Summary:
The article is about a supplier has a product or group of products that he believes will sell if he can get them in front of end users. The trick is that getting them in front of end users means getting them stocked in retail establishments. Retailers are hesitant to stock the product because they do not have the same level of confidence in it as the supplier, they do not want to invest the money and risk getting stuck with something that may not sell. Because the supplier realizes in-store exposure is critical to getting his products sold, he offers to stock his product in their stores. This creates a condition of shared risk whereby the supplier risks the capital investment associated with the inventory while the customer risks dedicating retail space to the product. This also creates a condition of shared benefit because neither the supplier nor the customer will benefit until the product is sold to an end user. This shared-benefit condition will often be enough to convince a customer to stock the product.
Connection:
The connection i made between the article above and chapter 11 of accounting text book is the consignment inventory. As you read through the article, you would realize that consignment inventory is pretty complicated. But actually it has adventages and disaventages among the retailer and the supplier. For the retailer , he could share the profit by selling it to the customers. Even though he has a certain degree of risk,but compared it with the supplier, the supplier needs to provide the products and share the own profit with others. However; both of them have adventages such as share the risks, therefore, if the product is not sold out, they won't cause a lot of net loss.
Reflection:
After i read the article, I think the nature of consignmetn inventory is unrelated to the receipt processes. This is contrary to the basic design of most inventory systems transactional processes. Because of this, most inventory systems don't handle consignment inventory very well.This forces many businesses to manage consignment inventory with manual off-line processes (sending reports back and forth, maintaining data in spreadsheets, etc). Not only is this time consuming, but it also creates many opportunities for errors because the additional transactions necessary for consignment inventory can get rather complicated and are highly dependant on accurate information sharing. If this process is not monitored closely, it can end up in a bad situation.
Connection:
The connection i made between the article above and chapter 11 of accounting text book is the consignment inventory. As you read through the article, you would realize that consignment inventory is pretty complicated. But actually it has adventages and disaventages among the retailer and the supplier. For the retailer , he could share the profit by selling it to the customers. Even though he has a certain degree of risk,but compared it with the supplier, the supplier needs to provide the products and share the own profit with others. However; both of them have adventages such as share the risks, therefore, if the product is not sold out, they won't cause a lot of net loss.
Reflection:
After i read the article, I think the nature of consignmetn inventory is unrelated to the receipt processes. This is contrary to the basic design of most inventory systems transactional processes. Because of this, most inventory systems don't handle consignment inventory very well.This forces many businesses to manage consignment inventory with manual off-line processes (sending reports back and forth, maintaining data in spreadsheets, etc). Not only is this time consuming, but it also creates many opportunities for errors because the additional transactions necessary for consignment inventory can get rather complicated and are highly dependant on accurate information sharing. If this process is not monitored closely, it can end up in a bad situation.
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