In electronics manufacturing, “consignment” refers to an arrangement where components or materials are supplied by one party (usually a supplier or customer) and stored at another party’s facility (typically a manufacturer) without an immediate purchase.

How it works:

1. Storage and Use: The manufacturer keeps the consigned inventory on-site and uses it for production as needed. This can streamline manufacturing, as materials are readily available without immediate procurement.
2. Payment Terms: Payment for consigned materials is usually made only after the materials are used in production or when certain milestones are reached. This arrangement helps manage cash flow for the manufacturer, as they don’t have to pay upfront.
3. Inventory Management: The supplier retains ownership of the consigned inventory until it is used, making them responsible for managing and accounting for it until it is consumed in production.
4. Risk and Benefits: For manufacturers, this reduces inventory costs and risks but requires careful management. For suppliers, it ensures their products are available for use without immediate payment, creating potential business opportunities.

This model often fosters better collaboration and efficiency between suppliers and manufacturers in the electronics industry.