Introduction
In many companies, retaining sufficient inventory to be had with out buying and purchasing each object earlier can be a mission. This is wherein the SAP MM Consignment Process will become beneficial.
In a supplier consignment affiliation, the issuer offers materials which can be saved at the enterprise enterprise's premises, but the enterprise maintains to private the materials till they may be withdrawn or transferred to be used. SAP S/4HANA manages this separately as dealer consignment inventory, the use of specific stock indicator K.
For SAP MM experts, information consignment is essential as it connects purchasing, stock manage, goods moves, stock possession and dealer agreement.
This manual explains the SAP MM Consignment Process step by step, collectively with vital thoughts, transactions, stock moves and a realistic real-global state of affairs.
SAP MM Consignment Process Step-by-Step Guide through Proexcellency
What Is the SAP MM Consignment Process?
SAP MM consignment is a procurement manner in which a seller elements substances to a business enterprise, but the substances remain company-owned while they may be held within the company's warehouse.
The business enterprise does no longer usually recognize a payable absolutely due to the fact the cloth has arrived. A legal responsibility arises while the corporation withdraws the consignment material for consumption or transfers it into its private inventory.
Simple instance
Imagine a manufacturing corporation needs 1,000 portions of a regularly used trouble.
Instead of buying all 1,000 pieces right now:
Vendor materials → Company stores → Company consumes → Vendor is settled
This allows the employer to maintain cloth to be had at the equal time as delaying the financial settlement till the fabric is certainly withdrawn.
How Does SAP MM Consignment Work?
The number one device can be understood as:
Consignment Info Record
↓
Consignment Purchase Order
↓
Goods Receipt
↓
Vendor Consignment Stock
↓
Material Consumption / Transfer to Own Stock
↓
Liability Created
↓
Consignment Settlement
SAP identifies seller consignment inventory using unique inventory indicator K. The stock is controlled one after the other for the relevant supplier and may be monitored at plant and storage-location diploma.
Step 1: Create the Consignment Info Record
The system begins with the shopping statistics maintained a few of the business business enterprise, material and provider.
For consignment procurement, a consignment shopping for information document is used. It consists of essential data at the side of the agreed consignment price used later when withdrawals are settled.
Important transaction
ME11 – Create Purchasing Info Record
The purchasing organization can preserve the seller-fabric relationship and applicable consignment situations.
Why is it important?
When the agency enterprise later consumes or transfers the material, SAP wishes the correct consignment fee to determine the rate related to the withdrawal.
Step 2: Create a Consignment Purchase Order
The buying branch creates a buy order for the specified cloth.
A key distinction is that the acquisition order object makes use of the Consignment object category K.
Common transaction
ME21N – Create Purchase Order
The consignment object class tells SAP that the material is being procured as dealer consignment in desire to as regular enterprise organisation-owned inventory. SAP documentation notes that consignment gadgets use object category K and that the goods receipt is non-valuated.
Important aspect
The fabric is ordered, however possession does no longer right away switch to the employer.
Step 3: Vendor Delivers the Material
The provider guarantees the requested cloth to the agency's warehouse.
For instance:
Vendor: ABC Components
Material: Motor Bearing
Quantity: 500 quantities
The warehouse receives the fabric and prepares it for gadgets receipt.
Step 4: Post Goods Receipt
The warehouse crew posts the products receipt closer to the consignment purchase order.
In SAP S/4HANA, this will be done the usage of the right goods-receipt software program application or transaction which consist of MIGO, relying on the machine and technique configuration.
Because the PO object is consignment, the received fabric is published to organization consignment inventory in area of normal valuated enterprise inventory. SAP notes that a consignment items receipt is non-valuated.
Important concept
The physical quantity will boom, but the company does no longer very very own the material yet.
Step 5: Monitor Consignment Stock
After items receipt, the material turns into available as dealer consignment inventory.
The inventory is physical positioned within the business enterprise's warehouse, however ownership stays with the vendor.
A typically used transaction is:
MMBE – Stock Overview
SAP moreover provides functionality together with MB54 for displaying consignment shares.
The warehouse can therefore show:
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Material
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Quantity
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Plant
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Storage vicinity
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Vendor
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Stock kind
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Consignment stock
Step 6: Consume the Consignment Material
This is the most crucial degree of the way.
Suppose the producing department desires 100 portions of the cloth.
The warehouse troubles one hundred portions from the vendor's consignment inventory.
At this aspect, the agency has withdrawn cloth for consumption, and SAP creates the corresponding prison obligation within the course of the vendor primarily based definitely at the applicable consignment fee.
The essential employer concept is:
Receipt does not imply fee. Consumption creates the monetary duty.
This is one of the key versions amongst regular procurement and dealer consignment.
Step 7: Transfer Consignment Stock to Own Stock
Sometimes a commercial enterprise corporation can also determine that the cloth need to become its very non-public stock in area of being fed on proper away.
SAP enables moving consignment inventory to business enterprise organisation-owned stock.
A switch the use of motion type 411 with special stock indicator K can switch consignment stock to the business enterprise's personal stock. SAP explains that this switch creates a felony responsibility in the direction of the consignment supplier and values the transferred amount the use of the consignment charge.
Example
Vendor consignment stock:
500 pieces
Company transfers:
a hundred portions → Own inventory
Remaining provider consignment:
four hundred portions
The transferred a hundred portions grow to be business enterprise-owned inventory and are valuated as a cease result.
Step 8: Consignment Settlement
Once substances had been withdrawn from consignment stock, the ensuing supplier liabilities need to be settled.
SAP offers MRKO – Consignment and Pipeline Settlement for this device. SAP's contemporary documentation describes MRKO as the software used to settle posted withdrawals and generate a settlement assertion for the provider.
The settlement manner clears the criminal duty created through the consignment withdrawal and posts the corresponding quantity to the vendor account.
Important transaction
MRKO – Consignment and Pipeline Settlement
Unlike a ordinary purchase order approach, the vendor does not constantly send a conventional bill for each withdrawal due to the fact the company can carry out the agreement primarily based at the recorded consignment withdrawals.
Real-World Scenario
SAP MM Consignment Process Step-by-Step Example
Let's consider a manufacturing enterprise organisation referred to as ABC Manufacturing.
ABC Manufacturing often makes use of electric powered vehicles in its production line.
The company reaches an agreement with XYZ Motors, its provider.
Business settlement
XYZ Motors substances:
Material: Electric Motor
Quantity: 1,000 gadgets
Ownership: Vendor-owned until withdrawal
Settlement: Based on actual intake
Step 1 — Consignment Info Record
The buying business enterprise keeps the seller-material dating and consignment fee.
Step 2 — Consignment PO
The consumer creates a buy order with:
Item Category: K
Step 3— Goods Receipt
XYZ Motors offers you 1,000 vehicles.
The warehouse posts the products receipt.
The 1,000 automobiles now seem as supplier consignment inventory.
Step 4 — Production Requirement
Production calls for:
250 motors
The warehouse issues 250 cars from consignment stock.
Step 5 — Liability
SAP statistics the corresponding felony obligation based totally totally on the relevant consignment charge.
Step 6 — Remaining Stock
Vendor consignment stock turns into:
1,000 − 250 = 750 vehicles
Step 7 — Settlement
The company plays consignment agreement for the withdrawn quantity.
MRKO is used for the agreement manner.
The complete business flow
XYZ Motors
↓
Consignment Purchase Order
↓
Goods Receipt
↓
1,000 Vendor-Owned Motors
↓
250 Motors Consumed
↓
Liability Created
↓
MRKO Settlement
↓
Vendor Payment / Settlement
This is the type of situation that enables SAP MM newcomers recognize why the consignment approach works in any other case from ordinary procurement.
Why Is the SAP MM Consignment Process Important?
Understanding consignment facilitates SAP MM specialists join severa business enterprise areas:
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Procurement
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Inventory Management
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Warehouse Operations
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Vendor Management
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Material Consumption
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Stock Ownership
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Financial Liability
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Settlement
It is likewise an amazing example of approaches SAP MM connects bodily material motion with economic agency techniques.
For beginners, truely memorizing transaction codes is not sufficient. Understanding even as ownership changes, at the same time as liability is created, and the manner the vendor is settled is lots extra valuable in actual SAP responsibilities.
Proexcellency Providing SAP MM and S/4HANA MM Online Training
Proexcellency provides SAP MM and SAP S/4HANA MM online training designed to assist newcomers understand SAP procurement and stock strategies thru practical commercial enterprise business enterprise conditions.
Training can reputation on requirements consisting of:
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SAP MM Procurement
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Purchase Requisition and Purchase Order
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Goods Receipt and Goods Issue
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Inventory Management
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Material Master
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Vendor/Supplier Processes
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Consignment Process
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SAP MM T-Codes
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Real-global corporation situations
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SAP S/4HANA MM processes
The aim is to help beginners recognize how SAP MM works in an actual business surroundings, in choice to clearly memorizing transaction codes.
FAQs
1. What is consignment in SAP MM?
Consignment is a technique wherein dealer-owned substances are saved on the commercial enterprise organisation's location and are paid for at the same time as they may be withdrawn or transferred for corporation organization use.
2. What is precise inventory K in SAP MM?
K represents issuer consignment stock in SAP.
3. What is the consignment item elegance?
K is the identical antique consignment item class applied in shopping files.
4. What is MRKO in SAP MM?
MRKO is used for consignment and pipeline settlement, permitting published withdrawals to be settled with the provider.
5. Is consignment stock company-owned?
No. While it's miles bodily stored on the enterprise's premises, supplier consignment stock stays seller-owned till it is withdrawn or transferred to corporation-owned stock.
Conclusion
The SAP MM Consignment Process is an important procurement and inventory situation in which corporations can hold supplier-owned substances available at their facilities and settle them primarily based mostly on real withdrawals.
The whole device can be remembered as:
Consignment Info Record → Consignment PO → Goods Receipt → Vendor Consignment Stock → Consumption/Transfer → Liability → Settlement
The most vital idea is easy: bodily availability does not automatically endorse ownership. SAP continues supplier consignment stock separate and creates the tremendous prison duty on the same time as the cloth is withdrawn or transferred.
For SAP MM experts, mastering this way via a actual-global situation makes it a good buy plenty much less complicated to understand shopping, stock, stock possession and agreement together.
Learn SAP MM and SAP S/4HANA MM with Proexcellency and assemble practical know-how through real-international industrial employer situations.
Written by Mahesh