Vendor Consignment

Vendor Consignment
Applies to:
SAP ECC 6.0. For more information, visit the Supply Chain Management homepage.
Summary
This document helps the P2P consultants to understand the Vendor Consignment scenario in SAP. It
explains how the master data to be maintained and process to be followed for the Vendor Consignment
business. Any suggestions and improvements towards this document will be always welcome.
Author:
Dipak Kadam
Company: Larsen & Toubro InfoTech Ltd

Created on: 18 March 2011
Author Bio
Dipak Kadam is now an employee of Larsen & Toubro InfoTech Ltd. He has total 15+ years of experience
out of which near about 3 years experience in the area of SAP consulting in procure to pay (P2P) process.
He has worked in OTIS Elevator company in areas like Manufacturing, Production Planning and
Procurement as part of domain experience.
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Vendor Consignment
Table of Contents
Vendor Consignment .......................................................................................................................................... 3
Advantages ......................................................................................................................................................... 3
Process ............................................................................................................................................................... 3
Vendor Consignment in Inventory Management ................................................................................................ 6
Vendor Consignment Stock ............................................................................................................................ 6
Goods Receipt to Vendor Consignment Stock ............................................................................................... 7
Transfer Postings ............................................................................................................................................ 8
Goods Issue from Consignment Stock ........................................................................................................... 8
Vendor Consignment in Invoice Verification ..................................................................................................... 10
Cancelling Consignment Documents ............................................................................................................... 11
Related Content ................................................................................................................................................ 12
Disclaimer and Liability Notice .......................................................................................................................... 13

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Vendor Consignment
Vendor Consignment
In consignment processing, the vendor provides materials and stores them on your premises. The vendor
remains the legal owner of the material until you withdraw materials from the consignment stores. Only then
does the vendor require payment. The invoice is due at set periods of time, for example, monthly. In addition,
you can also arrange with the vendor that you take over ownership of the remaining consignment material
after a certain period of time.
Advantages
The use of consignment settlement reduces the cost of stockholding in the company by:
Reducing the flow of paper and administration work

Minimizing transport costs by using collective transports
And, for a modest capital tie-up, increased security of supply is guaranteed with minimal inventory levels and
short lead times.
Process
To manage material in the consignment stores, you need the following master data:
Material master record: When you manage the affected material as your own material, it is not
necessary to create a new material master record for the consignment material. By using the same
material number, the consignment stock can be included in the unrestricted-use stock of a material.
Vendor master record for the vendor of the consignment material.
Purchasing information record of the Consignment infotype.
To request consignment goods from vendors, create a purchase order with a special consignment item. This
consignment item is then posted directly to the consignment stock of the affected vendor during the goods
receipt(GR). It is also possible to post another goods receipt into the consignment stock. The system does
not valuate the consignment stock during the goods receipt.
If material is withdrawn from the consignment stock, for example, for production, the withdrawals are
valuated with the price of the vendor that is defined in the consignment info record. For the settlement of
withdrawals, there is a special report.
Consignment Info Record
Before you can order consignment material at a vendor or post a goods receipt into consignment stock, you
have to maintain the price of the material for the particular vendor in a purchasing info record. The price is
necessary for the valuation and settlement of material withdrawals. If you procure consignment material from
several vendors, you must create a consignment info record for each vendor. The consignment stock is
managed separately for each vendor.
To create the info record, choose, from the Purchasing menu, Master DataInfo Record Create. Enter the
vendor, material, plant, and the standard purchasing organization of the plant. As the infotype, choose
Consignment.

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Vendor Consignment
Transaction: ME11
Further data maintenance corresponds with that of a normal purchasing info record.
Enter information on the General Data

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Vendor Consignment
Enter information on the Purchase Org data 1
Consignment prices can be determined in foreign currency, period-based, and in any unit of measure. You
can also take advantage of the Purchasing condition technique, including the definition of discounts and
price/quantity scales.
Consignment Order
To determine that a material is procured for consignment stores, enter the item category K (Consignment) in
a purchase order. This item category has the following effects:
You must enter a material number.
You cannot enter a purchase order price or conditions for the item.
You require a goods receipt for the item. The goods receipt is posted in the vendor consignment
stock, and is non-valuated.
You cannot enter an invoice for the consignment item.
Item category K can also be used in outline agreements and purchase requisitions.

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Vendor Consignment
Transaction: ME21N
If a material is always procured for the consignment stores of a plant, you have the opportunity to consider
this with MRP using a special procurement key in the material master record. This special procurement key
means that a purchase requisition with item category K is created during the planning run for a demand for
this material.
Vendor Consignment in Inventory Management

Inventory Management supports the following functions within vendor consignment:
Special stock type vendor consignment
Goods receipt in vendor consignment stock with and without reference to a purchase order
Transfer postings within the vendor consignment stock and transfer postings from vendor
consignment stock to your own stock
Goods issues from vendor consignment stock

Vendor Consignment Stock
Material that you procure using vendor consignment is managed in a vendor-related special stock, K
(consignment vendor). This special stock is updated at storage location level, as the material is actually in
your own company. The consignment stock is then not actually valuated because is still belongs to the
vendor. For consignment stock, the stock types are unrestricted-use, in quality inspection, and blocked. The
consignment stock is considered when you determine the available stock of a material. Explain that
consignment stock is available for planning and can be addressed in Inventory Management.
If you have consignment stock for a material, it is displayed in the stock overview (transaction MMBE). At
storage location level, there is a list of totals of all consignment stocks. With a double-click on this special
stock level, you can see an exact overview of how this consignment stock is distributed to the individual
consignment vendors.

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Vendor Consignment
Unlike the stock overview, with the Display consignment stocks function, you can display consignment stocks
for several materials at the same time.
From the Inventory Management menu, choose Environment Consignment Consignment from Vendor
Stock (transaction MB54).
Goods Receipt to Vendor Consignment Stock

You can enter goods receipts in your consignment stores with and without purchase order reference. If you
enter a goods receipt to a consignment order, the system posts the delivered quantity automatically into the
consignment stock of the vendor. As the movement type, choose 101; the system sets the special stock
indicator K automatically. As for a normal goods receipt to a purchase order, you can post to all three stock
types.
You can also post another goods receipt without purchase order and make an initial entry of stock balances
in the three stock types for consignment. In addition to the known movement types for these goods
movements (501, 503, 505 for GR without purchase order; 561, 563, 565 for initial entry of stock balances),
you must specify the special stock indicator K and the vendor of the consignment material. All goods receipts
in the consignment stock are non-valuated.

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Vendor Consignment
Transfer Postings
For consignment stocks, you can also execute transfer postings and stock transfers. For these goods
movements, in addition to the movement types for stock material, you must also specify the special stock
indicator K and the vendor of the consignment material. These goods movements are also non-valuated.
These are the possible stock transfers and transfer postings for consignment stock:
Stock-to-stock transfer posting
Storage-location-to-storage-location stock transfers
Plant-to-plant stock transfers
Goods Issue from Consignment Stock
You can only post a goods issue from unrestricted-use consignment stock for consumption. If the
consignment material is in stock in quality inspection or in blocked stock, you must first post the consignment
material to unrestricted-use stock. It is possible to make withdrawals for samples and scrapping from all
three stock types. When entering goods issues, you must specify the special stock indicator K and the
consignment vendor, in addition to the movement type in all goods movements. You also have the option of
adopting consignment stocks into own stock. To do this, post a transfer posting with movement type 411,
and special stock indicator K. Unlike the goods issue for consumption, this transfer posting causes an
increase in the valuated stock and no consumption posting.
For both goods issues from consignment stock and transfer postings to own stock, there is a liability towards
the consignment vendor. The withdrawal is valuated with the price from the consignment info record.

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Vendor Consignment

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Vendor Consignment
Vendor Consignment in Invoice Verification

You should regularly clear liabilities towards the vendor that exist because of the issues from the vendor
consignment stock. The consignment goods are settled without invoice receipt, as the vendor cannot trace
the goods withdrawal directly. The vendor can only manage the consignment stock
To settle consignment withdrawals, from the Inventory Management menu, choose Environment
Consignment Consignment from Vendor Liability (transaction MRKO). With this report, you can display
settled and non-settled consignment withdrawals and settle non-settled withdrawals.
Possible selection criteria include company code, plant, vendor, material, document date and posting date of
the withdrawal, and the material document number. So that you can inform the vendor about the settled
withdrawals and the credit memo amount, the system creates a message with message type KONS in
addition to the settlement document.
Transaction: MRKO
You do not expect an invoice from the vendor for goods withdrawals from consignment stocks or a pipeline.
Instead you settle posted withdrawals and return deliveries yourself and send the vendor a statement of the
settlement. You can perform this settlement periodically in the background. The following documents can be
involved:
Invoices
Credit memos
Consignment settlement is connected to message determination. As a result, you can define a form in
Customizing. A message record is created during each settlement. This message record completes the form.
Depending on the system settings, you can send this form to the vendor immediately on posting or at a later
time.

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Vendor Consignment
Cancelling Consignment Documents

Cancel the documents in Inventory Management and start consignment settlement. The system generates a
credit memo for the returned document. If the consignment prices have changed since the original goods
receipt, post the credit memo in Financial Accounting. Clear the invoice and the credit memo in Financial
Accounting.
Consignment settlement is not connected to the purchasing information system, because the purchase order
history is not updated during consignment settlements.
You cannot make any net postings during consignment settlement. This means that you cannot calculate any
cash discounts. To take cash discounts into account, you must include these in the consignment price. This
ensures that the cash discount is implicitly posted during the goods withdrawal and settlement.
You cannot settle delivery costs.
Note, that consignment settlement cannot be performed simultaneously by several users. The material
documents are not blocked during settlement, which means that duplicate settlement documents can be
created.
The liabilities account for consignment settlement must not be flagged as Post automatically only, and must
not be defined as a reconciliation account.

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Vendor Consignment
Related Content
http://help.sap.com
www.sap.com
For more information, visit the Supply Chain Management homepage

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Vendor Consignment
Disclaimer and Liability Notice

This document may discuss sample coding or other information that does not include SAP official interfaces and therefore is not
supported by SAP. Changes made based on this information are not supported and can be overwritten during an upgrade.
SAP will not be held liable for any damages caused by using or misusing the information, code or methods suggested in this document,
and anyone using these methods does so at his/her own risk.
SAP offers no guarantees and assumes no responsibility or liability of any type with respect to the content of this technical article or
code sample, including any liability resulting from incompatibility between the content within this document and the materials and
services offered by SAP. You agree that you will not hold, or seek to hold, SAP responsible or liable with respect to the content of this
document.

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Vendor Consignment

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Company: Larsen & Toubro InfoTech Ltd

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Reducing the flow of paper and administration work

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Enter information on the Purchase Org data 1

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