SAP Consignment: Configuration Guide and Process Overview

Here in this post we will configure SAP consignment & explain the consignment process in detail.

1. What is Consignment

Consignment is a business arrangement where vendor left the goods in the possession of an authorized third party to sell.

Consignment involves a consignor, who is the owner of the goods and provides items to a third party (who is called consignee) to sell on their behalf. 

The consignor retains ownership of the goods until they are sold

2. SAP Consignment Process

If we transform the consignment process from the business language to the SAP language, below will be the salient point of the SAP consignment process

• In the SAP Consignment process, suppliers delivers the goods at the buyer location, but retains ownership until goods are consumed.
• Since ownership is retained by the suppliers at the time of goods delivery, so no financial obligation of the buyer for the goods supply into their premises by seller.
• Buyers take the ownership of the goods when goods is removed for consumption.
• Since in the vendor consignment process we (our car company) is buyer so if we want to withdraw the vendor consignment stock, there are subsequent two processess
  • Transfer the goods from the consignment stock to our own stock through MIGO/411K. This is the step when ownership of the goods is transferred and we are financially liable to pay the supplier for the goods.
  • Now the goods are issued further to process , for example- issue to cost center (201) or issue to production order (261) etc.

3. Configuration of Consignment Process

We will configure the consignment process in SAP. Lets first see what are the steps involved in the configuration of SAP consignment process.

3.1 Consignment Info record Creation

Since stock is owned by supplier so there is no connection between consignment stock and the purchase order

Hence the info record is the only master data from where process get the valuation

Start T-Code ME11

Input Supplier, Material, Purchasing Organization & Plant. Select the category as “Consignment”

Input the tax code & Price negotiated with supplier.

Save & purchasing info record is created.

3.2 Consignment Purchase Order Creation

Now we will create Consignment Purchase Order.

To create Consignment PO, have to use item category as “K”

--> Item category defines how the procurement of a material or service item is controlled.

--> The item category determines whether below are mandatory or admissible for an item:
      • Material number
      • Additional account assignment
      • Inventory management in the SAP system
      • Goods receipt
      • Invoice receipt

Let’s see the characteristics of Item Category “K”

Follow the below Path

SPRO –> Materials Management –> Purchasing –> Define External Representation of Item Categories

Select “K” and click on details

Consignment PO is created

Note : Please check the below post to check the creation of BP vendor used in the consignment Purchase order

Creation of BP Vendor for Vendor Consignment

3.3 Goods Receipt of the Consignment PO

Now we will GR of consignment PO by MIGO

GR done and as described above , no financial postings are done at GR

3.4 Consignment Stock

As described after GR, Non-Valuated Vendor consignment stock owned by Supplier is generated.

Check the stock in MMBE

3.5 Stock Transfer to Own

Now to use the stock we need to first transfer the stock to our own stock through 411K.

Once we execute this , The Ultimate Guide to Master SAP MM-FI Integration

--> We can directly issue the stock production order or cost center, if we know the details and ready to use the stock. Thus we can eliminate the step of transferring the stock from consignment stock to own stock

We have received the OBYC error

Please check the below post to resolve this error

The Ultimate Guide to Master SAP MM-FI Integration –  Scenario 4 :Transfer from Consignment Stock to Own

3.5.1 FI Document Generated

As stated above, FI document is not generated

3.5.2 Transfer Posting of stock

Stock is now available in the ownership of our company

Before this transfer stock was under a special stock category “K” i.e. “Consignment Stock”, check HERE

3.6 Consignment Invoice

Consignment invoice is done through a special process called ERS i.e. “Evaluated Receipt Settlement” instead of normal invoking through MIRO

Please check the below post for the details

How to Configure Logistics Invoice Verification in SAP S4 HANA – Invoicing for Consignment (ERS)

This completes the consignment Process.

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