Direct answer: A customer-supplied material / consigned-material page cannot stop at "we support incoming-material processing" or "we build to drawing with customer materials." It should state the projects and material types covered, receiving and quantity confirmation, incoming inspection and nonconformance disposition, storage and segregation, issue and traceability, loss and scrap, reconciliation and counting, return and shipment-back, liability and insurance, documents and audit. Otherwise, after the customer ships the material, shortages, mixed lots, excess loss, ownership of offcuts, and who pays for scrap all become disputes at delivery.
This guide is for manufacturers in Changzhou and nearby areas doing OEM/ODM, EMS, custom equipment, molds, and precision machining, as well as customer procurement, SQE, finance, customs, legal, IT, and website teams. Information is current to 2026-11-01. It is a review of public rules, standards, and project practice, not legal, quality-system, customs, or insurance advice; specific receiving, inspection, loss, scrap, compensation, and return arrangements depend on the contract, technical/quality agreement, applicable law, and regulator requirements.
Consigned material is not "the customer's property, so damage is not our problem"; once received, you must inspect, keep it safely, use it as agreed, and report exceptions truthfully. Consigned material is also not exempt from inspection, and final-product quality responsibility does not shift just because the customer supplied the material. Loss rates, scrap, offcuts, and returns must be written before receiving, not argued afterward.
How does the consigned-material page relate to RFQ, sample, complaint, and portal pages?
The RFQ page answers how quotes and lead times work; the sample page answers how first articles are approved; the complaint page answers containment, analysis, and corrective action; the customer portal answers orders, shipment, and reconciliation; the consigned-material page answers how customer-supplied material is received, inspected, stored, used, returned, and who is responsible. They must align: receiving lots, issue records, finished-goods lots, and complaint traceability should be one chain.
The most common break is: the customer ships material and the supplier only signs the delivery note; no incoming inspection, and rust or wrong dimensions are found during production; excess loss is reported only after the fact and the customer says "we never authorized that much"; offcuts sit in the warehouse and the customer asks "where is my material"; at month-end the two inventory balances differ by tonnes. Stating the rules on the website lets sales stop explaining orally and lets the customer prepare the same documents.
| Page/entry | Answers | Audience | Cannot replace |
|---|---|---|---|
| RFQ page | Quotation basis, lead time, trade terms | Procurement, project | Receiving and responsibility for consigned material |
| Sample/FAI page | Sample approval, FAI, production consistency | Quality, engineering | Inventory and loss of production lots |
| Complaint/8D page | Intake, containment, root cause, corrective action | Customer SQE, quality | Inspection and custody of the material itself |
| Customer portal | Orders, shipment, reconciliation, progress | Existing customers | Receiving, issue, and return of consigned material |
| Consigned-material page | Receiving, inspection, storage, loss, scrap, counting, return | Procurement, SQE, finance, customs | The contract/quality agreement itself |
This page map is editorial; the contractor's duties to inspect and keep customer-provided materials are in Articles 775 and 784 of the Civil Code.
Which materials count as consigned, and what must be managed for each?
Use at least five categories: raw materials (steel, aluminium, plastic pellets, sheet), components (customer-specified motors, bearings, connectors, PCBA), tooling/gauges/molds, packaging, and bonded/processing-trade materials. The focus differs: raw materials need grade, heat/lot, dimensions, and rust protection; components need model, lot, shelf life, and ESD; tooling needs ID, status, and calibration; packaging needs revision and quantity; bonded materials need separate books and customs-compliant storage and write-off.
The categories are not to make the page complicated; they determine who inspects, where it is stored, how it is labelled, and how it is counted. Customer-supplied connectors may need moisture and ESD control and cannot sit on the same ordinary rack as steel; customer-supplied tooling mixed with company-owned tooling makes ownership easy to confuse at stocktake. Listing types and control points gives warehouse and procurement a shared language.
| Type | Typical content | Control focus | Common gap |
|---|---|---|---|
| Raw material | Steel, aluminium, plastic pellets, sheet, wire | Grade, heat/lot, dimensions, rust, weight variance | Count pieces only, ignore heat/lot |
| Components | Customer-specified motors, bearings, connectors, PCBA | Model, lot, shelf life, ESD, moisture | Mixed with own stock |
| Tooling/gauges/molds | Customer-supplied fixtures, jigs, gauges, molds | ID, ownership, status, calibration, maintenance | No ownership marking |
| Packaging | Customer-specified cartons, labels, pallets, manuals | Revision, quantity, kit matching, obsolete segregation | Old revision mixed in |
| Bonded material | Customer-supplied material under processing trade/bond | Separate books, segregated area, write-off, documents | Mixed with ordinary trade |
These categories and controls are editorial; bonded-material requirements follow customs rules and the company's customs procedures—this article is not customs advice.
Who counts at receiving, what is counted, and what evidence is kept?
At receiving, confirm at least: delivery note/packing list matches the purchase order/consigned-material list, quantity (pieces, weight, pallets), packaging condition, lot/heat/serial number, certificate of analysis/conformity, shelf life, transport damage, and moisture/temperature records where relevant. Keep the receiver, date, exception photos, and customer notification; if quantity or appearance is disputed, mark and photograph at the dock—do not sign "in good condition" and fix the record later.
Article 775 of the Civil Code provides that where the customer supplies materials, it should supply them as agreed; the contractor should inspect them promptly and, on finding nonconformity, promptly notify the customer to replace, complete, or take other remedial measures; the contractor must not replace customer-supplied materials without authorisation or replace parts that do not need repair. A receiving signature is not a formality—it is the starting point for shortage disputes, defect notices, and replacement responsibility.
| Item | What to confirm | Evidence | Common gap |
|---|---|---|---|
| Document match | Delivery note, packing list, order/consigned list, part revision | Signed/scanned documents | Only "received" |
| Quantity | Pieces, weight, pallets, weight variance, short/over shipment | Count sheet/weighbridge ticket | No count or weight |
| Lot | Heat/lot, production batch, serial, shelf life | Label/photo | Lot not traceable |
| Quality documents | COA/CoC, material cert, inspection report | Documents with shipment | Missing/late |
| Appearance/transport | Damage, moisture, rust, deformation, contamination | Photos/video | Found after signing |
| Exception notice | When, to whom, by what means, reply | Email/system record | Verbal only |
This receiving list is editorial; the prompt inspection and notice duty is in Article 775 of the Civil Code; specific documents and deadlines follow the contract/quality agreement.
What happens when incoming inspection finds nonconformance?
Segregate, label, and record first, then choose one of four dispositions: return/replace, customer sorting, use-as-is concession, or scrap—each with written customer confirmation. Inspection should cover appearance, dimensions/performance, material certificates, lot consistency, and packaging; sampling plan, AQL, inspection deadline, and acceptance criteria belong in the quality agreement. Do not start production while waiting for the customer, and do not ship nonconforming material back without evidence.
What makes consigned material special is that "the material is the customer's, but the schedule is yours." If replacement is slow, delivery slips; if the customer accepts a concession, record a written deviation and finished-product risk assessment; if the customer asks the supplier to sort or 100% inspect, agree in advance who bears the labour and cost. Clause 8.5.3 of GB/T 19001-2016 requires the organisation to identify, verify, protect, and safeguard customer or external-provider property, and to report loss, damage, or unsuitability and retain documented information; incoming inspection and exception notices are how that clause is implemented.
| Disposition | When | What to keep | Common gap |
|---|---|---|---|
| Return/replace | Lot nonconforming, wrong spec, transport damage | Nonconformance report, return note, replacement plan | Produce first, document later |
| Customer sorting | Usable after sorting, customer confirms | Sorting criteria, labour/cost confirmation | Verbal approval |
| Use-as-is | Deviation acceptable, written concession | Deviation note, risk assessment, release | No written record |
| Scrap | Unusable or customer abandons | Scrap note, photos, weight/count, customer confirmation | Simply discarded |
| Hold | Responsibility unclear, customer silent | Segregated label, register, deadline | Mixed with good stock |
These dispositions are editorial; the customer-property control requirement is in GB/T 19001-2016, clause 8.5.3; specific decisions follow the quality agreement and customer requirements.
How should storage, labelling, and segregation work?
Give consigned material a dedicated area or clear labelling: customer, part number, lot, quantity, status (pending/approved/rejected/hold), and receipt date; manage FIFO and shelf life, with rust, moisture, ESD, and mix-up controls; keep separate books and a segregated area for bonded material. Customer property, own material, finished goods, and scrap must not be mixed—especially, consigned material must not be used to fill another customer's order.
Article 784 of the Civil Code provides that the contractor should properly keep the materials supplied by the customer and the completed work, and is liable for damage or loss caused by poor custody. "Proper custody" can be made concrete on the page: warehouse conditions, stacking height, rust-prevention cycle, temperature/humidity records, fire protection/insurance, stocktaking, and exception reporting. That is also what a customer audit looks for—not a sentence saying "we will keep it safe."
| Item | Requirement | Evidence | Common gap |
|---|---|---|---|
| Area | Dedicated area/rack, physical segregation or clear marking | Layout/photos | Mixed with own stock |
| Label | Customer, part number, lot, quantity, status, date | Sample label | Material name only |
| FIFO | Issue by lot/shelf life; avoid long storage | Issue records | Newest used first |
| Environment | Rust, moisture, ESD, temperature/humidity, fire | Checklists/records | No environment records |
| Bonded | Separate books, area, write-off, documents | Customs ledger | Mixed books/area |
| Exception report | Report loss/damage/unsuitability promptly in writing | Exception note/email | Hidden or delayed |
These storage requirements are editorial; the custody duty is in Article 784 of the Civil Code; bonded material follows customs rules.
How should issue, substitution, and traceability be controlled?
Tie every issue to a work order/production lot/finished-goods lot and record part number, lot, quantity, issuer, date, and remaining material; do not substitute customer material without authorisation or use it for another customer's order; any substitution/alternate requires written customer approval and a finished-product risk assessment. Finished-goods lots must trace back to consigned-material lots, so a complaint can distinguish material from process causes.
Article 775 of the Civil Code explicitly states that the contractor must not replace customer-supplied materials without authorisation or replace parts that do not need repair. In practice, "substitution" may be an engineering cost-down proposal or an emergency when material runs out; either way, when the material is customer-supplied, the supplier cannot decide alone. "Substitution requires written approval" on the page is more useful than explaining afterward that "we thought it was allowed."
| Step | What to record | Evidence | Common gap |
|---|---|---|---|
| Issue | Work order, part number, lot, quantity, issuer, date | Issue slip/system | Only "production issue" |
| Binding | Consigned lot ↔ finished lot/serial | Traceability sheet/MES | Broken lot chain |
| Substitution | Written customer approval, scope, risk assessment | Approval note | Engineering verbal decision |
| Diversion | Prohibited for other orders/customers | Permissions/audit | Shared stock confusion |
| Remaining material | Return to store, label, quantity, status | Return slip | Left on the line |
| Traceability | Complaint/recall can find lot and destination | Trace drill | Only finished lot number |
These traceability requirements are editorial; the prohibition on unauthorised replacement is in Article 775 of the Civil Code; the traceability granularity follows the contract and industry requirements.
How should loss, scrap, and quantity variance be agreed?
Agree the "reasonable loss rate/tolerance" and the calculation basis (input quantity, finished quantity, area/weight), then agree how excess loss is notified, approved, replaced, and charged; scrap needs photos, weight/count, cause, and customer confirmation; offcut/scrap ownership, recycling method, and residual value must be stated. Without an agreed loss rate, do not unilaterally deduct from payment afterward.
Quantity variance usually appears at three points: short shipment at receiving (carrier/supplier short-shipped), excess loss in production (process/equipment/human), and stocktake variance (records/mixed material/not returned). The page can require "variances raised in writing within the agreed period, with evidence, adjusted after both sides confirm," and state that "no unilateral replacement or deduction before confirmation." That is both a commercial rule and the basis for finance reconciliation.
| Item | What to state | Evidence | Common gap |
|---|---|---|---|
| Loss rate | Basis, percentage/tolerance, applicable materials | Contract/quote | Only "as actual" |
| Excess loss | Notice deadline, cause analysis, replacement/charge | Excess-loss note | Deduct afterward |
| Scrap | Approval, photos, weight/count, customer confirmation | Scrap note | Discarded directly |
| Offcuts | Ownership, recycling/return, residual value | Recycling record | Default to supplier |
| Short/over shipment | Tolerance, notice, replacement/return | Receiving record | Not acknowledged after signing |
| Deduction | Basis, amount, mutual confirmation | Reconciliation | Unilateral deduction |
These loss and scrap rules are editorial; specific percentages, charges, and responsibility follow the contract/quality agreement—this article does not set a universal loss rate.
How should counting, reconciliation, and material return be accepted?
Do monthly/quarterly reconciliation and annual/project-end stocktaking at minimum: opening stock + receipts − issues − scrap ± adjustments = closing stock; the reconciliation should list part number, lot, quantity, unit, status, and variance reason; the customer may count on site or remotely. At project end or cancellation, remaining material, offcuts, tooling, and packaging should be returned, recycled, or destroyed as agreed, with freight, duty, and documents allocated in writing.
Consigned-material reconciliation most often fails on "books do not match reality": material is in the warehouse but not booked, returns are not registered, scrap is not approved, and samples/trial material are not counted. Link the consigned-material ledger to the customer portal/reconciliation so the customer can at least see receipts, issues, stock, and variances. Returns also need packaging, rust protection, export/import documents, and bonded write-off—not just a tracking number.
| Step | What to do | Evidence | Common gap |
|---|---|---|---|
| Reconciliation | Opening + receipts − issues − scrap ± adjustments = closing | Reconciliation statement | Totals only |
| Stocktake | Periodic/project-end; customer may sample-count | Count sheet/photos | Never counted |
| Variance | Cause, responsibility, adjustment/compensation | Variance report | Written off silently |
| Material return | Remaining material label, quantity, status, handover | Return slip | Left on the line |
| Ship-back | Packaging, transport, duty, documents, insurance | Logistics/customs documents | Tracking number only |
| Project close | Material, tooling, packaging, scrap all settled | Close-out checklist | Left unresolved |
Counting and return are editorial; the reconciliation cycle, return responsibility, and documents follow the contract, customs requirements, and customer requirements.
How should liability, insurance, and finished-product quality be separated?
The contract should distinguish: quality liability for the customer's material itself, the supplier's processing/custody liability, and transport/force-majeure/third-party liability; state who insures, the limit, beneficiary, deductible, and claims cooperation; and state notice, mitigation, and cost-sharing when a material defect causes line stoppage, rework, or scrap. Consigned material does not remove the producer's responsibility for finished-product quality, but the supplier may seek contractual contribution for losses caused by customer-material defects.
Article 26 of the Product Quality Law provides that producers are responsible for the quality of the products they produce; products must not contain unreasonable danger to personal or property safety, must have the performance they should have, and must conform to the standards stated on the product or packaging and to the quality conditions indicated by product descriptions or physical samples. In other words, even if the material is customer-supplied, the producer may still face end-customer or regulatory responsibility for the finished product; how supplier and customer share it depends on the contract, quality agreement, and evidence. Do not present "consigned material" as a liability shield on the website.
| Risk | What to state | Evidence | Common gap |
|---|---|---|---|
| Material defect | Notice, replacement, line-stop/rework cost sharing | Inspection report/email | Silent rework |
| Custody loss | Damage/loss liability, cap | Contract/insurance | No cap |
| Finished quality | Producer responsibility; defence/recourse for material defects | Quality agreement | Assumed exemption |
| Insurance | Who insures, limit, beneficiary, deductible | Policy | Neither side insured |
| Force majeure | Notice, mitigation, evidence, next steps | Event record | No plan |
| Third parties | Transport/warehouse/subcontractor liability | Contract/receipt | Broken chain |
Liability allocation is editorial and not legal or insurance advice; finished-product responsibility is in Article 26 of the Product Quality Law; specific allocation follows the contract and applicable law.
What should the page say, and how should it link?
Include projects and material types covered, receiving documents and deadlines, incoming inspection and nonconformance disposition, storage and segregation, issue and traceability, loss and scrap, counting and reconciliation, return and ship-back, liability and insurance, and a contact; link to the RFQ page, sample/FAI page, complaint/8D page, customer portal, and mold/tooling ownership page. The public page states rules and checklists, not customer part numbers, prices, inventory detail, or proprietary drawings.
Make it a "consigned-material management" page, not a slogan about "incoming-material processing": first let the customer identify the material type and documents required; then show the receiving/inspection/reconciliation process and deadlines; finally give the exception contact and escalation path. Sales can screen projects with it, SQE can align inspection criteria, finance can reconcile, and the warehouse can receive against it.
| Module | What to write | Evidence/asset | Common gap |
|---|---|---|---|
| Scope | Project types, material types, exclusions | List | Only "incoming processing" |
| Receiving | Documents, quantity, lot, appearance, notice deadline | Sample receiving form | No deadline |
| Inspection/disposition | Items, sampling, criteria, four dispositions | Inspection spec | Only "inspection passed" |
| Storage/traceability | Area, label, FIFO, lot binding | Layout/label | Mixed storage |
| Loss/scrap | Loss rate, excess, scrap, offcuts | Contract/forms | Dispute afterward |
| Counting/return | Formula, count, return, ship-back | Reconciliation/logistics | Books do not match |
| Liability/insurance | Material/custody/finished/transport/force majeure | Contract/policy | Consigned material as shield |
| Links/contact | RFQ, sample, 8D, portal, tooling ownership | Page test | Broken links |
These modules are editorial; public scope, customer part numbers, and inventory detail are handled under confidentiality requirements, with specific terms per contract.
Go-live acceptance checklist
Ten checks: scope, receiving documents, incoming inspection, nonconformance disposition, storage segregation, issue traceability, loss and scrap, counting and reconciliation, return and ship-back, and liability/insurance. Each needs an owner, evidence, and review date. The pass condition is not "the page says consigned material is supported"; it is that the customer knows how to ship, how it is received, how it is inspected, how it is counted, how it is returned, and whom to call when something goes wrong.
Sales, procurement, SQE, warehouse, production, finance, customs, legal, and the website vendor can share this list. Before go-live, run one real consigned-material project through the flow: customer ships → receiving count → incoming inspection → storage labelling → work-order issue → finished-lot binding → loss/scrap → monthly reconciliation → project-end return. Any step that fails is a step the page has not yet explained.
| Check | Pass condition | Evidence | If it fails |
|---|---|---|---|
| Scope | Projects/material types/exclusions clear | List | Add scope |
| Receiving documents | Delivery note, packing list, lot, certificates, deadline | Receiving form | Add fields |
| Incoming inspection | Items, sampling, criteria, deadline executable | Inspection spec | Add spec |
| Nonconformance | Return/sort/concession/scrap all in writing | Disposition form | Add process |
| Storage segregation | Area, label, FIFO, environment, bonded | Layout/checklist | Fix warehouse |
| Issue traceability | Work order, lot, finished binding, substitution approval | Trace records | Add records |
| Loss/scrap | Rate, excess, scrap, offcut ownership | Contract/forms | Add clauses |
| Counting/reconciliation | Formula, cycle, variance, customer count | Reconciliation | Add reconciliation |
| Return/ship-back | Remaining material, tooling, packaging, freight/duty/documents | Return/customs | Add process |
| Liability/insurance | Material/custody/finished/transport/force majeure/insurance | Contract/policy | Legal revision |
This checklist is editorial; specific receiving, inspection, loss, scrap, return, and liability arrangements follow the law, contract, quality agreement, and customs requirements.
Who should read this, who should not, and what decisions does it support?
It suits manufacturers in Changzhou and nearby areas that receive customer-supplied raw materials, components, tooling, packaging, or bonded materials—especially OEM/ODM, EMS, custom equipment, mold, and precision-machining projects. It does not suit teams that buy all materials themselves and receive only drawings or standard-part orders from customers.
Read it if you are in sales, procurement, SQE, warehouse, production, finance, customs, legal, or a website vendor; you are building a consigned-material page, incoming-processing quotation, quality agreement, inventory reconciliation, or customer-audit preparation; or you need to decide what counts as consigned, how to receive, how to inspect, what loss is allowed, who approves scrap, who owns offcuts, and how to return. Skip it if you have no consigned-material business but want one "incoming processing" page to win every order; you treat consigned material as a liability shield; or you want one page to replace contract, quality-system, customs, or legal advice. It supports self-review of scope, receiving and inspection, storage and traceability, loss and scrap, counting and return, and liability/insurance.
Lingyi Information is a website development and enterprise AI project provider, not a law firm, quality-system certification body, customs broker, or insurance broker. This article is not a substitute for legal, quality-system, customs, or insurance advice. Changzhou projects are delivered remotely or on site as confirmed per project; Lingyi is one candidate, does not claim a local office or team, and does not promise customer conversion, loss outcomes, or inquiries.
FAQ
Who is responsible if consigned material is damaged or short?
Start with the contract and evidence: was quantity/appearance confirmed at receiving, was custody as agreed, was loss within tolerance, was the exception reported promptly? Under Articles 775 and 784 of the Civil Code, the contractor must inspect and notify promptly and keep the customer's material properly; damage or loss caused by poor custody leads to liability. Specific allocation still depends on the contract, quality agreement, and records.
Does consigned material need incoming inspection?
Yes. Customer-supplied does not mean inspection-exempt; the supplier should inspect promptly as agreed and notify the customer to replace, complete, or remedy nonconforming material. Inspection can be simplified by material type, but appearance, quantity, lot, quality certificates, and key dimensions/performance should not be skipped entirely; otherwise responsibility is harder to establish after production.
How is the consigned-material loss rate set?
By material type, process, historical data, and customer agreement, with a clear calculation basis (input, finished output, weight/area) and excess-loss handling. The law does not set a universal loss rate; without an agreement, do not deduct unilaterally afterward. Write "reasonable loss, excess-loss notice, replacement, cost bearing" into the quote/contract.
Can consigned material be substituted or alternated?
Without written customer consent, do not replace customer-supplied material or replace parts that do not need repair. Substitution/alternate use requires written customer approval, the substitution scope, and a finished-product risk assessment; especially when material runs short, do not use first and explain later. The exact boundary follows the contract and technical/quality agreement.
Who owns scrap and offcuts from consigned material?
It depends on the contract. A common approach is that the customer owns the material, and offcuts/scrap are returned, recycled, or processed by the supplier with residual value settled; without an agreement, disputes often arise at project end or reconciliation. The page should state ownership, recycling method, measurement, residual value, and cost bearing—not default to one party.
What if the consigned-material count does not match?
First check "opening + receipts − issues − scrap ± adjustments = closing," then look for unrecorded receipts, unregistered returns, sample/trial use, mixed material, and unapproved scrap; prepare a written variance report with evidence and mutual confirmation before adjusting or compensating. Do not write it off silently or deduct unilaterally before confirmation.
One-sentence takeaway
A Changzhou manufacturer's consigned-material page should not say "incoming-material processing supported." It should turn scope, receiving documents, incoming inspection, storage segregation, issue traceability, loss and scrap, counting and reconciliation, return and ship-back, and liability/insurance into an executable checklist—so the customer knows how to ship, how it is received, how it is counted, and how it is returned.
Method and limitations
This is a review of public rules, standards, and project practice, not a compliance certification or legal opinion on any company, material, contract, quality system, customs matter, or insurance. No undisclosed customer part numbers, prices, inventory, or inspection data were used. Material categories, receiving lists, inspection dispositions, loss bases, reconciliation formulas, and the acceptance checklist are editorial suggestions, not legal, quality-system, customs, or insurance conclusions. Specific receiving, inspection, loss, scrap, return, and liability arrangements depend on the law, contract/quality agreement, customs rules, and company policy.
Sources and scope
Information is current to 2026-11-01. The following are public official/primary pages; their scope, version, and wording control.
- Civil Code of the PRC, Articles 770, 771, 775, and 784: Cyberspace Administration of China. Definition and content of work contracts; customer-supplied material inspection/notice/no unauthorised replacement; contractor's custody duty.
- GB/T 19001-2016, Quality management systems—Requirements (published 2016-12-30, effective 2017-07-01, current): National Standards Full-Text Public System. Clause 8.5.3, customer or external-provider property: identify, verify, protect, safeguard; report loss/damage/unsuitability and retain documented information.
- Product Quality Law of the PRC (2018 amendment), Article 26: State Administration for Market Regulation. Producers are responsible for product quality; products must meet safety, performance, and stated standards/descriptions.
Managing customer-owned containers as property; see the returnable-packaging / container-pool page acceptance checklist.