Consignment Stock in SAP refers to stock provided by a vendor that is stored at the purchaser’s premises but remains the property of the vendor until it is withdrawn or consumed by the purchaser. This arrangement allows the purchaser to avoid upfront payment for inventory until it is used, while the vendor retains ownership until the goods are consumed.

Key Characteristics of Consignment Stock

  1. Vendor Ownership:
    The stock remains the property of the vendor while it is stored at the purchaser’s location.
  2. Deferred Payment:
    Payment is made to the vendor only for the quantity withdrawn or consumed, reducing the purchaser’s financial burden.
  3. Stock Visibility:
    Consignment stock is visible in the SAP system and is tracked separately from the purchaser’s own inventory.
  4. No Immediate Invoice:
    Since the stock is not purchased outright, no invoice is generated at the time of delivery to the purchaser.

Purpose of Consignment Stock

The Consignment Stock model is used to:

  1. Reduce Inventory Costs:
    The purchaser does not pay for the stock until it is used or withdrawn, improving cash flow.
  2. Enhance Supply Chain Flexibility:
    Ensures that the required stock is available at the purchaser’s premises, reducing lead times.
  3. Improve Vendor Relationships:
    Encourages collaboration between vendors and purchasers by aligning inventory management.
  4. Simplify Inventory Management:
    SAP tracks consignment stock separately, providing clear visibility into vendor-owned inventory.

Process Flow for Consignment Stock in SAP

The consignment process in SAP involves several steps:

1. Goods Receipt of Consignment Stock

  • When consignment stock is delivered by the vendor, it is recorded in the system as vendor-owned stock.
  • Transaction Code: MIGO
  • Stock Movement Type: 101 K (Goods receipt for consignment stock).

2. Consumption of Consignment Stock

  • When the purchaser withdraws or consumes the stock, ownership transfers to the purchaser.
  • Transaction Code: MIGO
  • Stock Movement Type: 201 K (Goods issue from consignment stock).

3. Settlement and Payment

  • After withdrawal, the system generates a liability to the vendor for the consumed quantity.
  • Transaction Code: MRKO (Consignment Settlement).

Key Features in SAP for Consignment Stock

FeatureDescription
Separate Stock TypeConsignment stock is managed separately as vendor-owned stock in SAP.
No Immediate Invoice PostingNo financial accounting documents are generated during goods receipt for consignment stock.
Automatic Liability PostingWhen the stock is consumed, the system creates a liability for the consumed quantity.
Tracking by VendorConsignment stock is tracked by vendor, providing clear visibility into the stock levels for each vendor.

Stock Status of Consignment Stock in SAP

SAP categorizes consignment stock under the following statuses:

  1. Unrestricted Use:
    Stock that can be withdrawn or consumed without restrictions.
  2. Quality Inspection:
    Stock that is under quality inspection before being moved to unrestricted use.
  3. Blocked Stock:
    Stock that is blocked due to quality issues or other reasons and cannot be used until released.

Configuration for Consignment Stock in SAP

1. Define Consignment Info Record

  • Transaction Code: ME11
  • Purpose: Maintain vendor-specific pricing and delivery details for consignment stock.

2. Consignment Pricing Condition

  • Transaction Code: MEK1
  • Purpose: Set up pricing conditions specific to consignment, such as material cost per unit.

3. Movement Types for Consignment

  • Goods Receipt: 101 K
  • Goods Issue (Consumption): 201 K
  • Return to Vendor: 221 K

Example of Consignment Stock Process

Scenario:

A vendor supplies 1,000 units of Material X to the purchaser’s premises on a consignment basis. The purchaser withdraws 500 units for production.

  1. Goods Receipt:
    • Material: X
    • Quantity: 1,000 units
    • Movement Type: 101 K
    • The stock is recorded as vendor-owned in the system.
  2. Consumption:
    • Material: X
    • Quantity: 500 units
    • Movement Type: 201 K
    • Ownership transfers to the purchaser, and a liability is created for 500 units.
  3. Settlement:
    • Vendor is paid for 500 units through the consignment settlement process (MRKO).

Benefits of Consignment Stock

  1. Improved Cash Flow:
    Payment is only made for consumed stock, reducing upfront costs.
  2. Enhanced Stock Availability:
    Ensures the required inventory is available without the purchaser owning it outright.
  3. Simplified Inventory Management:
    SAP tracks consignment stock separately, providing visibility into vendor-owned and consumed stock.
  4. Risk Reduction:
    The purchaser avoids the risk of overstocking since unconsumed stock remains vendor-owned.
  5. Better Collaboration:
    Strengthens vendor-purchaser relationships through shared responsibility for inventory.

Frequently Asked Questions (FAQs)

1. What is consignment stock in SAP?
Consignment stock refers to vendor-owned inventory stored at the purchaser’s premises, where ownership remains with the vendor until the stock is consumed or withdrawn.

2. How is consignment stock tracked in SAP?
SAP tracks consignment stock separately as vendor-owned inventory using specific movement types (e.g., 101 K for goods receipt).

3. When does ownership of consignment stock transfer?
Ownership transfers when the stock is withdrawn or consumed, at which point a liability is created for the purchaser.

4. Is there an invoice generated for consignment stock?
No invoice is generated at the time of goods receipt. An invoice is created only after the stock is consumed or settled.

5. Can consignment stock be returned to the vendor?
Yes, consignment stock can be returned to the vendor using the appropriate movement type (221 K).

6. How is payment made for consignment stock?
Payment is made through the consignment settlement process (MRKO), which generates a financial document for the consumed quantity.

Conclusion

Consignment Stock in SAP provides an efficient way to manage inventory by allowing vendors to store their stock at the purchaser’s premises while retaining ownership until the stock is consumed. This model offers significant benefits, such as improved cash flow, reduced inventory risks, and streamlined supply chain management. Proper configuration and handling of consignment stock in SAP ensure accurate tracking and seamless integration with procurement and financial processes.