Consignment Inventory: Review and Critique of Literature

Consignment inventory (CI) is a supply chain business partnership where the customer orders to the vendor, but delays paying for goods. In CI, like the traditional systems, each member has authority over the timing and quantity of replenishments; however, these systems differ in time of transferring ownership. Previous researches showed different approaches for delay in payment in customer managed inventory systems: (1) pay as sold, (2) pay as sold during a predefined period, (3) pay after a predefined period and (4) order to order consignment. Each of the mentioned approaches can be considered as delay in payments in CI, though in most studies, it mainly included the first aforementioned category. In this type, CI was mostly taken to be synonymous with vendor managed inventory (VMI) or consignment vendor managed inventory (C&VMI). Besides, the area of trade credit, which is based on the second and third types of delay in payment, has received the attention of many researchers, although no work has considered trade credit as one of the states of CI. In this paper, firstly we extracted CI from existing literature of VMI and C&VMI. Secondly, a classification of CI related studies was provided based on delay in payments.