Q22: Brian, a quickie: Buyer wants to put us ‘on consignment’ i.e. we invoice on sales out (Ian, St Albans 4th Feb 2016)
A: Thanks Ian,
‘On consignment’ always seems like increased collaboration, but strictly speaking, unless you build in some conditions, it can end up diluting your account P&L.
As you know, most retailers have shrink levels of approx. 2%, meaning that for every 100 cases you deliver, 98 actually goes through the checkout. This means that by agreeing to invoice based on sales out, you are absorbing the shrinkage issue (and cost!).
If the buyer is acting in good faith, your condition that checkout sales be restored to 100% (volume sales out/98 x 100) for invoicing, should be accepted. If not, then not…
Hope this helps.
Brian
P.S. Despite your having to refuse ‘on consignment’ your buyer may be simply wanting more money.
Best to continue with ‘obviously we cannot agree to unconditional on consignment invoicing, but we may have other ways of increasing our trade investment, depending on getting equivalent value in return... Now what type of money are we talking about?’
Disclaimer:
Your Query?
A: Thanks Ian,
‘On consignment’ always seems like increased collaboration, but strictly speaking, unless you build in some conditions, it can end up diluting your account P&L.
As you know, most retailers have shrink levels of approx. 2%, meaning that for every 100 cases you deliver, 98 actually goes through the checkout. This means that by agreeing to invoice based on sales out, you are absorbing the shrinkage issue (and cost!).
If the buyer is acting in good faith, your condition that checkout sales be restored to 100% (volume sales out/98 x 100) for invoicing, should be accepted. If not, then not…
Hope this helps.
Brian
P.S. Despite your having to refuse ‘on consignment’ your buyer may be simply wanting more money.
Best to continue with ‘obviously we cannot agree to unconditional on consignment invoicing, but we may have other ways of increasing our trade investment, depending on getting equivalent value in return... Now what type of money are we talking about?’
Disclaimer:
Your Query?
For a KAMClinic reply, simply email me ( bmoore@namnews.com ) giving as much detail you are comfortable with...
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