Vendor Consignment Process in SAP

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Vendor Consignment Process in SAPVendor consignment process in SAP is used when a vendor provides your company materials on loan. The materials are kept in the warehouse of your company until you withdraw the said materials for processing. Then, the liability is created for the vendor and a payment is done to the vendor on agreed intervals, e.g. weekly or monthly.

For the vendor consignment process in SAP to work, you first need to agree on pricing with the vendor. The prices are a kept in consignment info records in the SAP system. The prices can be automatically copied to purchase orders from info records.

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After maintaining consignment info records, a consignment purchase order is created in SAP and handed over to the vendor. The vendor provides your company with materials according to the purchase order (PO). The warehouse of your company performs goods receipt  of the materials against the purchase order and the materials are stored as consignment stock in the SAP system.

Later, when materials are required for processing, you withdraw the material from the warehouse and a liability is created for the vendor which is settled through a special payment process (i.e., MRKO transaction).

A visual illustration of the steps of the vendor consignment process in SAP is presented on the picture below.

Vendor Consignment Process in SAP Diagram
Vendor Consignment Process in SAP Diagram

Steps of Vendor Consignment Process in SAP

The step-by-step process of working with vendor consignments goes as explained below.

Consignment Info Record

You first create a Consignment Info Record through transaction ME12.

Start Transaction ME12
Start Transaction ME12

You need to select Consignment and enter Vendor, Material, Pur.Org, Plant as shown on the picture below then hit Enter button.

Transaction ME12 - Initial Screen
Transaction ME12 – Initial Screen

Provide the price in highlighted box in Purchasing Organization view and then save the info record.

Transaction ME12 - Enter Price
Transaction ME12 – Enter Price

Consignment Purchase Order

Now, start transaction ME21n in the dialog box to create a consignment purchase order (PO).

Start ME21N Transaction
Start ME21N Transaction

In the new purchase order, enter Vendor, Item Category: K, Material, Quantity, Plant, Storage location as highlighted on the screenshot below and hit Enter button on your keyboard.

ME21N Transaction - Create a Purchase Order
ME21N Transaction – Create a Purchase Order

Next, enter Purchasing Organization, Purchasing Group, Company Code under Org. Data tab as show below.

ME21N - Enter Organizational Data
ME21N – Enter Organizational Data

Then, click on Check button, to check for errors in the document.

Check Purchase Order for Errors
Check Purchase Order for Errors

Finally, click the Save button to save the document and the SAP system will display a message that a PO was created.

Save Purchase Order
Save Purchase Order
A Purchase Order was Created
A Purchase Order was Created

Goods Receipt

Now, to do Goods Receipt against the Purchase Order you need to use the transaction MIGO.

Start MIGO Transaction
Start MIGO Transaction

In below screen, choose Goods Receipt against Purchase Order and enter the number of the purchase order created earlier. Then, hit Enter button.

Goods Receipt against a Purchase Order
Goods Receipt against a Purchase Order

Data is pulled in MIGO by the SAP system from the Purchase Order. Next, you should click on OK check boxes for all the items.

Set OK Indicator for Items to Perform Goods Receipt
Set OK Indicator for Items to Perform Goods Receipt

Then, click on Check button to check for possible errors.

Check Goods Receipt for Errors
Check Goods Receipt for Errors

Finally, click on Post button to save the document. The system will display a message that a material document was posted.

Use Post Button to Save Goods Receipt
Use Post Button to Save Goods Receipt
Goods Receipt of Consignment Stock was Posted
Goods Receipt of Consignment Stock was Posted

Goods Issue

Now, when goods are required, you can perform Goods Issue to, for example, a cost center. To do this you use the transaction MIGO where it is necessary to choose Goods Issue against Other with the movement type 201 and a special indicator K for consignment as highlighted on the screenshot below.

Goods Issue against a Cost Center
Goods Issue against a Cost Center

In the Material tab of MIGO transaction, enter the material number that you would like to issue from the warehouse.

Material Number in MIGO Transaction
Material Number in MIGO Transaction

In the Quantity tab of MIGO transaction, enter quantity required for issue.

Quantity in MIGO Transaction
Quantity in MIGO Transaction

In the Where tab of MIGO transaction, enter Plant and Storage Location (from where you would like to issue the materials).

Plant and Storage Location in MIGO Transaction
Plant and Storage Location in MIGO Transaction

In Partner tab of MIGO transaction, enter the vendor number.

Vendor in MIGO Transaction
Vendor in MIGO Transaction

In Account Assignment tab of MIGO transaction, enter a cost center (the cost of the materials will be allocated to the specified cost center).

Cost Center in MIGO Transaction
Cost Center in MIGO Transaction

Click on Check button to check for possible errors.

Check for Errors with Goods Issue
Check for Errors with Goods Issue

Finally, click on Post button to save the goods issue document. The SAP system will display the number of posted material document.

Click Post Button to Save Goods Issue
Click Post Button to Save Goods Issue
Goods Issue was Successfully Posted
Goods Issue was Successfully Posted

Settle Liabilities

Finally, the last step of vendor consignment process in SAP is to settle the liabilities that our company has for the vendor. It is necessary to use the transaction MRKO for settling liabilities created against the vendor.

Start MRKO Transaction
Start MRKO Transaction

In the first screen of MRKO transaction, you should enter Company Code, Material and choose Settle radio button as shown on the screenshot below.

Consignment Settlement
Consignment Settlement

Next, click on Execute button.

Click Execute Button
Click Execute Button

The system will show a list of the consignment materials that can be settled. Double click on the line item which requires settlement and finally save the document. This step will end the vendor consignment process in SAP.

Consignment Items for Settlement
Consignment Items for Settlement

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Did you like this SAP MM tutorial? Have any questions or comments? We would love to hear your feedback in the comments section below. It’d be a big help for us, and hopefully it’s something we can address for you in improvement of our free SAP MM tutorials.

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6 thoughts on “Vendor Consignment Process in SAP”

  1. This is good platform to learn and the way you have explained is appreciating. Please upload like this more . Thanks for this 😊

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