write-downs—to secure buy-in from warehouse staff to senior leadership.
4. Prioritize Process Design Over Technology
Map every workflow—receiving, storage, sales reporting, payment—before selecting tools. Once the process is clear, choose software that supports those steps and integrates through open APIs. This sequence prevents costly rework and keeps your program focused on results, not features.
How Amplio Makes B2B Consignment Service Easier For You
1. Centralized Valuation & Ledger
Amplio gives you a single interface for consignment—from valuation to final sale. You upload asset details once; the platform records condition, market value, and expected recovery in an auditable ledger.
2. Automated Listing & Compliance
Automated workflows list each machine on secondary marketplaces, apply your pricing rules, and handle compliance checks, so you skip manual data entry and reduce risk.
3. Real-Time Visibility
Real-time dashboards show on-hand stock, sell-through rate, and gross recovery, letting you adjust strategy before idle assets drain value.
4. In-House Negotiation Support
During negotiations, our specialists act as your in-house disposition team. They present accurate condition reports to buyers, defend your pricing, and close deals faster.
Contact us to accelerate your asset recovery and shorten your cash-conversion cycle with our turnkey consignment solution.
