Consignment of inventory is when a seller (consignor) distributes the goods to an agent (consignee). The consignee holds and sells the goods on behalf of the consignor. The consignor includes the good's in its inventory at year end.
A common example is when a publishing company like McGraw Hill sends books to Barnes & Nobles to sell on its shelves. Technically the inventory is sitting on Barnes & Noble’s shelves, but should not be considered to be inventory on Barnes & Noble’s books. Rather that inventory should be included into McGraw Hill’s inventory.