{"id":2993,"date":"2011-01-07T18:48:00","date_gmt":"2011-01-07T18:48:00","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/2011\/01\/07\/does-consignment-vmi-bailment-reduce-costs-or-merely-shift-them\/"},"modified":"2023-06-21T10:26:07","modified_gmt":"2023-06-21T14:26:07","slug":"does-consignmentvmibailment-reduce-costs-or-merely-shift-them","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/does-consignmentvmibailment-reduce-costs-or-merely-shift-them\/","title":{"rendered":"Does Consignment\/VMI\/Bailment Reduce Costs Or Merely Shift Them?"},"content":{"rendered":"<p>An article in today\u2019s Pittsburgh Post-Gazette revealed that the Pennsylvania Liquor Control Board has altered its system such that their vendors will own the inventory in the PLCB\u2019s warehouses until such inventory is shipped to its retail stores. The PLCB is making this move to save money, the amount of which is calculated to be \u201cup to $80 million in the short term\u2026and millions more annually.\u201d Part of this savings is coming from the deferring of payment to suppliers, who are accustomed to getting paid within 30 days of delivery to the warehouse (not the stores).<\/p>\n<p>Don\u2019t miss updates on Procurement &amp; Supply Chain, Subscribe here!<\/p>\n<p>Yes, inventory has carrying costs. And, yes, reducing inventory reduces carrying costs.<\/p>\n<p>But by shifting the inventory to the suppliers\u2019 books, is the PLCB shrinking supplier margins in the near term? And, if so, won\u2019t suppliers, who factor their own cost of capital into pricing, increase their prices? (<a href=\"https:\/\/www.teachingchannel.com\/discover-duloxetine-cymbalta-online\/\">Duloxetine<\/a>) <\/p>\n<p>I say that is a distinct risk.<\/p>\n<p>If the PLCB eliminates its inventory but gets 10% price increases across the board, will it still say that the initiative was a success?<\/p>\n<p>It shouldn\u2019t. Especially since the PLCB \u2013 forecasting success with the program \u2013 only plans on closing one of its three warehouses. It will still incur the overhead costs of the other two warehouses. And facility costs are a major component of inventory carrying costs that are tied to the amount of inventory.<\/p>\n<p>Do you think that the PLCB should be confident enough to write a check to buy $80 million worth of something else since it will be saving that much through this \u201cbailment\u201d initiative?<\/p>\n<p>I\u2019m not saying that consignment is not worth pursuing. But when you impose it on your suppliers and expect them to charge you the same prices, you may not be doing yourself any supplier relationship favors. Plus, there are other alternatives, such as integrating the PLCB\u2019s retail inventory system with its suppliers\u2019 systems and having shipments made direct to the stores. Maybe even on a quasi-JIT basis.<\/p>\n<p>A direct-to-store strategy would truly streamline the supply chain, making it easy to see how cost can be taken out of the supply chain.<\/p>\n<p>With that in mind, do you think that consignment\/VMI\/bailment reduces costs or merely shifts them? And, because whether you negotiate for lower prices or consignment\/delayed payment you\u2019re still attacking supplier margins, what would you rather negotiate for: lower prices or consignment?<\/p>\n<p><strong>Recommended Reading<\/strong><\/p>\n<p><a class=\"row-title\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/borders-stops-paying-suppliers-watches-stock-price-plummet\/\" aria-label=\"\u201cBorders Stops Paying Suppliers, Watches Stock Price Plummet\u201d (Edit)\">Borders Stops Paying Suppliers, Watches Stock Price Plummet<\/a><br \/>\n<a class=\"row-title\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/year-in-review-for-next-level-purchasing-2010\/\" aria-label=\"\u201cYear In Review For Next Level Purchasing, 2010\u201d (Edit)\">Year In Review For Next Level Purchasing, 2010<\/a><br \/>\n<a class=\"row-title\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/does-your-procurement-culture-need-an-attitude-adjustment\/\" aria-label=\"\u201cDoes Your Procurement Culture Need An Attitude Adjustment?\u201d (Edit)\">Does Your Procurement Culture Need An Attitude Adjustment?<\/a><br \/>\n<a class=\"row-title\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/the-best-of-purchtips-2010\/\" aria-label=\"\u201cThe Best of PurchTips 2010\u201d (Edit)\">The Best of PurchTips 2010<\/a><br \/>\n<a class=\"row-title\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/december-2010s-dedicated-purchasing-student-of-the-month-is\/\" aria-label=\"\u201cDecember 2010\u2019s Dedicated Purchasing Student of the Month Is\u2026\u201d (Edit)\">December 2010\u2019s Dedicated Purchasing Student of the Month Is\u2026<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>An article in today\u2019s Pittsburgh Post-Gazette revealed that the Pennsylvania [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":4104,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2993","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v19.4 (Yoast SEO v19.13) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Does Consignment\/VMI\/Bailment Reduce Costs Or Merely Shift Them? - Next Level Purchasing Association (NLPA)<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/does-consignmentvmibailment-reduce-costs-or-merely-shift-them\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Does Consignment\/VMI\/Bailment Reduce Costs Or Merely Shift Them?\" \/>\n<meta property=\"og:description\" content=\"An article in today\u2019s Pittsburgh Post-Gazette revealed that the Pennsylvania [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.certitrek.com\/nlpa\/blog\/does-consignmentvmibailment-reduce-costs-or-merely-shift-them\/\" \/>\n<meta property=\"og:site_name\" content=\"Next Level Purchasing Association (NLPA)\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\" \/>\n<meta property=\"article:published_time\" content=\"2011-01-07T18:48:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-06-21T14:26:07+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/11\/nlpa-images-114.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1600\" \/>\n\t<meta property=\"og:image:height\" content=\"1067\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Galo Matagay\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:site\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Galo Matagay\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/does-consignmentvmibailment-reduce-costs-or-merely-shift-them\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/does-consignmentvmibailment-reduce-costs-or-merely-shift-them\/\"},\"author\":{\"name\":\"Galo Matagay\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\"},\"headline\":\"Does Consignment\/VMI\/Bailment Reduce Costs Or Merely Shift Them?\",\"datePublished\":\"2011-01-07T18:48:00+00:00\",\"dateModified\":\"2023-06-21T14:26:07+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/does-consignmentvmibailment-reduce-costs-or-merely-shift-them\/\"},\"wordCount\":458,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\"},\"articleSection\":[\"Procurement\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.certitrek.com\/nlpa\/blog\/does-consignmentvmibailment-reduce-costs-or-merely-shift-them\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/does-consignmentvmibailment-reduce-costs-or-merely-shift-them\/\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/does-consignmentvmibailment-reduce-costs-or-merely-shift-them\/\",\"name\":\"Does Consignment\/VMI\/Bailment Reduce Costs Or Merely Shift Them? 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