Consignment in SAP SD

In SAP consignment is one the special procurement type. Under consignment when goods are procured from the vendor, these are physically stored in company’s premises but these goods are not the property of the company. These goods still belong to the supplier. This is the nature of ownership of the stocks which differentiate it from company’s other stock. All this stock is widely known as consignment stock in SAP.

Here it also important to high light that consignment stock in Material Management is totally different from the consignment stock in Sales and Distribution. In MM, vendor goods are stored at company’s premises whereas in SD company goods are stored at customer’s premises.

Customer Consignment:

In SD, it is known as Customer Consignment. Since these special stocks are located at customer premises and not at company own premises hence, these are managed at plant level and not at storage location level.

Vendor Consignment:

In Material Management it is widely known as Vendor consignment. Since these special stocks are located at company’s premises hence, these are managed at storage location level. It is not the valuated stock.

Ownership of Goods:

In consignment processing, the vendor remains the legal owner of the material until materials is not withdrawn from the consignment stores or it is not transferred to company’s own stock. Once it is withdrawn or transferred to company’s own stock, the ownership also got transferred to the tune of quantity withdrawn or transferred.

Allocation of stock:

Like standard material, a vendor consignment material can also be allocated to one of three stock types:

• Unrestricted-use stock
• Quality inspection stock
• Blocked stock

This stock can be transferred by means of transfer postings from one stock type to any other stock types. But withdrawals are only possible from unrestricted stock type.
When the material is withdrawn from the unrestricted stock types it is valuated at the price of the respective vendor.

Consignment Liabilities:

In the standard SAP, consignment liabilities arise in the case of withdrawals from consignment stock or when consignment stock is transferred to own stock. Depending on the settings for the posting rules for the transaction/event key (KON), it is possible to work with or without account modification. Necessary configuration setting is required in SPRO under automatic posting for transaction/event key for Consignment payables (KON). This setting will be a combination of General Modification, valuation class and General Ledger account.

In subsequent articles, you will find more details on the topic realted to procurement of consignment materials, maintenance of consignment stock, withdrawal and transfer from consignment stock. consignment settlement and intimation to the consignment vendor regarding these settlement.