Vendor Consignment in SAP MM

Consignment in Real Business

As a business deal you have an agreement  with a vendor to source a particular number of consignment material to your organization. The consignment material value is still retained by the vendor until you take out it from the consignment inventory or post it to own valuated stock. You take possession of the material when you issue to a cost centre or handover it into your own stock. You settle your consignment liabilities with the vendor monthly. As a SAP MM consultant you want to set up this scenario in SAP system.

Special Procurement Vendor Consignment

Vendor Consignment in Material Management

As described above in first paragraph, consignment means that material made accessible to you by a vendor is stored in your company but truly valued to the vendor. A liability to the vendor only rises when you pull out material from the consignment stocks. The following section roughly outlines the entire vendor consignment process Details on the individual steps are covered in the further sections.

To manage material in the consignment stock. you need the following master data:

Automatic Account Determination in SAP MM

What is Automatic Account Determination? 

Different transactions in inventory management and invoice verification are relevant to accounting. These transactions must be recorded in an accounting document containing the postings to the FT G/L accounts. The G/L accounts to which the postings are made in such a document should be determined automatically by the program as far as possible.

Example: 
When a. raw material is issued for a production order, postings are made to stock accounts (under credits) and to consumption accounts (under debits).

in SAP MM process,  automatic account determination is a. procedure applied to accounting-relevant transactions. The system uses it to identify the G/L accounts to which postings are to be made without any user intervention. Therefore, these accounts must be entered in a. special table in Customizing for the transactions in inventory management and invoice verification.

Contracts in SAP MM Process

What is Contract:

In the MM Purchasing element, a contract is a type of outline purchase agreement against which release orders (releases) can be issued for agreed materials or services as and when required during a certain overall time-frame. (In the literature and in practice, similar concepts may also be referred to by a number of other terms, such as "systems contract", "blanket order agreement", "blanket contract", and "period contract".)

A contract is an agreement between the vendor and the customer for the vendor to supply material to the customer at an agreed price over a specified period of time.

Structure on Contract in SAP MM:

The contract consists of items defining the individual materials, material groups, or services with prices and in many cases quantities.

An item is assigned to an item category, which defines the type of procurement (e.g. item category K for consignment, or L for subcontracting).

An item of the procurement type "external service" contains a set of service specifications. Such specifications may be hierarchically structured. The summary view of such a hierarchical structure is termed an "outline", and the individual levels of the hierarchy are referred to as "outline levels". Quantities are specified in service lines. Services can be released (ordered, or called off against the contract) at item level or at the level of the service line.

Costs can be apportioned among various Controlling objects via the account assignment.

Release orders issued against the contract (see below) are logged in the release documentation.

Contracts can take the following forms:

Quantity contracts (MK):
Use this type of contract if the total quantity to be ordered during the validity period of the contract is known in advance. The contract is regarded as fulfilled when release orders totaling a given quantity have been issued.

Value contracts (WK):
Use this type of contract if the total value of all release orders issued against the contract is not to exceed a certain predefined value. The contract is regarded as fulfilled when release orders totaling a given value have been issued.

You can also set up corporate buying contracts with your vendors. These are valid for all plants and company codes within a client (see Centrally Agreed Contract - DC).

Over the contract validity period, certain quantities of the materials or services covered are released (called off) against the contract as and when required through the issue of purchase orders referencing the latter. Such purchase orders are thus termed "contract release orders" or simply "release orders". (Outside SAP, particularly in the UK; they may also be referred to as "call-off orders".)

How to Change Purchase Order in SAP MM

Step 1)

For changing an existing purchase order you can use transaction code ME22N  (or ME22 – the old version).

Immediately after executing transaction code, system will take you to the most recent purchase order you have created, changed or viewed. If you need to change some other purchase order, you can use the option which appears in the menu

How to Post Goods Receipt in SAP MM

Step 1) You can post the goods receipt for a purchase order using transaction code MIGO.

Let’s say we want to do a goods receipt for our purchase order 4500018386.

1. Choose A01 – Goods Receipt.
2. Choose R01 – Purchase Order.
3. Enter your purchase order number.
4. Press ENTER.

Step 2)

How to Release Invoice in SAP MM Process

An invoice request is blocked for payment until its manually released. You can release the invoice by using t-code MRBR.

Step 1)

1. Execute t-code MRBR.
2. On the initial screen enter the company code and invoice number.
3. Check the release method (release manually if you want to process it in the second screen). This can be done choosing Automatically (please note the difference with automatic release in MIRO transaction being blocked and automatic release in t-code MRBR as those are two different things).
4. Our document has a manual payment block, so we will select that option. Execute.

Invoice Verification in SAP MM Process

Invoice verification is done via MIRO transaction.

Step 1)

1. Enter transaction code MIRO.
2. Choose invoice as a transaction type.
3. Enter the invoice date.
4. Enter the purchase order number.
5. Hit ENTER.

Step 2)

On Payment tab choose R – invoice verification.