COMPARISON OF BUFFER AND CONSIGNMENT STOCK IN THE CZECH REPUBLIC

Abstract

Today’s turbulent and highly competitive business environment forces supply chain managers to ensure sufficient inventory level while keeping inventory-related costs as low as possible. Therefore, enormously important aspect of effective inventory management is placing the right amount of safety stock at the right places (for example at a supplier, consignment stock, safety stock) in the supply chain for costs as low as possible. Managing inventory is considered as one of the most challenging tasks facing supply chain managers and specialist due to the fact, that decisions related to inventory locations, level of inventory kept throughout the supply chain have a fundamental impact on the response time, service level, delivery lead-time and the total cost of the supply chain. The concept of Consignment Stock is crucial for helping manage inventories in which the supplier keeps the inventory and maintains a stock of material in the buyer´s possession. Nowadays it also becomes an important strategy, which companies adopt in order to face manufacturing and supply chain management challenges. The main objective of this paper is to explain possible reasons of Consignment stock concept preferences in comparison to the Buffer stock concept. The analysis is based on both quantitative and qualitative survey.