Consignment vs. Selling Excess Inventory Outright: Which Recovers More?
Every company that builds electronics ends up with parts it won't use: a cancelled program, an engineering change, a last-time buy that turned out too generous. Once you decide to move it, the real question is how. Sell it outright, or consign it and get paid as it sells?
An outright buyer takes on the risk of holding your stock and prices that risk in. On consignment the parts sell at market to the customer who needs them, so more of the selling price comes back to you, but only as each line sells. Most lists are best split: sell the slow, low-value lines outright and consign the lines with real demand.
How each option works
| Outright sale | Consignment | |
|---|---|---|
| When you're paid | Once, up front | As each line sells |
| How much you recover | Lower: the buyer prices in holding risk | Higher: parts sell at market |
| Who owns the stock | The buyer, from the day of sale | You, until each part sells |
| Where it sits | Leaves your dock once | Ships to the distributor's warehouse |
| Who carries the market risk | The buyer | You: unsold lines are still yours |
| Best for | Closing a quarter, clearing a building, low-value or slow lines | Lines with steady demand, MIL-spec and obsolete parts, anything worth waiting for |
What decides it, line by line
- Is anyone asking for it? Parts that buyers search for and request every month sell well on consignment. A part nobody has asked for in years is a candidate for an outright offer.
- What is each line worth? Consignment pays off on lines where the gap between market price and an outright offer is large: MIL-spec connectors, JAN/JANTX semiconductors, obsolete ICs. On cheap commodity passives the gap is small and speed wins.
- How old are the date codes? Many buyers set date-code limits. Lines near those limits lose value fastest, so move them first, whichever way you choose.
- Do you need the cash or the space now? If the deadline is the end of this quarter, an outright sale gives you certainty. If you mainly need the floor space, consignment frees it just as fast, because the stock ships out either way.
- How was it stored? Moisture-sensitive parts outside dry-pack, or reels that were opened, need inspection before anyone can sell them as new. Be honest about it up front; it changes the offer either way.
The costs of waiting that don't show up on an invoice
Excess on your shelves keeps costing money after you've decided you don't need it. It occupies racks and cage space your active inventory could use. It still has to be counted, audited and insured. And it loses value on two clocks at once: market prices fall as supply recovers and a part generation ages, and date codes drift past what customers will accept. Consigning stock removes the first two costs immediately and stops the clock on the third, because the parts are being actively sold instead of waiting.
Consignment and inventory write-downs
Finance teams often ask whether getting rid of excess helps with taxes. Here is the general picture; it is not tax advice, and your tax advisor should make the call for your company.
Under U.S. tax rules, a company generally can't write excess inventory down just because it's slow-moving. The Supreme Court's 1979 decision in Thor Power Tool Co. v. Commissioner held that excess goods held for sale can't be written down to an estimated value without evidence such as actual sales, disposal, or a genuine offer for sale at the lower price. Treasury rules allow damaged, obsolete or otherwise "subnormal" goods to be valued at a bona fide selling price, but that also needs evidence of what the goods sell for.
That is where a disposition program helps. Consigned stock stays on your books until it sells, so consignment itself is not a write-off. But it turns slow stock into documented sales at real market prices, and gives you a clear record of what didn't sell and what happened to it. An outright sale records a loss on the sale date. Either way, the documentation is what your accountant needs.
Choosing a consignment partner
- Where will the parts be stored? Ask about security, ESD control and dry storage for moisture-sensitive devices. Your parts keep their value only if they're stored properly.
- Who will they sell to? A partner selling to OEMs, contract manufacturers and defense programs protects your parts' reputation and your price. One that dumps lists on broker boards does neither.
- How will you know what sold? Ask how sales are reported and how often you're paid.
- What quality system stands behind it? ISO 9001 certification, inspection on receipt and lot traceability mean that if a buyer questions a lot, the answer exists.
How RH Electronics runs consignment
Consigned stock ships to our warehouse in Oceanside, California, where every lot is inspected on receipt and stored card-access secured, ESD-controlled under a program built to ANSI/ESD S20.20-2021, with dry-pack storage for moisture-sensitive devices. It's listed in our 950,000+ part catalog as in stock and sold to the OEMs, contract manufacturers and defense programs that send us requirements. You keep ownership until each part sells and you're paid as it does. Send a stock list and we'll tell you, line by line, what we'd consign and what you'd be better off selling outright. See the consignment program →
Common questions
Does consignment recover more than selling excess inventory outright?
Usually. An outright buyer prices in the risk and cost of holding the stock. On consignment the parts sell at market to the buyer who needs them, so more of the price comes back to you, in exchange for being paid as each line sells instead of up front.
Who owns consigned inventory?
The consignor does. Ownership stays with you until a part sells, and unsold lines remain yours.
Can I write down excess inventory for taxes?
Generally not just because it is slow-moving. Under Thor Power Tool Co. v. Commissioner (1979), a write-down normally needs support such as actual sales, disposal, or a genuine offer for sale at the lower price. Consignment produces documented sales and a disposition record that help support that. This is not tax advice; ask your tax advisor.
Should I consign or sell my whole excess list?
Usually neither. Split it: consign lines with real demand and meaningful value, sell slow or low-value lines outright, and scrap what has no market. A good partner evaluates the list line by line.