Consignment Processing

Applies to:
SAP 4.7c, SAP-SD. For more information, visit the Enterprise Resource Planning homepage.

Summary
This article would explain you the mapping of consignment process in SAP giving reader the step wise
process of the same. It first covers the introduction of Consignment processing and then the configuration
required to be done in SPRO to achieve the same. The last part would give you the complete process
overview with in form of SAP transactions.

Author: Venuka Chetri

Company: Infosys Technologies Ltd
Created on: 1 January 2011

Author Bio
Venuka Chetri is working at Infosys technologies Limited Company. Currently he is working for SAP Sales
and Distribution module. He has an overall 4.5 yrs of experience as a functional consultant in sales and
distribution module out of which 2yrs is in SAP-SD consulatancy.

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 Consignment Processing

Table of Contents
Introduction of Consignment Process ................................................................................................................. 3
Example: ......................................................................................................................................................... 3
The solution ..................................................................................................................................................... 3
Walkthrough of Configuration Setting for Consignment Process in SAP ........................................................... 4
Consignment Fill up ............................................................................................................................................ 4
Consignment Issue ............................................................................................................................................. 6
Consignment Return ........................................................................................................................................... 7
Consignment Pickup ......................................................................................................................................... 10
Delivery type ................................................................................................................................................. 11
Return delivery type ...................................................................................................................................... 12
Consignment process flow................................................................................................................................ 12
Consignment Fill up .......................................................................................................................................... 13
Consignment Issue ........................................................................................................................................... 16
Consignment Return ......................................................................................................................................... 22
Consignment Pickup ......................................................................................................................................... 28
Conclusion ........................................................................................................................................................ 32
Related Content ................................................................................................................................................ 33
Disclaimer and Liability Notice .......................................................................................................................... 34

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 Consignment Processing

Introduction of Consignment Process

Consignment Inventory is inventory that is in the possession of the customer, but is still owned by
the supplier. In other words, the vendor places some of his inventory in his customers possession (in their
store or retail space) and allows the customer to sell or consume directly from his stock. The customer will be
billed for inventory only after he has consumed or sold it on per day basis or weekly basis.
The shared benefit to the customer is that he does not have to invest his capital in inventory. But has to bear
the inventory carrying costs and incur storage cost and managing the inventory. So how supplier is
benefitted? This is where the benefits may not be clearly seenor may not even exist. Lets look into the
consignment model that has significant benefits for the supplier as well as to the customer.

Example:
A supplier has a product of which he believes that he will sell if he can get them in front of direct consumers.
This means he has to get the product stocked in retail chains to make it available to end consumers. But
Retailers are hesitant to stock the product because they do not have the same level of confidence in it as the
supplier as they dont want to invest the money buying that product and stock it to sell. Since the supplier
knows that to sell his product he has to confront his product directly to the end consumer. Hence he needs a
store exposure for selling it. So he offers to stock his product in customers (retailer) stores. Now there is a
condition of shared risk wherein the supplier risks the capital investment he has put in the inventory while the
customer risks providing the retail space to the product. This also creates a condition of shared benefit
because neither the supplier nor the customer will benefit until the product is sold to an end-user.
For a more specific example, consider Pepsi (food and Beverage) manufacturer that produces bottles of
Pepsi with different pack size. He has customers (local food chain or food outlet) that stock bottles but
customers are hesitant to stock too many bottles in fear of the expiry date or falling demand?

The solution
Let us consider the classic consignment model because it is the best-case scenario for applying the
consignment inventory model. Consignment model works well for:
New and unproven products: When the product concept is new the risk of selling the product
is very high. Hence the shared risk is bear by both supplier and customer
The introduction of existing product lines into new sales channels: Since the product is
pushed through new sales channels again the risk of selling the product is high.
Expensive products where sales are questionable.
From these examples you will know that consignment model fits in a scenario where there is high- degree of
demand uncertainty from the customers point of view and a high degree of confidence in the sales capability
from the suppliers point of view.

Consignment stock should be managed in your system as this stock still forms a part of your valuated stock.
However, consignment stock must be

Separately managed from the rest of your stock to monitor the quantity stored at the
customers location.
Separately managed for each customer

In SAP inventory management, the consignment stock is managed as a special stock (in system it is
managed as consignment stock) in your inventory and is assigned to specific customers. This enables you to
keep track of consignment goods movement.

You can use the partner function if the consignment stocks are not managed by the sold-to party but by a
central office.

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 Consignment Processing

Walkthrough of Configuration Setting for Consignment Process in SAP

Consignment Fill up
1. First create a document type ZKB by copying the existing record. For example copy fill up
type from CF. Due to the customer not being billed for any of these items in consignment
fill up, no invoice is relevant. Thus, the sales document type setting whether it is for order-
related or delivery related billing should show no billing document relevant.

2. Then create an item category copying the standard item category for consignment fill up.
Item category should be set as not relevant for billing as well as set for no pricing.

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 Consignment Processing

3. Create a schedule line category with movement type as 631. Movement type 631 is the
indicator key through which the system will post the stock into consignment category stock
for the particular customer at the time of post goods issue. Check on the Item relevant for
delivery field as we will be moving the stock from unrestricted use to special stock. You can
also set the delivery block for further authorization of the which will propose a delivery block
before the materials are shipped to consignee. Hence you can monitor what stock had been
sent and whether it has been authorized or not.

Note: Here if you keenly observe we have marked item relevant for delivery in Schedule line category because in
Schedule line category a sales order item is relevant for delivery, so are the schedule lines that belong to the item.
The same has not been marked in Item category because the item itself is not delivered and serves for information
purpose as a text item.

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 Consignment Processing

Consignment Issue
1. Create a document type copying the existing doc type CI.

2. Create the subsequent item category by again copying the standard item category relevant
for consignment issue. You have to select W as value for special stock which means
consignment stock. Since we have issued the stock to customer the document is relevant for
billing. Hence we would also ensure that billing relevance is set to A (Delivery related to
billing).

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 Consignment Processing

3. Create schedule line category. Ensure that movement type is set as 633 which is GI:
consignment. Also tick the field Item relevant for delivery.

4. Using copy control of sales document to sales document refer the consignment fill up in
consignment issue with relevant document type, item category and schedule line category.

Consignment Return
1. Create a sales document type for consignment return by copying the existing standard doc
type relevant for consignment return. Select SD document category as H which means
return type document.

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 Consignment Processing

2. As the stock is coming back into the plant, you will want a special shipping point to be
automatically determined. This can be done through shipping point determination.

3. You can put a billing block in order to check if the credit is authorized or not. Hence assign
the standard billing block as 08.

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 Consignment Processing

4. Create item category for the consignment return. Ensure that you have marked special stock
as W (Material being controlled must be controlled as a special stock) as we would be
taking the goods back to consignment stock from customer. Also the document will be
relevant for billing as a credit note will be generated. So ensure that billing relevance field is
filled up. The document will be also relevant for pricing. If you wish to follow a different
pricing procedure while the goods is being returned the same can be done by entering a
different document pricing procedure indicator. Since the item is relevant for return mark the
return indicator also.

5. Create a schedule line category with movement type as 634 (GI receipt: Consignment).
Since we are taking back the item the indicator Item relevant for delivery should me
marked.

6. Using copy control of billing document to sales document refer the Billing note in
consignment return with relevant document type, item category and schedule line category.

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 Consignment Processing

Consignment Pickup
1. Create a sales document type for consignment pickup. Here the SD document category will be C
not H as it is still in sales order stage and not been issued to customer.

2. Create an item category for consignment pickup. It is not relevant for billing as the ownership is still
with the company and not with the consignment customer. As we are returning the stock to
unrestricted use stock we have to mark the return indicator.

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 Consignment Processing

3. Create a subsequent schedule line category type with movement type as 632(GI consignment return.
Delivery)

4. Using copy control of sales document to sales document refer the consignment fill up in consignment
pickup with relevant document type, item category and schedule line category.

Delivery type
1. Create a delivery type copying the standard delivery type LF.

2. Using copy control of sales document to delivery document refer consignment pickup and
consignment issue in this delivery type

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 Consignment Processing

Return delivery type

Using copy control of sales document to delivery document refer consignment return and consignment
pickup in this delivery type

Consignment process flow

Data used:
Company Code: 1200- IDES India
Sales Org: 1200- Chennai India
Distribution Channel: 10- Final customer sales
Plant: 1212- Chennai
Material: 3679- Pepsi Bottle
Customer: 9092- Iyan Enterprise (Sold to Party and ship to party):
First we need to check the quantity in Plant stock through Tcode MMBE.

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 Consignment Processing

It is clear that the stock quantity for material 3679 is 99.

Consignment Fill up

1. Create a consignment order

In consignment orders you are allowing the stock to reside in your customer location. After
having the consumption information from the customer you will invoice him accordingly. If he
returns the stock due to damage or expiry you will accept the stock and take it back.

In this step, you are not billing the customer because the ownership still lies with consignee. It
will not be relevant for billing and pricing because you are not charging money for these goods in
this step.

Create a Sales document type ZKB with item category as ZBN and schedule line category as
E1.

In schedule line category, you will set movement type 631 & set for availability check.

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 Consignment Processing

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 Consignment Processing

2. Creation of Delivery note

The delivery note created is in reference with Consignment fill up. Do post goods Issue for
the same.

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 Consignment Processing

3. Check the stock status

Note: The stock has moved from unrestricted use to special or consignment stock.

Consignment Issue
In consignment issue the ownership lies with customer as we issue the stock to the customer for their use to
sell.
For consignment issue create a Sales document type ZKE with item category as ZEN and schedule line
category as C1.

In schedule line category, you will set movement type 633 & set for availability check.

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 Consignment Processing

1. Create consignment issue with reference to consignment fill up order

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 Consignment Processing

Document flow

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 Consignment Processing

2. Create delivery note with reference to Consignment issue order

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 Consignment Processing

3. After doing the post goods issue check the stock status

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 Consignment Processing

Note: The stock has moved out of consignment stock.

4. Creation of Billing Document

With reference to delivery note create a billing document to bill the customer.

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 Consignment Processing

Consignment Return
Consignment return is done when the goods are returned back to the consignment stock because of some
reason (like Expiry, bad quality, not able to sell etc). After doing consignment Return (Post goods return
processing) the stock will be again added to the Special stock/ Consignment stock but not to the unrestricted
stock. If we want it the stock to be in unrestricted use we should once again do the process of Consignment
pick up in the system.

Create Sales order type ZCR with item category as ZRN with movement type as 634.

1. Create Consignment return order with reference to billing document.

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 Consignment Processing

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 Consignment Processing

2. Create a return delivery note with reference to Consignment return

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 Consignment Processing

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 Consignment Processing

Document flow

3. Check the stock

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 Consignment Processing

Note: The stock is moved into consignment stock.

4. Creation of Credit/billing document

As we know that in consignment return the customer returns the goods to the consignee and
consignee returns the same to the company. Here as the consignee has already sold (& billed)
the goods to the customer, the company has to issue a credit memo to the consignee (as in
consignment process company pays the consignee only when he sells the goods to the
customer).

With reference to delivery note create a billing document/ Credit for return.

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 Consignment Processing

Consignment Pickup
Consignment Pickup is also a return process of the goods. But in this the goods lying at the customers
location is taken back before the consignment issue is done for the stock. This means the Special stock is
transformed into actual stock or unrestricted stock.

Create a Sale order type ZCP with item category as ZCPE with movement type as 632.

1. Create consignment pickup order with reference to Consignment fill up which we

created in the start.

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 Consignment Processing

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 Consignment Processing

2. Create a return delivery note with reference to consignment pickup

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 Consignment Processing

3. Check the stock status.

Note: It has moved from the special stock to unrestricted use stock.

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 Consignment Processing

Conclusion
Hence we have seen how the consignment process can be mapped into the system. The flow differs from
nature of the type of consignment. Also we have seen the impact of stock movement in every step of
consignment flow.

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 Consignment Processing

Related Content
www.sap-basis-abap.com/sd
http://help.sap.com
http://www.inventoryops.com/ConsignmentInventory.htm
http://forums.sdn.sap.com/click.jspa?searchID=69689314&messageID=9698089
http://forums.sdn.sap.com/thread.jspa?threadID=830692
Consignment Stock In-Transit in SAP
For more information, visit the Enterprise Resource Planning homepage

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 Consignment Processing

Disclaimer and Liability Notice

This document may discuss sample coding or other information that does not include SAP official interfaces and therefore is not
supported by SAP. Changes made based on this information are not supported and can be overwritten during an upgrade.
SAP will not be held liable for any damages caused by using or misusing the information, code or methods suggested in this document,
and anyone using these methods does so at his/her own risk.
SAP offers no guarantees and assumes no responsibility or liability of any type with respect to the content of this technical article or
code sample, including any liability resulting from incompatibility between the content within this document and the materials and
services offered by SAP. You agree that you will not hold, or seek to hold, SAP responsible or liable with respect to the content of this
document.

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