2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

Community

SAP Community  Products and Technology  Enterprise Resource Planning  ERP Blogs by Members

 Vendor Consignment Process

Enterprise Resource Planning Blogs by Members

Gain new perspectives and knowledge about enterprise resource planning in blog posts from community
members. Share your own comments and ERP insights today!

All community  What are you looking for today?

Vendor Consignment Process

sanilbhandari
Product and Topic Expert

‎09-17-2013 6:33 AM

 68 Kudos

What is Vendor Consignment?

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(vendor) until the same is withdrawn from the stock of the consignment and put to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is liable to pay the supplier (Vendor) only when the stock is withdrawn (consumed).

Key Process Design for the Consignment process for Vendors in SAP

- Consignment has been designed as a special procurement type in SAP

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 1/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

- The consignment stock is not valuated till the time it is consumed or withdrawn,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

Basic Configuration Steps for Vendor Consignment Process in SAP

1. Activate Purchasing Info Record for Info category as Consignment. The

Configuration transaction code for the same is OMEV.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 2/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

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

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

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 3/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 4/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

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

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 5/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

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 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:

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.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 6/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

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 which is created when
the GRN is done in case of a consumption purchase order.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 7/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

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.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 8/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

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. Settlement – The next step in the vendor consignment process is the settlement of
the vendor liability. This is done through transaction code MRKO

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.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 9/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

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.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 10/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 11/39
2/6/24, 7:15 PM Vendor Consignment Process - SAP Community

Accounting Entries

1. At the time of Goods Receipt – No Accounting entries are generated at the time
of goods receipt

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 “V”)

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

is “S)

Consumption A/c DR (Account Assignment

OBYC-GBB-VBR)

To Consignment Payable A/c (Account Assignment

OBYC-KON)

Price Difference A/c (Dr/Cr) (Account Assignment

OBYC-AKO)

SAP Managed Tags:

SAP ERP, FIN (Finance)

Tags:

enterprise resource planning sap erp financials

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-members/vendor-consignment-process/ba-p/13257635 12/39