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Vendor Consignment Process

What is Vendor Consignment?

Vendor Consignment is a process wherein the supplier provides materials and stocks them in the purchaser’s premises. The material remains in the books of the supplier (vendor) until the same is withdrawn from the stock of the consignment and put to use. The inventory gets transferred to the books of the purchaser only when the same is removed from the consignment stock. The supplier (vendor) would not invoice the purchaser initially when they come into the premises of the purchaser. The purchaser is liable to pay the supplier (Vendor) only when the stock is withdrawn (consumed).

Key Process Design for the Consignment process for Vendors in SAP


     – Consignment has been designed as a special procurement type in SAP

–    –  The consignment stock is not valuated till the time it is consumed or withdrawn, since theoretically, it lies in the books of the supplier (Vendor)

–    –  The consignment material number is the same as that of a material in unrestricted stock in the purchaser’s books

–    –  Since the sourcing of a material can happen from multiple parties, the consignment stock is maintained at the level of each supplier or vendor.

–    –  The price of the consignment is maintained in the purchasing info records (PIR) of the info category, Consignment

–    –  When the withdrawal happens from the consignment stock of a supplier, the goods receipt in the purchaser’s books happens at the price maintained in the  purchasing info records of type consignment for that vendor and material combination.

–    – The goods receipt against a consignment purchase order is always non valuated


         Basic Configuration Steps for Vendor Consignment Process in SAP

1.       1. Activate Purchasing Info Record for Info category as Consignment. The Configuration transaction code for the same is OMEV.


1.    2.  Configure the special procurement type 10. This is done in IMG Node:

IMG>Production>Material Requirement Planning>Master Data>Define Special Procurement Type


3. Assign the special procurement type in the material master. The Master Data transaction code for the same is MM02. This is done in MRP2 view of the material master


4. Create a purchasing info record (PIR) of the category, Consignment. This is done using the transaction code ME11.



5. Maintain the automatic account assignment for material posting. The below transaction need to be maintained in the configuration transaction code OBYC

–           a. Consignment Payables : KON

–           b. Expense/Revenue from Consignment Material Consumption : AKO

–           c. Offsetting entry for Inventory Posting : GBB – VBR


Consignment Process Steps in SAP

The consignment process steps in SAP are fairly simple. It involves creating a purchase order, doing a good receipt and a withdrawal of the stock from Vendor’s books. The last step in the consignment process for a vendor is the settlement of the vendor’s liability. The steps are highlighted as:


1.    1.  Procurement – A standard purchase order is created with item category as K using the transaction code ME21N.  There is no price which is applicable for a consignment purchase order and hence should not be entered at the time of creation of purchase order.


     The goods receipt is done using the standard transaction code MIGO. The stock is posted as consignment stock without value. The same would reflect as a special stock for the vendor. Since the material lies in the purchaser’s premises, the same would be reflected in terms of quantity at a storage location as well till the time the same is consumed for use. The same can be checked in the standard stock reports in transaction code like MMBE. There is no accounting document which is created when the GRN is done in case of a consumption purchase order.



1.   2. Consumption – Consumption of consignment material happens when goods issue is done with item category K. The price at which the goods issue will be done will be picked from the purchasing info record which has been created for consignment for the material and vendor combination. In this particular case, to elaborate the process a production order was created and a goods issue was done with the item category K against the production order. Generally the consignment materials are part of Bill of Materials (BOM). Goods issue document is posted in such a case when activity confirmation is done for the production order through transaction code CO15.



     In the above case, the price is picked from the purchasing info record which would have been created for the material and vendor combination.


1. 3.  Settlement – The next step in the vendor consignment process is the settlement of the vendor liability. This is done through transaction code MRKO


     This would display the withdrawals from the consignment stock which have taken place and for which the liability for the vendor has not been created. You also have the option to check the accounting entries for the withdrawals for consumption made from the consignment stock for a vendor.



     After analyzing the unsettled withdrawals, you can create the vendor liabilities by selecting Settle from the main screen. This will settle the outstanding entry in Consignment Account Payables account and create a vendor liability. The price of vendor liability creation will happen at the Info Record Price.




     Accounting Entries

1.       1. At the time of Goods Receipt – No Accounting entries are generated at the time of goods receipt

2.       2. At the time of Withdrawal or Consumption of Consignment Stock –

(a)             a.  The material is valuated at moving average Price (Price Control in Material Master is “V”)

               Consumption Account DR                 (Account Assignment OBYC-GBB-VBR)

                         To Consignment Payable A/c  (Account Assignment OBYC-KON)

               The unit value of material comes from the Info record Price for material vendor combination for info category Consignment

(b)             b. The material is valuated at standard price (Price Control in Material master is “S)

               Consumption A/c DR                                               (Account Assignment OBYC-GBB-VBR)

                                            To Consignment Payable A/c      (Account Assignment OBYC-KON)

                                            Price Difference A/c (Dr/Cr)        (Account Assignment OBYC-AKO)

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  • Precise and good info Sanil.

    I have a question on one practical scenario. When goods are in transit between warehouse(Consignment stock) and production house and if some damage/loss happens to material, who owns this loss? Is it vendor or customer? Do we use inco terms here as well based on which ownership terms can be arrived at?



    • Hello,

      Indeed in business transaction the incoterms are defining the ownership of the goods.

      But keep in mind that eventhough it’s well spread not all countries sign the chart.

      In addition there are incoterms may be sometime interpreted differently in country and juridiction.

      Finally the purpose of the consignment is indeed for the manufacturer not to have its own stock increased with the consignment stock. So it is not shown in his stock account because he does not possess them.  Now of course it’s not because you do not own them that you might not responsible for damage to the goods.  All this should be defined in a proper sales contract !  Who is reliable for what. Incoterms can help in that too.


  • Hi Sanil,

    Very good document.

    Precisely it is a very helpful document. 🙂

    Keep up the good work and thanks for sharing such a wonderful Doc.

    Best of Luck. 🙂



  • Hi Sanil

    Very Helpful document. Also would like to know in which industry is vendor consignment process more prevelant or used frequently.


    Parth Bhatt

    • Thanks Parth.

      I have mapped this process in the Consumer Products and Apparel and Footwear Industries. It is also used widely in the manufacturing sector.


      Sanil Bhandari

  • Hi,

    Excelent document!

    Auditing the consigment process i am trying to understand how are configured SAP accounts determination for posting consignments products from purchase until the sale.

    I understand that this document is for purchase…

    Everything was going good, until i consulted the automatic account assignment for material posting on transaction code OBYC / Offsetting entry for Inventory Posting : GBB – VBR. The VBR is blank in the account.

    In what other place can i find this configuration?

    Where can i find the account determination when the product is sold?

    (sorry for my english :D)

    Thank you,


  • Hi

    This is a nice document but I’ve got some issue. I am not able to view all of its screen shots attached in this document. I have tried on two different systems and internet connections. What could be the issue?


  • can anyone talk more about the billing trigger, we have it set when movement type 411 is executed, but I am not clear how the trigger works, when material is transferred from the warehouse to production with movement type 411, how is the payment activated? Also any thoughts on the process to include Consignment Materials in the cycle counting process and monthly/semi and annual inventory counts?

  • Hi Sanil,

    Very helpful document!

    May I ask you one question? I am confused in some details.

    I am not really understand the reason why the PO item can still be deleted after goods receipt when it is a vendor consignment PO. Could you explain this case for us?

    Best Regards,


  • I have a scenario here, I am maintaining new gross price condition in info record with difference currency.  What will be document currency while posting 411 K movement type and while doing MRKO what will be document currency that will be generated?

  • Very good Document!


    If for some reason an inventory quantity in consignemtne stock (K) needs to be adjusted, what should be the process? ; I understand that the stock value should not be changed since the stock is not owned yet by the purchaser. I see that the regular inventory adjustment process considers the special K stock but wants to create an FI document.

    Best regards.

  • Is there a report that has same information as MRKO but has the original PO# and line where the material was received? I have some customers requesting this information for traceability.

  • After the material is consigned to the supplier, can a movement be made to mark the consigned stock, towards another center and warehouse, maintaining the special status of consigned?

  • Hi Mr. Sanil Bhandari,

    Nice post, easily understood.

    I have a question and hopefully you or any other members/readers of this post will help me.

    In the case of an item has been taken out from the consignment stock, then for some reason the goods are not so used or consumed and consumers want to return it back to consignment stock, how is the procedure in SAP? Would you please explain in detail, so that such withdrawal can be returned back and the unwanted withdrawal will no be invoiced by the vendor.

    Thanks and regards.

  • Hi Sanil,


    firstly thanks for this e2e process.


    At our company we are having price discrepancy issues.

    Our Price in Info records are incorrect and MRKO is triggered we get incorrect vendor liability as part of the self bill functionality.

    How do we capture the price discrepancy without requesting the vendor to send a CR/DR note on top of there invoice. ?


  • Hi,

    Thx for posts.

    I have a “special” case.

    Vendor produces the goods and stores it in his warehouse.

    We do call-of the goods. It means that we “buy” the goods and transfer it to own warehouse (in other EU country).

    Is this also a kind of vendor consignment process ? or other process ?

    any suggestion is very much appreciated.