Consignment Process in SAP - What is Consignment?
Consignment
in SAP - What is Consignment?
Consignment Means Company provides material to Vendor is stored in
vendor’s premise but actually belongs to the company. A liability only occurs
if vendor consumes or sells some materials from the consignment stock.
In other words “Consignment is an agreement between the Company
and the Vendor means that Company will send materials to the Vendor but the Vendor
will pay only after consuming or selling the materials. If the material remains
then the remaining materials will belong to the company and will be taken back
by the company.”
Main Concepts of Consignment Process:
1.
In
Consignment Process the Company provides materials to vendor and keeps
materials on vendor’s premises and the materials are called consignment stocks.
2.
Company
remains the legal owner of the material until the vendor withdraws some
materials from consignment stores.
3.
The
Vendor is paid on the basis of consumption happened means if vendor consumes
some materials from consignment stock.
4.
Invoice
is due after set period of time and payment is made to company periodically.
5.
The
Consignment Price for procuring a Consignment Material from a Vendor is stored
Info Record.
6.
Consignment
Prices can be defined periodically.
Consignment Process in SAP – Configuration in SAP:
Material Master:
At
Plant Level in Material Master Record, the field special procurement in MRP
view will be set to ‘10’.
Purchase Requisition:
1.
Requisition
will be automatically created by MRP.
2.
The
Item Category for Consignment Requisition will be “K”.
Purchasing Info Record:
1.
The
Consignment Price in Info Record is maintained by means of using the
Consignment Info Record Category Radio Button.
2.
The
Text in Info Record will have explanation for the price information. This Text
will default in the Purchase Order.
3.
The
Price maintained in Info Record is required for Material Valuation and
Accounting purposes.
4.
The
Inventory Valuation would be using the Material Master Price and not based on
the Info Record Price.
5.
Consignment
Settlement will be based on the valid price in the Info Record on the day of
Consumption.
Purchase Order:
1.
The
Purchase Order Type will be a Standard (NB).
2.
The
Item Category for the Consignment Purchase Order will be “K”.
3.
If
Purchase Order is generated manually then Item Category Code needs to be
defined as K.
4.
The
Price at the Item Level in Purchase Order will be zero and explanation for this
will be defined in Info Record.
Mapping for Consignment Stock:
1.
The
Consignment Material can be seen in SAP in the socks as a Separate Stock line
item.
2.
One
Material code can be used in case there is more than one vendor is supplying
the same material. This facilitates the stock transfer from Consignment Stock
to available stock.
3.
The
Consignment Stocks from different vendors will be kept independent of one
another at the price of the individual vendors.
4.
Consignment
Material can be allocated to one of three stock types:
·
Unrestricted-Use
Stock
·
Quality
Inspection Stock.
·
Blocked
Stock.
5.
The
Stock withdraws can only be posted from Unrestricted Stock.
Inventory Transactions:
No Accounting entries are posted when the material is received in the system with reference to Purchase Order (As it is Consignment Material).Only Consignment Stock for the Vendor is updated.
Transfer Posting:
When the material is transferred from Consigned Stock to own stock accounting entries are posted. Own stocks of company is updated.
·
The company clearing
account is credited as per the purchase order price (As per Consignment Info
Record)
·
Raw Material Account is debited at standard price from Material
Master at Plant Level (Defined in Accounting 1 View)
·
Different Amount (Difference between A and B) is debited to price
variance account.
·
Invoice and Payment are based on the quantity consumed in the
period and on the price at the time the product was used (Moved from Consigned
to itself).
·
The Price comes from the Consignment Info Record.
·
Invoicing will be through the Consignment Settlement Method
·
The Vendor will have an invoicing schedule with the company
·
An Invoice document will be generated automatically, based on the
consumption of Consigned Materials.
·
Payment will be done on the base of this Document.
·
The Vendor will not receive the Invoice from the Company.
·
No Cash discount can be calculated. Cash discount agreed with the
company should be incorporated in the price.
·
The Prices should be flat and no scale conditions on prices are
applicable.
·
Settlement can be done only when the transfer posting is completed
in the system.Settlement can be created for the consigned quantity which transferred
to Vendor.
Useful Extra Steps in Consignment Process in SAP MM:
1. Consignment Info record (Must)
2. Item category – K (Must)
3. Create Purchase order using vendor and
material with item category K but mention no price.
4. Vendor sends the consignment stock.
Goods receipt using movement type 101 against this consignment purchase order.
5. Now takes the material from consignment
stock by using movement type 411+K.
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