Certified Supply Chain Professional (CSCP) Practice Exam

In which of the following models does the supplier maintain ownership until the good is sold?

1. Traditional inventory management

2. Just-in-time inventory systems

3. Vendor-managed inventory in consignment

4. Direct purchase models

The correct answer is: Vendor-managed inventory in consignment

In vendor-managed inventory in consignment, the supplier retains ownership of the goods until they are sold by the retailer or end-user. This model allows suppliers to proactively manage inventory levels at the customer's location, ensuring that products are available when needed while minimizing excess stock. By keeping ownership until the sale occurs, suppliers can better control inventory costs and risks associated with unsold goods. This model contrasts with traditional inventory management and direct purchase models, where ownership typically transfers to the buyer upon purchase. Just-in-time (JIT) inventory systems focus on reducing inventory levels by receiving goods just as they are needed in the production process; however, ownership transition still generally occurs at the point of delivery. Therefore, vendor-managed inventory in consignment distinctly emphasizes supplier ownership until the actual sale, which is a key element of its structure and provides unique benefits in inventory management strategies.