VENDOR CONSIGNMENT PROCESS
Definition
Vendor Consignment is a process wherein the supplier provides materials and
stocks them in the purchaser’s 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withdrawn from the stock of the consignment and put to use.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withdrawn (consumed).
Process
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withdrawn, since theoretically, it lies in the books of the supplier (Vendor)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 purchaser’s 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 purchaser’s 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
Configuration Involved
Activate Purchasing Info Record for Info category as Consignment.
The Configuration transaction code for the same is OMEV.
VENDOR CONSIGNMENT PROCESS
Configure the special procurement type 10.
This is done in IMG Node: >Transaction code: SPRO
IMG>Production>Material Requirement Planning>Master Data>Define Special
Procurement Type
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
VENDOR CONSIGNMENT PROCESS
Create a purchasing info record (PIR) of the category, Consignment.
This is done using the transaction code ME11.
VENDOR CONSIGNMENT PROCESS
Create a purchasing info record (PIR) of the category, Consignment.
This is done using the transaction code ME11.
VENDOR CONSIGNMENT PROCESS
Automatic Account Determination
Maintain the automatic account assignment for material posting. The below
transaction needs to be maintained in the configuration transaction code
OBYC
Consignment Payables : KON
Expense/Revenue from Consignment Material Consumption : AKO
Offsetting entry for Inventory Posting : GBB-VBR
VENDOR CONSIGNMENT PROCESS
Process Steps:
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 Vendor’s books.
The last step in the consignment process for a vendor is the settlement of the
vendor’s liability.
The steps are highlighted as follows:
VENDOR CONSIGNMENT PROCESS
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.
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 purchaser’s 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 (Financial Impact) which is created when
the GRN is done in case of a consumption purchase order.
VENDOR CONSIGNMENT PROCESS
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.
VENDOR CONSIGNMENT PROCESS
In the above case, the price is picked from the purchasing info record which would
have been created for the material and vendor combination.
Settlement / Invoicing:
Please understand, this process is not done through the standard invoicing transaction
code MIRO.
This is done through Transaction Code MRKO
In this step the vendor consignment process is the settlement of the vendor liability /
This is exactly what MIRO does for a standard process of purchase.
VENDOR CONSIGNMENT PROCESS
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.
VENDOR CONSIGNMENT PROCESS
After analysing 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.
VENDOR CONSIGNMENT PROCESS
VENDOR CONSIGNMENT PROCESS
Accounting Entries
At the time of Good Receipt :No Accounting entries are generated at the time of goods receipt
At the time of Withdrawal or Consumption of Consignment Stock
Consumption Account : Debit (Account Assignment OBYC-GBB-VBR
To Consignment Payable Account : Credit (Account Assignment OBYC-KON)
If the material is valuated at moving average Price (Price Control in Material Master is
“V”)
If the unit value of material comes from the Info record Price for material vendor
combination for info category Consignment.
Consumption Account : Debit (Account Assignment OBYC-GBB-VBR
To Consignment Payable Account : Credit (Account Assignment OBYC-KON)
Price Difference A/c (Dr/Cr) : Credit Account Assignment OBYC-AKO
