Vendor Owned Inventory (VOI) or Consignment Inventory is defined as “Inventory provided ‘on consignment’ in commercial trading and to be paid for as used or sold”.
The key principles of VOI is that the Supplier puts the Inventory into the Customers’ warehouse and the Supplier is paid when the Inventory is consumed or sold to the Customers’ own customers.
Clearly, there are many benefits for the Customer; they pay later and have the Inventory on hand and does not have capital tied up in Inventory.
For the supplier, having their Inventory in the Customers’ warehouse, they have a certainty of supply and demand turnover – this is better than having the Inventory sitting in their own Warehouse, with no potential customer.
