Consignor

The consignor is an independent owner who transfers goods to the consignee for sale on their behalf. The consignee acts as an agent or middleman, and the ownership of the stock remains with the consignor until the goods are sold.

The consignor-consignee concept is typically used in the case of an auction. In the case of an auction, the person who wants to sell the goods/ property through auction is the consignor, and the auction house is the consignee. The auction house arranges the auction and sells the goods/property on behalf of the consignor, and after the sale or finalization of the deal, it charges the fees or percentage of sale known as fees or commission.

A consignor is the sole authority that takes care of the products and items until they reach the consignee, who is the recipient of the consignments. The consignee receives it to sell those items to the customers. However, until the goods are sold to the end users or consumers, their ownership rights remain with the consigner, who is the shipper as well in most cases.

The consignee pays a specific amount to the consignor and the latter is responsible for taking care of the shipment charges only. To take up this freight transaction, a contract is prepared for the parties involved. They go through the details and agree to the terms and conditions. This contract is the consignment, signed by a consignee, consignor, and carrier.

The Bill of Lading (BOL) is another document that is prepared for particular consignments. This is the document provided to all parties involved in the freight transaction. It is legally required that the recipient has to present this document to physically collect the shipped products and goods.

Let us consider the following examples to understand what is a consignor and also the relationship it shares with the consignee:

Example #1

ABC Ltd. manufactures spices and it wants to sell spices throughout the world. To sell across the world, ABC Ltd. entered into various consignment agreements with dealers worldwide and made all arrangements to transfer some of the packets for sale and get the order. All dealers act as consignees. ABC Ltd. will give dealers a fixed or variable commission upon each sale.

Example #2

Mobile manufacturing companies agree with online selling platforms like Amazon to sell mobiles on their behalf. The arrangement is called a consignment arrangement, the mobile manufacturing companies are consignors, and online selling platforms are consignees.

As the consignor is the owner and an independent authority behind the items being shipped to other places, they have to shoulder a lot of responsibilities and play an all-in-one role in their business.

Here is a list of responsibilities the consignors have to take care of:

• Transfer goods to the consignee.
• Provide sufficient stock to the consignee.
• Provide quality goods.
• Make available the consignment order on time to the consignee.
• Ensure goods placed with consignees are safe.
• Agree with the consignee in writing.
• Provide a timely commission to the consignee.
• Solve complaints from consignees.
• Ensure payment of goods sold by the consignee is received timely from the consignee and coordinate with the consignee for payment.

When the consignor takes all responsibilities to look after every step towards making products and goods available in the market, it benefits the market in multiple ways.

Some of the advantages have been mentioned below:

• It saves time for selling or marketing the goods as the consignee does.
• It helps focus on the quality of goods as the consignee makes sales.
• It saves the inventory holding cost.
• Able to sell the products at the global level.

Every process or activity that has benefits to offer also has a few restrictions or disadvantages that must be known to people or entities considering it. Below is a list of demerits of a consignor being the sole authority. Let us check them out:

• The Profit Margin is low as the commission cost is added, and the overall cost increases.
• The risk of goods held with the consignee increases as stock is the consignor's responsibility.
• Inventory holding cost is high if goods are not sold for a long time by the consignee.
• Difficulty in managing the stock of sales at the global level.

Consignor and consignee, as the terms imply, are different, but they both have the same objective, which is to make products and goods available in the market and to the end users or consumers. Plus, they both collectively make up the freight transaction channel. However, there are differences in the nature of the work they do. Let us check out some of them:

• A consignor is a party that ships the products and goods to the recipient at the other end via different delivery services. On the other hand, a consignee is the one that receives the consignment or the shipped product.
• A consignor can be a factory or a distribution center, while a consignee is a customer or client.
• When it is an international freight transaction, the consignor becomes the exporter and the consignee becomes an importer.

Moving further, when it comes to the differences between a consignor and a shipper, they both signify the same position or job role. Normally, the consignor and shipper are the same individual or entity unless the former has a third party involved in the process of shipping the items.

In case where a consigner and shipper is not the same, they come together to sign the BOL, specifying the shipment terms and clauses.

This has been a guide to Consignor and its Meaning. Here, we explain vs consignee, vs shipper, responsibilities, examples, benefits, and limitations. You can learn more about it from the following articles –

• Consignment Accounting
• Inventory Valuation
• Finished Goods Inventory
• Inventory Audit