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Call-Off Stock

Understanding Call-Off Stock for Efficient Inventory Management

Call-off stock, also sometimes referred to as vendor-managed inventory (VMI), is an important inventory management concept that enables just-in-time availability of goods. It essentially involves a buyer and supplier agreement for the supplier or vendor to store inventory at the buyer’s premises itself for future purchase orders.

How Call-Off Stock Arrangements Work

A call-off stock arrangement requires extensive coordination between the buyer and supplier of goods. It enables the vendor to have control over decision making for the inventory stored on the buyer’s site while retaining ownership until the final sale is confirmed. For example, an electronics manufacturer may request its chip supplier to maintain an on-site stock of 10,000 units of a specialized component. This stock is then “called off” by the manufacturer based on production needs through the placement of firm purchase orders.

Benefits of Call-Off Stock Practices

Call-off stock brings several advantages for both buyers and sellers across industries. Some key benefits include:

  1. Enables a predictable supply for the buyer without tying up capital into unused inventory. For the vendor, it ensures a committed long term revenue stream.

  2. Reduces stockout risks that disrupt manufacturing and order completion timelines. The on-site inventory allows quick call-off purchase orders to be fulfilled.

  3. Lower warehousing and inventory carrying costs as the supplier manages capital intensive aspects. Shipping small batch orders from an accessible location also cuts logistics overheads.

  4. Real-time inventory tracking, forecasting and replenishment planning is facilitated as the vendor has transparency and access.

Call-off stock also allows customized vendor managed inventory solutions tailored to the buyer’s variable production schedules. It creates a mutually beneficial partnership between procurer and suppliers.

Statutory Compliance for Call-Off Stock

Procuring businesses must ensure proper book-keeping and compliance covering the taxability, valuations and ownership of call-off stock held on their site. Invoice issuance, freight duties, title transfers and payments should happen only after confirmation purchase orders for ease of accounting. Having clearly defined call-off schedules also aids seamless legal compliance.

Therefore, call-off stock empowers manufacturers and buyers to have strategic control over inventory planning while freeing up working capital for their core operations. Embracing such vendor managed inventory solutions through close supplier relationships can give businesses the flexibility to scale production efficiently.

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