Supplier to agree to such consignment arrangement

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Some suppliers provide what is known as “consignment stock” to retailers. With such an arrangement, the buyer (i.e. a retailer) does not pay the supplier for delivered stock, until it is sold to its customers. Briefly discuss the effects of such an arrangement on the buyer’s holding cost rate and its purchasing policy (order quantity and reorder point). What may be the motivating factors for both a buyer and a supplier to agree to such a consignment arrangement?

Reference no: EM132171970

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