Posted by: ahmedashfaque | August 19, 2014

What is SAP – consignment process

In my previous post we had seen how subcontracting process works in SAP. In this post we will see how consignment process works in SAP.

In many industries, manufacturer gets into agreement with vendors so that the vendor keeps inventory of its materials at manufacturer premises. The manufacturer issues materials from this inventory for manufacturing. Since the inventory belongs to the vendor, the manufacturer is not liable for the inventory. The manufacturer pays vendor only when material is taken from this inventory.

To implement consignment process in SAP, a pricing mechanism called info record is created. The info record category will be consignment. The consignment process should be activated in customizing in SAP. Now you can create a PO or contract of consignment type. Now you can do goods receipt for the material to come from vendor warehouse to vendor inventory in your premises. Once you have stock in vendor inventory you can do goods issue.

On the PO or the contract the price is not mentioned because the price will come from info record. The payment to the vendor is also not settled on PO level or the goods receipt level. The payment to the vendor is settled against goods issue from vendor stock to your own stock.

There could be many variations to this standard consignment procedure. For example a third party sales process can be easily mapped to this consignment process. The manufacturer can keep stock of vendor material at its own premises. When any material is sold to a third party, only then the manufacturer makes payment to the vendor. In some cases, it is also possible to combine the consignment process with any other procurement process.

In my next post, I will discuss about scheduling agreement.



  1. […] my previous post i discussed about consignment process. Today i will discuss about scheduling […]

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