Consignment Sales Order /

Vendor Managed Inventory

For Henkel
Details of Presentation

• Consignment Process in SAP

• Consignment Flow Diagram
• What is Consignment SO and it is process
• Business Benefits
• Transaction Flow
• Consignment Process challenges

2
Consignment Process in SAP
In consignment orders allowing our stock to sit in customer location. Once Customer informs that they have
used the stock you, we will invoice them, If they returns the stock we will accept the stock to take it back. The
Consignment Process in SAP standard consist of four small sub-processes:

Sno. Activity Actions

1. Consignment • EP send materials to customer location consignment (Vendor Managed Inventory space
Fill-up provided by customer)
• In this step, we are not invoicing the customer. document flow is sales order ----
delivery. It will not be relevant for billing and pricing because we are not charging for
these goods in this step.
2. Consignment • Moving material from VMI location to Means issue materials from customer
Issue consignment (VMI location) to the end customer.
• In this, Create a consignment issue order, consignment issue delivery and a consignment
issue invoice. (the flow is very similar to a normal OR flow, but the materials are issued
from the consignment stock instead of plant stock unrestricted).
3. Consignment • Any return materials from customer ownership to Consignment Stock (EP
Return Responsibility)
• In this, Create consignment return order, consignment return delivery and a
consignment return invoice. (the flow is very similar to a normal RE flow, but the
materials are returned to the consignment stock instead of plant stock returns).
4. Consignment • Even if we create the consignment return process for the goods are not come to direct
Pickup to our plant. For that you need to create consignment pick up. The owner ship is not
changing so we do not need to create billing.
Note that in consignment fill up and consignment pickup there are no invoices since there is no change of 3
ownership for the materials.
4
5
 Consignment Flow
Consignment Fill-Up
Consignments

Consignment fill-up
SD Inc. Consignment
Customer Fill-up and Issue
Inc.
of SD
erty
Prop

Consignment fill-up
Customer
Consignments special stock
Consignment issue
Consignment Fill-up and Issue
Consignment fill-up Consignment Outbound
Customer Goods issue Customer: 1
SD Inc. fill-up
Customer
delivery
Inc. Consignment fill-up
of SD
erty Customer
Prop
special stock
Consignment Issue
 SAP AG 1999
Consignment issue
Consignment Outbound Customer: 1
Goods issue
Consignment issue fill-up delivery
Customer

Consignment Outbound Goods issue Billing document

issue delivery
Consignment issue
 SAP AG 1999

Consignment Outbound
 SAP AG 1999 Goods issue Billing document
issue delivery
Consignment Flow
Consignment Pick-Up

Consignment Pick up
SD Inc. Consignment
Customer Pick-up and Returns

Consignment pick-up
Customer
Consignment Pick-up and Returns special stock

Consignment Returns
Goods receipt Customer: 1
pick-up delivery
Consignment pick-up
Customer
special stock

Consignment Return
Consignment ConsignmentGoods
Returns returns
receipt Customer: 1
pick-up delivery
Customer Consignment Returns
Consignment Returns
Goods receipt Credit memo
returns delivery

Consignment returns

Consignment Returns
Goods receipt Credit memo
returns delivery

 SAP AG 1999

7
Organizational Unit: Shipping Point

What is Consignment SO and it is process

P
Plant 2 Plant 2

7
4 5 6
1 2 3 14
11 12 13
8 9 10 21
7 18 19 20
4 5 6 15 16 17 28
1 2 3 25 26 27
11 12 13
14 22 23 24
8 9 10 21 29 30 31
18 19 20
15 16 17 28
23 24 25 26 27
22 1 2 3

29 30 31 8 9 1
15 16 1
22 23
6 7 6 7 29 30
3 4 5 3 4 5
1 2 14 1 2 14
11 12 13 11 12 13
8 9 10 20 21 8 9 10 20 21
18 19 18 19
15 16 17 28 15 16 17 28
25 26 27 25 26 27
22 23 24 22 23 24
29 30 31 29 30 31

Shipping point 1 ship

Shipping point 1 shipping point shipping point
Factory

Storage Area
EP- Danville provided by Henkel Henkel Plant

 SAP AG 1999
 SAP AG 1999

1. Customer has provided a Area, which is called as Vendor Managed Inventory (VMI)
2. Consignments kept in Storage Location and issue to Customer from VMI for
production/consumption – until such time, Primary responsibility will be EP-Danville
property.
3. These stocks will be visible in our system as Inventory.
4. No Sales will be record in SAP.

8
 Customer Consignment Processing

Business Benefits Sales and Distribution Inventory Management

Consignment Fill-Up:
A consignment fill-up does not completely
Consignment Fill-Up Order
represent a real physical sale of goods to a
customer. However, the mechanisms during
order entry are the same as for a standard Outbound Delivery
order entry. For example, when an order is
entered, an availability check is performed for
the material, and the shipping point is Picking with Manual Batch
Determination
determined automatically. The sales order
does not contain any pricing conditions (net
value remains zero). Goods Issue to Consignment Stock

Consignment Issue:
Consignment Issue Order
At regular intervals, the customer reports
either how many articles they have sold, or
how many articles are in their current stock Outbound Delivery
(inventory): A corresponding order is entered,
which documents the issue from the
consignment stock. A billing document is Picking
created for the issue from the external stock at
the customer’s site. When the PGI done, the
Goods Issue from Consignment
transfer from consignment stock is carried out.
Stock
The article is no longer the property of the
company. The relevant accounting and
controlling documents are generated.
Customer Consignment Processing

Business Benefits Sales and Distribution Inventory Management

Consignment Pick-Up:
The customer can return goods that are not
Billing
required or sold to the central warehouse.
They are posted directly into unrestricted
stock. The physical inbound delivery of the
goods from the customer to the central
warehouse can be executed in different ways: Consignment Pick-up Order
The customer can write or phone to request
that the goods be picked up, or can deliver the
goods themselves. Alternatively, the return can
be initiated by office-based personnel (for Outbound/Returns Delivery
example, call back for expiring or defective
articles).

Goods Receipt from Consignment

into Free Stock
 Payment

Transaction
Inventory Sourcing
 Payment is a process that is part of the application
nt Customer Service take module Financial Accounting.
ne.  In this process step in Sales and Distribution you
Shipping can:
Sales Order Billing  Payment supports:
(VF01) Payment
: Outbound Delivery (VL01N)
 check the availability of the ordered goods and
Billing
(VA01)  publish the demand in materials planning  Posting payments against invoices

 Materials planning (MM) organizes and  Reviewing differences

 Shipping processing supports:
monitors the actual procurement
process. Picking Invoice
 Creating outbound deliveries Inventory
This includes products that are:
 Picking (by creating Check
transport orders)
 inhouse-produced or / and Packing
 externally-produced
 Packing
Post Goods Issue
 Posting the goods
 issue
SAP AG 1999

 SAP AG 1999

 SAP AG 1999
Present Scenario

• New Process of Consignment SO

C-SO or SA Outbound Delivery Consignment Delivery/PGI Stock Cons.

Billing PGI Outbound Delivery New SO

Consignment Process challenges/OIA

Current
• Issue of Invoice will happen only once in a month.
Challenges with Consignment SO.
 Adding up lot of transactions
 Increase the work load for Customer Support, Delivery, Finance team.
 Increase in manpower for reconciliation.
 Sales will reflect only at the end of month , when actual consumption happens.
 Stock monitoring required and reconciliation with portal.

Customer End
• Customer Consumption means (Henkel ) withdraw material from our VMI location and should not be
linked to their production consumption.