SAP MM Consignment Procurement Process

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withdrawn from the stock of the consignment and put to use.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 The purchaser is liable to pay the supplier (Vendor) only when the stock is withdrawn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).

Prerequisites:

1. Special Procurement type Consignment has to be given in Material Master (Optional)

2. Create Consignment Info Record –Mandatory

3. Maintain OBYC settings for Transaction Key KON –Consignment Accounts Payable

4. Maintain Output Condition Records for Output type KONS with Transaction Code MRM1

Process Steps:

1. Create Purchase Order with Item Category K– Consignment- T Code ME21N

2. Goods Receipt against Consignment Purchase Order, Mvt Type 101 K – No accounting Entries
– T Code MIGO-Goods Receipt

3. Transfer the Consignment Stock to Own stock- Transfer Posting –411 K –T Code MIGO-
Transfer Posting

Accounting Entries:

Here Debit means +Ve and Credit means -Ve.

Consignment Payable – KON – Credit

Stock – BSX – Debit

4. Invoice Settlement – MRKO

Accounting Entries:

Consignment Payable(KON) – Debit

Vendor Account – Credit

4. Payment F110 or any other payment transaction

Accounting Entries:

Bank Account – Credit

Vendor Account – Debit

Example:
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withdrawn from the stock of the consignment and put to use.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 The purchaser is liable to pay the supplier (Vendor) only when the stock is withdrawn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

 The consignment stock is not valuated till the time it is consumed or withdrawn, since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. 1. Activate Purchasing Info Record for Info category as Consignment. The Configuration
transaction code for the same is OMEV.
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
4. Create a purchasing info record (PIR) of the category, Consignment. This is done using the
transaction code ME11.
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

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. 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.
 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.
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.
 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

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.
 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.
 Accounting Entries

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

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

(a) 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) 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)