Business Scenario:

Company ships the goods to their distributor warehouse as per requirement generation. The stock will be delivered to the distributor along with the shipping documents. The distributor will hold the stock at their location until Sales Order will be received from end-customer. When end-customer places the order to company, the company will issue the order from Consignment Stock (Distributor Place) and bill the end-customer.

Additionally the distributor will take 5% of the sale value as the Commission Charges at the time when company places the goods at their end.

For the above business scenario we will use the consignment process.

Customer Consignment

Consignment goods are goods which are stored at the customer location but which are owned by your company. The customer is not obliged to pay for these goods until they remove them from consignment stock. They are only billed for the goods when they removed the stock from the warehouse and only for the actual quantity taken. Otherwise, the customer can usually return consignment goods which are not required.

There are four main transaction for consignment processing.

  1. Consignment Fill –up
  2. Consignment Issue
  3. Consignment Pick-up
  4. Consignment Return
  • Consignment Fill-up:

Consignment Fill-up is used to supplement the Customer’s Consignment Stock.

  • Consignment Issue:

Consignment Issue is used to remove the quantity from Customer’s Consignment stock (special stock) and making it the property of the customer. In case of different end-customer, we can say that it is the process to issue stock to end-customer from Consignment Stock.

  • Consignment Pick-up:

Consignment Pick-up is used to re-post all the unused goods that haven’t been used at the customer’s consignment site.

  • Consignment Return:

Consignment Returns are used for when your Customer wants to return goods to the consignment stock. Or we can say, when end-customer returns the stock.

Solution:

  • Distributor will be opened as Special Stock Partner
  • All the End-Customers will have the Distributor as a special stock partner (SB) in their partner function.
  • Company will place Consignment Fill-up Order to Distributor for Stock Movement.
  • Proforma Invoice and relevant shipping documents will be generated against the delivery order.
  • Warehouse will do PGI and transport the stock to Distributor (Consignment Location)
  • For Distributor Commission on Sales Value, a new Pricing Procedure will be created containing Sale Price Condition Type as statistical and new Commission Condition followed with accrual key for accrual account. Importantly the Commission Condition will be marked as Accrual so that no net value of the invoice will be generated.
  • After PGI, the invoice will be generated for hitting Distributor Commission.
    • To hit Commission we will create one accrual account, let say Commission Payable.
    • The Commission Expense account & Accrual (Commission Payable) account will be define in VKOA.
    • Accounting entries will be
      • Commission Expense                                     Debit
      • Commission Payable                                                      Credit
  • The Distributor will submit the Invoice / Debit Note for Commission Payable after receiving the goods.
  • Invoice will be booked in AP against the distributor along with the settlement of the Commission Payable account.
  • When End-Customer orders the goods, Consignment Issue Sales Order will be created, followed with the Delivery, PGI and Invoicing. As the end-customer are buying the stock, the end-customer will be marked in Sales Order Sold-To, Ship-To and Bill-To.

Configuration:

  • Create New Account Group for Consignment Customers – (ZCON)
    • Path:     IMG * Financial Accounting (New) * Accounts Receivable and Accounts Payable * Customer Accounts * Master Data * Preparations for Creating Customer Master Data * Define Account Groups with Screen Layout (Customers)

         Pic1.jpg

  • Define number range for the created Account Group
    • Path:     IMG * Financial Accounting (New) * Accounts Receivable and Accounts Payable * Customer Accounts * Master Data * Preparations for Creating Customer Master Data * Assign Number Ranges to Customer Account Groups

Pic2.jpg

  • Define Partner Determination of the created Account Group
    • Path:     IMG * Sales and Distribution à Basic Functions  * Partner Determination  * Set Up Partner Determination * Set Up Partner Determination for Customer Master

Pic3.jpg

  • Create New Account Key for defining Accrual Account in Pricing Determination – (ZCA)
    • Path:     IMG * Sales and Distribution * Basic Functions à Account Assignment / Costing * Revenue Account Determination * Define and Assign Account Keys

Pic4.jpg

  • Create Accrual Account in FS00 for Commission Payable and Expense account for Commission Expense
    • Path:     SAP Menu * Accounting * Financial Accounting * General Ledger * Master Records * G/L Accounts  * Individual Processing * FS00 Centrally

Pic5.jpgPic6.jpg

  • Define the accounts for Accrual in VKOA
    • Path:     IMG * Sales and Distribution * Basic Functions * Account Assignment / Costing * Revenue Account Determination * Assign G/L Accounts

Pic7.jpg

  • Create New Condition Table or Use Condition 307 ( Customer with Release Status)
    • Path:     IMG * Sales and Distribution * Basic Function * Pricing * Pricing Control * Define Condition Table

Pic8.jpg

  • Create New Access Sequence and assign the Condition Table to the Access Sequence
    • Path:     IMG * Sales and Distribution * Basic Function * Pricing * Pricing Control * Define Access Sequence

Pic9.jpg

Pic10.jpg

  • Create New Condition Type (ZC09) and mark the condition as Accrual
    • Path:     IMG * Sales and Distribution * Basic Function * Pricing * Pricing Control * Define Condition Type * Maintain Condition Types

Pic11.jpg

  • Create New Pricing Procedure that will contain Sales Price Condition and Commission Condition  — (ZEC001)
    • Path:     IMG * Sales and Distribution * Basic Function * Pricing * Pricing Control * Define And Assign Pricing Procedure * Maintain Pricing Procedures

Pic12.jpg

  • Create New Customer Pricing Procedure for Consignment Specific Pricing Procedure Determination
    • Path:     IMG * Sales and Distribution * Basic Function * Pricing * Pricing Control * Define And Assign Pricing Procedure * Define Customer Pricing Procedure

Pic13.jpg

  • Create New Billing Type for Assigning the Pricing Procedure for Billing — (ZF2C)
    • Path:     IMG * Sales and Distribution * Billing à Billing Documents  * Define Billing Type

Pic14.jpg

Note:

Similarly create additional Billing Type for Cancellation and assign the Cancellation Billing Type to the above billing type.  E.g. ZS1C for Cancellation, so assign ZS1C in ZF2C billing Type.

  • Now create the new Delivery Type for assigning in Sales Order Type
    • Path:     IMG * Logistics Execution * Shipping à Deliveries * Define Delivery Types

Pic15.jpg

  • Create New Order Type for Consignment Fill-up – (ZKB)
    • Path:     IMG * Sales and Distribution * Sales * Sales Document * Sales Document Header * Define Sales Document Types

Pic16.jpg

  • Create New Order Type for Consignment Issue – (ZKE)
    • Path:     IMG * Sales and Distribution * Sales * Sales Document * Sales Document Header * Define Sales Document Type

Pic17.jpg

  • Assigning the Sales Order Types to the designated Sales Area
    • Path:     IMG * Sales and Distribution * Sales * Sales Document  * Sales Document Header  * Assign Sales Area To Sales Document Types * Assign sales order types permitted for sales areas

Pic18.jpg

  • Assign the Sales Document Pricing Procedures to Order Types
    • Path:     IMG * Sales and Distribution * Basic Function * Pricing * Pricing Control * Define And Assign Pricing Procedure * Assign Document Pricing Procedure to Order Types

   Pic19.jpg

  • Assign the Document Pricing Procedure to Billing Type
    • Path:     IMG * Sales and Distribution * Basic Function * Pricing * Pricing Control * Define And Assign Pricing Procedure * Assign Document Pricing Procedure to Billing Types

Pic20.jpg

  • Now define the pricing procedure determination combination
    • Path:     IMG * Sales and Distribution * Basic Function * Pricing * Pricing Control * Define And Assign Pricing Procedure * Define Pricing Procedure Determination

Pic21.jpg           

  • Now create the Item Category for Consignment Fill-up so that we will mention billing document generation
    • Path:     IMG * Sales and Distribution * Sales * Sales Documents * Sales Document Item * Define Item Categories

Pic22.jpg     

  • Now create the Item Category for Consignment Issue
    • Path:     IMG * Sales and Distribution * Sales * Sales Documents * Sales Document Item * Define Item Categories

Pic23.jpg

  • Now assign the Item category to the relevant Sales Order Type for determination
    • Path:     IMG * Sales and Distribution * Sales * Sales Documents * Sales Document Item * Assign Item Categories

Pic24.jpg

  • Now assign Batch Search Procedure against the Document Type ( If Batch Management is active)
    • Path:     IMG * Logistics – General * Batch Management * Batch Determination and Batch Check * Batch Search Procedure Allocation and Check Activation * Allocate SD Search Procedure / Activate Check

Pic25.jpg

Master Data:

Customer Master

  • Create the Consignment Distributor by selecting the Account Group (ZCON) and define the Customer Pricing Procedure to “8” for proper pricing procedure determination
    • Path:     SAP Menu * Logistics * Sales and Distribution * Master Data * Business Partner  * Customer * Create * XD01 – Complete

Pic26.jpg

Commission %

  • Maintain Commission % in ZC09 against the Customer
    • Path:     SAP Menu * Logistics * Sales and Distribution * Master Data * Conditions * Select Using Condition Type * VK11 – Create

Pic27.jpg


Sales Order

  • Now create Sales Order with ZKB Document type, with the Consignment Customer on the respective Sales Area 1500/20/10. Make sure that pricing procedure must be ZEC001
    • Path:     SAP Menu * Logistics * Sales and Distribution * Sales * Order  * VA01 – Create

Pic28.jpg

Delivery Order

  • Now create Delivery Order for the created Sales Order

Proforma Invoice

  • Now create Proforma Invoice for the Delivery so that Shipment Documentation can be processed

Transfer Order – if WM Active

  • Now create Transfer Order for the created Delivery Order
  • Confirm the Transfer Order

Post Goods Issue

  • Now create PGI for the Delivery and check the Accounting. The stock position after the PGI will be.

Pic29.jpg

Create Commercial Invoice

  • Now create Commercial Invoice for booking the Commission Expense with Commission Payable

Note: If COPA is active in the organization then kindly define ZC09 for data flow from SD to COPA.

  • Path:     IMG * Controlling * Profitability Analysis * Flow of Actual Values * Transfer of Incoming Sales Order  * Assign Value Field * Maintain Assignment of SD conditions to CO-PA Value Fields

Following will be the Accounting Entries generated :

Pic30.jpg

End-User Sales

Customer Master:

  • Create End-User Customer as a general customer with your relevant Account Group. Be sure that the “Cust. Pric. Proc” should be “1”. This will ensure the default pricing procedure should be determine against the relevant Customer.
  • Also make sure to enter the “Consignment Distributor” as a Special Partner (SB) in Partner determination of the Customer.

Sales Order:

  • Create Sales Order with the Sales Document Type “ZKE Consignment Issue” and with relevant Sales Area.

     Follow afterwards, the normal Sales Process.

Special Note:


To settle the liability from the Accrual Account, the vendor will submit the debit note and invoice will be parked against the vendor with the settlement of the accrual account.

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7 Comments

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  1. ' MoazzaM '

    Hi Imran

    I liked the way you posted a thread and after many suggestions and R&D you came up with this solution and document.

    Only one thing that I want to request you is please add accounting documents screenshots to make it more clear and easy to understand.

    Thank$

    (0) 
    1. Imran Khan Post author

      Dear Moazzam

      The last screenshot is of the accounting document which is generated in which Commission Payable & Commission Expense accounts are hit.

      If I am not catching what you are saying then please let me know.

      Thanks

      (0) 
      1. ' MoazzaM '

        Hi Imran

        This accounting document is the one we created after consignment fillup. Right? I want you to add final end customer’s invoice accounting document as well.

        Now my doubt is that when we check stock in MMBE this will be shown against this comission agent customer number. When end user places order and we create consignment issue how would system issue material to end user when it was already allocated to commission agent?

        I have not tested your scenario thats why I am asking this to clear my doubts.

        Thank$

        (0) 
        1. Imran Khan Post author

          Hi Moazzam

          The final end customer invoice will be generated normally as with the usual customers. The accounting document will be same as it is for general Orders.

          Regarding your doubt, “how would system issue material to end user when it was already allocated to commission agent?

          The stock which lies on the commission agent is a Special Stock (W) and when you create the Consignment Issue Order the item category picks the special stock of “W” category – See picture 23 (Maintain Item Categories – ZKEN). The commission agent will be identified from the Partner Function SB defined in the End-Customer.

          Hope it clarifies your doubt. Feel free to revert if you still need clarification.

          Thanks

          (0) 
  2. arnab sarkar

    Hi Imran,

    Very good post , truly apprecited but what I am saying if COPA is not activated then provide the accouting part screen shot which is generated.

    Regards,

    Arnab

    (0) 
    1. Imran Khan Post author

      Hi Arnab

      Thanks for the comments.

      The last screen shot is actually the accounting document. The COPA document is different and it can hit the values as per the settings in configuration.

      Thanks

      (0) 

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