In this blog, I explain the basics of the customer consignment solution introduced in SAP Business ByDesign in the 2105 release.
There are also 2 videos for your convenience available:
A consignment process can be viewed at from the selling or receiving side. With Customer consignment, we only focus on the selling company managed in SAP Business ByDesign.
Consignment stock is comprised of goods which are send to and stored at the customers location (consignee), but which are owned by the sending company (consignor). The customer is only obliged to pay for these goods when they remove them from consignment stock. The customer can return consignment goods which are not required without being invoiced.
It has advantages for both sides. The consignor can establish a comprehensive long-term business relationship and the consignee can reduce the capital lock-up having at the same time immediate availability of the goods.
The consignment process typically has a negotiated a long-term contract (1) as a basis. This can be optionally reflected in SAP Business ByDesign but is not a must. Then, the provisioning of the products to the customer happens with an initiating fill-up sales order (2) and following with a standard outbound process (3) reducing the warehouse stock and increasing the consignment stock but without changing the ownership.
When the customer issues the goods, an information is given to the consignor which results in the transfer of the ownership, the reduction of the consignment stock (4) and hence, the invoices can be created (5).
The return and adjustment processes are enabled as described in a later section.
To use customer consignment functionality, you need to scope it in the Business Configuration > Sales > Product and Service Portfolio for Sales > Sell Consignment Products.
Furthermore, we recommend that you prepare the product data financial view and assign a special account determination group per consignee/customer and business residence to show the consignment inventory on the balance sheet.
Basic Aspects of Customer Consignment
Consignment stock can now be identified with the consignment indicator and the Custodian ID – as the possessor to whom the products were shipped-to – in the stock overview. That’s also why the site ID is not filled since the stock is not located in the own warehouse although still in the own ownership.
For inventory valuation and tax reasons, the consignment stock overview shows additionally the Account ID and the Fill-up site.
The Account is the customer to whom the products are sold. One account could have several different locations where the consignment stock is located (= custodian).
The fill-up site from which the products were initially sent to the customer is displayed because inventory valuation could differ from one site/business residence to another.
Both fields are consistently used through the process.
Furthermore, you can see the sales order ID displayed in the stock overviews which shows if a consignment issue sales order allocates a certain quantity of consignment stock until it is released. It also prevents other documents from allocating the same stock.
The inventory values in consignment are provided a new common task ‘Valuated Consignment Stock’ in the Physical Inventory Work Center. This is similar to the valuated stock for goods in your warehouse.
For those of you working with serial managed products that you use in consignment, you can use the ‘Consignment Serial Overview’. It shows all the serial IDs which are located at the custodian.
Fill-up and Issue Process of Customer Consignment (Logistics)
The process starts with the consignment fill-up process to send and provide the goods to the customer/consignee without changing the ownership and thus without invoice relevancy.
You start with the creation of a sales order only with the difference that the item type should be changed to ‘Product – consignment fill-up’. The consignment fill-up is not invoice relevant. This item type is copied into the following item line for easier maintenance. Sales Orders mixed with consignment item types and other item types are allowed. If you want to default the consignment fill-up item type per product you can set the consignment item group in the product data.
Please also pay attention to the account and ship-to party. Often, these are the same, but you could have different ship-to-parties for one account. The ship-to party ID will be shown as Custodian ID in the consignment inventory.
The rest follows the ‘standard’ shipping process with or without using the customer demand release step or with or without using warehouse tasks or the Third-party logistics processing. In many screens, you have the option to select consignment documents.
Further down the line, the customer uses the goods and provides the information on the quantities that are removed or issued from consignment and can be invoiced.
Also here, the process starts with creating sales order items, this time with the item type ‘Product – consignment issue’. The consignment issue is invoice relevant. The defaulting of the item type into the following item lines applies also for the consignment issue item types.
Please also use the corresponding account and ship-to party (= custodian) since these are essential for the consignment inventory postings together the ship-from (or fill-up) site.
Furthermore, the issue date on item level is important for tax and inventory valuation purposes.
In addition, the ship-from (fill-up) site is crucial for proper tax and inventory valuation. It can be either entered manually, or it can be proposed by using the ‘Allocate consignment’ Button.
The Allocation of consignment checks the consignment stock situation to make sure these quantities are available in consignment stock, and no negative consignment stock is posted. It proposes the ship-from site automatically if there is enough stock for the full quantity. If there are more sites to serve the full quantity the site with the most stock is proposed. Only a successful (green) allocation status allows the release and posting of an issue order item. In case the full quantity cannot be allocated to one site, you can use the Button Assign Source of Allocation that will show the available quantity and site information.
If the product is batch-managed, the identified Stock ID must be added in the detail section. Similar for serial-managed products the serial number has to be maintained in a separate tab.
After the release of a consignment issue sales order item, the consignment stock for the corresponding combination of Account, Custodian, Product (eventually identified stock or serial number), ship-from (fill-up) site is reduced. Technically, there is an outbound delivery created to trigger the goods and activity confirmations. Then, the items are relevant for invoicing and appear in the open invoice requests and can be invoiced.
Stock Overview after Consignment Issue
If a credit limit check is enabled for a customer, also sales orders with the item type ‘Product – consignment fill-up’ are considered in the credit limit check. It means system checks if the value of the fill-up items is in the range of the given credit limit of the customer. If the credit limit is exceeded the fill-up sales order cannot be released for delivery execution.
For sales orders with item type ‘Product – consignment issue’ the system will not check the credit limit since goods already have been consumed by the customer and the creation of the invoicing should not be restricted.
Furthermore, all the open invoices – including them for customer consignment – reduce to the open credit limit values.
If you work with approvals in sales orders, you can include or exclude the item types ‘Product – consignment Fill-up’. Or ‘Product – consignment Issue’.
The corresponding web services and options to use the excel upload for the sales order items are enabled.
Fill-up and Issue Process of Customer Consignment (Financials)
For the postings along the consignment process, specific valuation data on level Company/Business Residence/Consignee is needed. Therefore, in the product master data a new Valuation level is available to maintain the following information:
- Account Determination Group: The recommendation is, to apply a separate Inventory account to display the value of consignment stock in reports (e.g. in Balance Sheet). For this, you have to create your own Account Determination Group for customer consignment.
- Perpetual Cost Method: Standard and Moving Average are supported.
- Inventory Costs per Set of Books: Please consider, that for Standard the most accounting principles prescribe to apply the same cost amount on consignee level as on Business Residence level!
The determination of the Moving Average costs happens on consignee level.
The maintenance of consignee valuation data can be done manually in material master data and with upload of an Excel template.
Furthermore, the system will set up the data automatically by copying the valuation data from Business Residence level when it recognizes – during Fill-up posting – that for this consignee these data are not available in the product master data.
Consignment Financial Fill-up Posting
With the Release of the Outbound Delivery and its related confirmation a Journal Entry the type Consignment Fill-up will be created with:
Consignment Financial Issue Posting
Once the Sales Order for a Consignment Issue is released the Journal Entry of type Issue for Consignment will be created:
Dependent if the automatic Revenue Recognition is activated in solution scope, the posting on debit side is made on Deferral account or Material Consumption account.
Return Processes and Adjustments
The customer can return consignment stock before they used or issued it without the obligation to pay (6). This can be initiated with a the ‘New Custodian Goods Return Notification’ from the Inbound Logistics work center (renaming of the former ‘New Parts Return Notification). Here all the relevant characteristics [account, sender (= custodian), product (evtl. identified stock, serial number), fill-up site] for posting the consignment stock have to be maintained. This is the trigger for the warehouse operators to receive the products back to the warehouse. With the corresponding inbound delivery, the consignment stock is reduced, and the warehouse stock is increased.
Furthermore, an adjustment of the consignment stock (7) can be necessary for example due to some quality issues or differences which cannot be corrected otherwise. With the ‘New Consignment Stock Adjustment’ common task in the Physical Inventory work center, you also have the option to post the absolute quantity in consignment stock or just an additional receipt (Delta Receipt) on top of the existing quantity. Also here, the Account ID, Custodian and Fill-up Site is mandatory for posting.
Customer Return after the invoicing for consignment goods (8) can be processed as usual customer return.
For the customer consignment report please check this blog.
Tips and Tricks
If you miss some of the customer consignment related fields, please use the personalization to enable it.
SAP Business ByDesign Help searching with the words “Customer Consignment” or in the related application areas of the Library as well as in the Business Scenario section.