Consignment is an important functionality within SAP sales and distribution. This process is widely followed within many business verticals. Companies following consignment process issue and maintain stock at customer’s premises, yet the ownership of the product is with the company itself. Thus the organization just stores the stock at customer’s store or warehouse instead of its own plant. At any time the customer can sell or use the products.
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The company will issue invoices for the quantity used or depleted from the stock levels at periodic intervals. A customer can also return the products if it is either damaged, poor quality or unsold. Hence the customer needs to pay for only the quantity of product which he utilizes or sells.
Examples of SAP Consignment process in real life
#1. Consider an example of selling on eBay where consignment process is being followed. In this Harry is an eBay seller and Tom is a trading assistant. Now Harry uses Tom to sell his bicycle. Tom sells the bicycle for $80. Tom gives Harry $40 and keeps remaining $40 as an income. Tom will bear shipping charges etc. Until the bicycle has been sold Tom will not pay to John. Thus the process of consignment takes place. In this example, Harry is a company and Tom is a customer in SAP.
#2. To give another example, lets say Sarah owns a mobile store in New York. She needs to display and maintain stock of latest models to be able to generate sales. However instead of buying and keeping the items on display, she signs up a contract with Samsung and Apple. As per this contract, she will be supplied with 50 handsets of various models from Samsung and Apple each. She does not need to pay anything for the same. However, periodically officials from the company will visit the store and count the number of handsets left in stock. For example, if Samsung official find that there are only 32 handsets left, they will invoice Sarah for 18 handsets which were sold in this period.
Steps for executing consignment process within SAP
As you can imagine from the above example, execution of a consignment process in an end to end manner requires several steps. These steps happen in different time period in real life. Let us look at these four stages in consignment process.
- Consignment Fill-up
- Consignment Issue
- Consignment Return
- Consignment Pickup
Consignment Fill-up
It is a process in which products are filling up at the customer site from company warehouse but the owner of the stock is the company itself. Sales order type for consignment fill-up is CF. The following are the steps to perform consignment fill-up in SAP.
Step 1:
- Enter transaction code VA01 in SD Master Data Screen.
Step 2:
- Enter order type as CF, sales organization, distribution channel, and division.
- In our example sales organization is 1000, distribution channel is 10, and division is 00.
Step 3:
- Enter sold-to-party, ship-to-party, and PO number.
- Enter Material and quantity of a product.
- Click on Save.
- In our example, sold-to-party is 1000, ship-to-party is 1000, PO number is 50, material is R-1140, and quantity is 20.
- The following message will be displayed.
Consignment Issue
The customer can sell or utilize the product at any time and company will issue the invoice for the used product. This invoice is called as consignment issue. Sales order type for consignment issue is CI. The following are the steps to perform consignment issue in SAP.
Step 1
- Enter transaction code VA01 in SD Master Data Screen.
- Enter order type as CI, sales organization, distribution channel, and division.
- In our example sales organization is 1000, distribution channel is 10, and division is 00.
Step 2:
- Enter sold-to-party, ship-to-party, and PO number.
- Enter Material and quantity of a product.
- Click on Save.
- In our example, sold-to-party is 1000, ship-to-party is 1000, PO number is 50, material is R-1140, and quantity is 20.
- The following message will be displayed.
Consignment Return
The customer can return the product due to damage, poor quality, expiry to the company. This is called as Consignment return. Sales order type for consignment return is CONR. The following are the steps to perform consignment return in SAP.
Step 1:
- Enter transaction code VA01 in SD Master Data Screen.
- Enter order type as CONR, sales organization, distribution channel, and division.
- In our example sales organization is 1000, distribution channel is 10, and division is 00.
Step 2:
- Enter sold-to-party, ship-to-party, and PO number.
- Enter Material and quantity of a product.
- Select Order Reason as Damaged in transit from drop-down.
- Click on Save.
- In our example, sold-to-party is 1000, ship-to-party is 1000, PO number is 50, material is R-1140, and quantity is 20.
- The following message will be displayed.
Consignment Pickup
When a customer requests the company to take back the damaged or poor quality products, then the company will take back the products from customer warehouse. This is called as Consignment pickup. Sales order type for consignment pickup is CP. The following are the steps to perform consignment pickup in SAP.
Step 1:
- Enter transaction code VA01 in SD Master Data Screen.
- Enter order type as CP, sales organization, distribution channel, and division.
- In our example sales organization is 1000, distribution channel is 10, and division is 00.
Step 2:
- Enter sold-to-party, ship-to-party, and PO number.
- Enter Material and quantity of a product.
- Select Order Reason as Returns from drop-down.
- Click on Save.
- In our example, sold-to-party is 1000, ship-to-party is 1000, PO number is 50, material is R-1140, and quantity is 20.
- The following message will be displayed.
By following the above steps, you can carry out consignment process in SAP. Another blog post containing how to configure consignment process will be taken up in future. We sincerely hope that this was useful and any comment of feedback will be very helpful.
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