Posted by: ahmedashfaque | March 26, 2014

consignment cycle in SAP materials management

Hi guys

I am starting articles which will teach you some lessons in SAP materials management set up and customization.

As you may be aware, learning SAP is very difficult. If you have come across some light weight ERP software and then tried your hands in doing the same thing in SAP then you will immediately realize that SAP is very difficult. It is because in SAP the business functionalities have been defined with a large number of options to take care of various kinds of scenarios and variations which exist to do the same thing at different large organizations as well as due to difference in procedures to be followed in different countries. To set up any business transaction completely for a given organization for a given country, you may need to set up a large number of master and transaction oriented entities in SAP. You need to do these settings at many levels inside SAP. Doing this entire set up requires deep knowledge of features, their locations in SAP and then you need to know how to complete each of the steps. This fact makes SAP difficult to master.  

Since in SAP a large number of these options for each kind of transaction exists, SAP is very versatile and can be used across countries and different kind of organizations. this is also the reason why SAP is the most widely used ERP system in the world.

One example here for setting up a consignment cycle. This excerpt is from chapter 10 of my SAP Materials Management Handbook.

Consignment Cycle
In many industries such as automotive, retail, and so on, manufacturers prefer a very close association with their vendors. They do not want to manage inventory of the components purchased from their vendors. Instead, they want their vendors to manage the inventory. So the vendors do not ship these components to the manufacturer. Instead, the manufacturer provides a warehouse space
for the vendor at the manufacturing site (plant) so that the vendor can keep an inventory of components needed for the plant. The plant uses this inventory and the vendor keeps an account of the number of components used by the manufacturer. Billing for the number of components used by the manufacturer is done by the vendor periodically.
In SAP, complete consignment cycle can be done easily in the standard system because default settings are already done so that the business cycle of consignment can be run without changing or setting any configuration in the Implementation Guide (IMG) area.

The steps required to do the complete consignment cycle are as follows:
1. Create info record of consignment type (mandatory).
2. Create consignment PO with item category “K” and maintain info record number.
3. Create GR movement type “101K.”
4. Create GI movement type “201K.”
5. Do consignment settlement with Tcode “MRKO.”
However, if you want to configure the consignment cycle in the IMG area, the complete business configuration and the subsequent testing steps will be as follows:
1. Activate consignment payment via info records in the IMG.
2. Create info record of consignment type for the material that is to be procured from the consignment vendor.
3. Check general ledger (G/L) account setting for consignment payable and stock posting.
4. Create a consignment contract (with an item category type “K”).
5. Create a PR referencing the above created contract.
6. Create a PO referencing the above-created PR for ordering the consignment material into consignment stock.
7. Post GR for the PO. The material will be received in consignment stock. At this point, a material document will be created.
8. Post GI to withdraw material from consignment stock to customer’s own stock. At this point, a material document and an accounting document




  1. nice post, my company was implement it but i did not know who they setting it in SAP. Instead i was confuse and non logical idea string in my head about consignment also how to determine stock before consignment contract.

    overall, this post is good, keep post Mr Ahmed

    • All kinds of stock (standard, consignment, subcontract etc.) are visible in MMBE.

      • MMBE also use for search batch of material.

        Do you have any material or book for SAP Consultant in MM module?

  2. Reblogged this on Ashfaque Ahmed's Blog.

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