Vendor Consignment Process

What is Vendor Consignment?

Vendor Consignment is a process wherein the supplier provides materials and stocks them in the
purchasers premises. The material remains in the books of the supplier (vendor) until the same
is withdrawn from the stock of the consignment and put to use. The inventory gets transferred
to the books of the purchaser only when the same is removed from the consignment stock. The
supplier (vendor) would not invoice the purchaser initially when they come into the premises
of the purchaser. The purchaser is liable to pay the supplier (Vendor) only when the stock is
withdrawn (consumed).
Key Process Design for the Consignment process for Vendors in SAP
- Consignment has been designed as a special procurement type in SAP
- - The consignment stock is not valuated till the time it is consumed or withdrawn, since theoretically, it lies
in the books of the supplier (Vendor)
- - The consignment material number is the same as that of a material in unrestricted stock in
the purchasers books
- - Since the sourcing of a material can happen from multiple parties, the consignment stock is maintained at
the level of each supplier or vendor.
- - The price of the consignment is maintained in the purchasing info records (PIR) of the info category,
Consignment
- - When the withdrawal happens from the consignment stock of a supplier, the goods receipt
in the purchasers books happens at the price maintained in the purchasing info records of type
consignment for that vendor and material combination.
- - The goods receipt against a consignment purchase order is always non valuated
Basic Configuration Steps for Vendor Consignment Process in SAP
1.
1. Activate Purchasing Info Record for Info category as Consignment. The Configuration transaction
code for the same is OMEV.

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1.

2. Configure the special procurement type 10. This is done in IMG Node:

IMG>Production>Material Requirement Planning>Master Data>Define Special Procurement Type

3. Assign the special procurement type in the material master. The Master Data transaction code for the same
is MM02. This is done in MRP2 view of the material master

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4. Create a purchasing info record (PIR) of the category, Consignment. This is done using the transaction code
ME11.

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5. Maintain the automatic account assignment for material posting. The below transaction need to be
maintained in the configuration transaction code OBYC
a. Consignment Payables : KON
b. Expense/Revenue from Consignment Material Consumption : AKO
-

c. Offsetting entry for Inventory Posting : GBB VBR

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Consignment Process Steps in SAP

The consignment process steps in SAP are fairly simple. It involves creating a purchase order,
doing a good receipt and a withdrawal of the stock from Vendors books. The last step in the
consignment process for a vendor is the settlement of the vendors liability. The steps are
highlighted as:

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1. 1. Procurement - A standard purchase order is created with item category as K using the transaction code
ME21N. There is no price which is applicable for a consignment purchase order and hence should not be
entered at the time of creation of purchase order.

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The goods receipt is done using the standard transaction code MIGO. The stock is posted as
consignment stock without value. The same would reflect as a special stock for the vendor. Since
the material lies in the purchasers premises, the same would be reflected in terms of quantity at
a storage location as well till the time the same is consumed for use. The same can be checked in
the standard stock reports in transaction code like MMBE. There is no accounting document which
is created when the GRN is done in case of a consumption purchase order.

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1. 2. Consumption Consumption of consignment material happens when goods issue is done with item
category K. The price at which the goods issue will be done will be picked from the purchasing info record
which has been created for consignment for the material and vendor combination. In this particular case, to
elaborate the process a production order was created and a goods issue was done with the item category K
against the production order. Generally the consignment materials are part of Bill of Materials (BOM). Goods
issue document is posted in such a case when activity confirmation is done for the production order through
transaction code CO15.

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In the above case, the price is picked from the purchasing info record which would have been created for
the material and vendor combination.
3.
1. 3. Settlement The next step in the vendor consignment process is the settlement of the vendor liability.
This is done through transaction code MRKO

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This would display the withdrawals from the consignment stock which have taken place and for which the
liability for the vendor has not been created. You also have the option to check the accounting entries for the
withdrawals for consumption made from the consignment stock for a vendor.

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After analyzing the unsettled withdrawals, you can create the vendor liabilities by selecting Settle from the
main screen. This will settle the outstanding entry in Consignment Account Payables account and create a
vendor liability. The price of vendor liability creation will happen at the Info Record Price.

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Accounting Entries
1.
1. At the time of Goods Receipt No Accounting entries are generated at the time of goods
receipt
2.
(a)
V)

2. At the time of Withdrawal or Consumption of Consignment Stock

a. The material is valuated at moving average Price (Price Control in Material Master is

Consumption Account DR
(Account Assignment OBYC-GBB-VBR)
To Consignment Payable A/c (Account Assignment OBYC-KON)
The unit value of material comes from the Info record Price for material vendor combination for info
category Consignment
(b)

b. The material is valuated at standard price (Price Control in Material master is S)

Consumption A/c DR
To Consignment Payable A/c
Price Difference A/c (Dr/Cr)

(Account Assignment OBYC-GBB-VBR)

(Account Assignment OBYC-KON)
(Account Assignment OBYC-AKO)

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