SAP MM special procurement guide
Supplier consignment separates physical possession from ownership. The material sits in the buyer’s warehouse, but the supplier owns it until the buyer withdraws it for use or transfers it into company stock. That timing changes how receipt, valuation, liability and settlement work.
What is the SAP MM consignment process?
In supplier consignment, a supplier delivers material to the customer’s premises but retains ownership while it remains in consignment stock. The customer can see and manage the quantity separately by supplier. Receipt into that special stock does not create the same valuated inventory and supplier liability as a normal purchase-order receipt.
The liability arises later, when material is withdrawn from consignment stock for consumption or transferred into the company’s own stock. Those withdrawals are then settled periodically using the agreed consignment price. This arrangement can improve material availability while postponing payment until use, but it only works when supplier ownership, quantities, prices and settlement periods are governed carefully.
Consignment is not a workaround for weak purchasing. The supplier-material relationship, price and tax information still need a controlled source record. The SAP MM source determination guide provides useful context for purchasing info records and approved sources.
Master data required for supplier consignment
Material and supplier records
The material must be identified consistently at the plant where the stock is managed, and the supplier must be valid for the purchasing relationship. Because consignment stock is supplier-owned, the same material held from two suppliers must remain distinguishable by supplier.
Consignment purchasing info record
A purchasing info record with the consignment category is essential for the supplier-material combination. It holds the commercial conditions used to value withdrawals and support settlement. Unlike a standard PO item, the consignment PO item does not carry the normal order price because receipt does not transfer ownership. The system needs the valid consignment info-record price on the withdrawal or transfer date.
Standard purchasing organisation and planning
The consignment info record is maintained for the purchasing organisation used by the plant. If consignment is the regular source for a material, the material’s planning setup can support consignment requirements. For occasional use, buyers can create or convert the requirement deliberately. The design should reflect an agreed sourcing model rather than forcing every shortage into consignment.
SAP MM consignment process step by step
- Agree commercial terms. Purchasing and the supplier agree the material, price basis, validity, tax treatment, replenishment approach and settlement cycle.
- Create the consignment info record. The buyer maintains the consignment category for the supplier-material relationship, including the price required for later withdrawal valuation.
- Create the consignment requirement and PO. The purchase order uses item category K. It requests replenishment but does not behave like a normally priced stock PO.
- Post goods receipt to supplier consignment stock. The delivered quantity becomes visible at the plant and storage location under the relevant supplier’s special stock. The receipt is non-valuated because the supplier still owns the goods.
- Withdraw or transfer the material. A goods issue from consignment stock or a transfer to own stock reduces supplier-owned quantity and creates a liability based on the applicable consignment price.
- Review unsettled withdrawals. Before settlement, the team checks supplier, plant, material, posting date, quantity, reversals and the price used.
- Run consignment settlement. The settlement process selects eligible withdrawals, creates the settlement document and supports a message to the supplier. The supplier does not submit a conventional invoice for each withdrawal.
- Reconcile stock and liability. Operations and finance compare supplier-owned quantities, unsettled withdrawals, settlement output and any reversals or disputed items.
Normal procurement versus consignment
| Question | Normal stock procurement | Supplier consignment |
|---|---|---|
| Who owns stock after receipt? | The buying company, subject to agreed terms | The supplier until withdrawal or transfer to own stock |
| Is goods receipt valuated? | Usually yes for valuated stock | No; it enters supplier-owned special stock |
| When does liability arise? | Through the normal receipt/invoice process | When consignment stock is withdrawn or transferred to own stock |
| Where is price held? | Purchasing conditions and PO | Consignment purchasing info record for settlement |
| How is payment evidence created? | Supplier invoice and invoice verification | Periodic settlement of eligible withdrawals |
Ownership, stock and accounting impact
Quantity visibility does not automatically mean company-owned inventory. At receipt, consignment stock is stored at the company’s premises but remains externally owned and separately managed. It can be available for planning and operational use according to the setup, yet it is not part of the company’s valuated stock at that point.
When a user issues consignment stock to consumption, the business has used supplier property and owes the supplier. When a user transfers the quantity to own stock, ownership changes and a liability also arises. The withdrawal value comes from the relevant consignment info record. A missing or invalid price is therefore not a minor master-data inconvenience; it blocks or distorts the financial consequence of the movement.
The liability posting requires the appropriate automatic account determination, including the consignment payable transaction. The broader logic behind valuation classes, transaction keys and G/L selection is covered in the new SAP MM automatic account determination guide.
For quantity concepts, stock categories and physical inventory, use the existing SAP MM inventory management guide. Keep in mind that a physical count verifies quantity; it does not by itself resolve who owns the quantity or whether withdrawals have been settled.
Controls that prevent consignment errors
- Supplier-level stock visibility: never combine supplier-owned quantities in a way that loses ownership evidence.
- Price validity: confirm that the consignment info record has a valid price and tax indicator for the withdrawal period.
- Movement authorisation: restrict transfers to own stock and consumption postings to trained roles.
- Regular settlement: schedule a documented cycle so liabilities do not remain unprocessed and suppliers can reconcile the notification.
- Reversal discipline: reverse the original material movement correctly when a withdrawal was wrong; do not use an unrelated adjustment that breaks traceability.
- Physical inventory: count supplier consignment stock separately and investigate differences with the supplier where appropriate.
Common symptoms and checks
| Symptom | What to check first | Why it matters |
|---|---|---|
| Consignment PO cannot be created | Material, item category K, supplier and purchasing info record | The process needs a valid supplier-material consignment relationship. |
| Receipt appears but no accounting document exists | Confirm that receipt went to supplier consignment stock | A non-valuated receipt is expected while ownership remains with the supplier. |
| Withdrawal has no usable price | Info-record validity, purchasing organisation, unit and currency | Settlement depends on the price valid for the withdrawal. |
| Old withdrawals remain unsettled | Settlement selection dates, supplier, plant, reversals and prior run status | Selection criteria may exclude otherwise valid liabilities. |
| Supplier disputes the credit memo amount | Withdrawal documents, quantities, dates and condition records | The settlement is based on actual withdrawals, not simply PO quantity. |
Practice scenario
A maintenance plant keeps supplier-owned bearings on site. Create a consignment info record for the supplier and material, request 100 units with item category K, receive them into consignment stock and confirm that the receipt is non-valuated. Issue 12 units to a maintenance cost center, transfer another 8 into own stock, reverse one intentionally incorrect withdrawal and settle the valid items. Reconcile the remaining supplier stock, the liabilities and the settlement notification.
Next, compare this supplier-owned flow with an internal plant replenishment using the SAP MM stock transport order guide. The documents may both move quantities, but ownership, supplying party, billing and reconciliation are fundamentally different.
Frequently asked questions
Is supplier consignment stock company inventory?
It is physically stored at the company’s site but remains owned by the supplier until withdrawal or transfer to own stock. SAP therefore manages it as supplier consignment special stock rather than ordinary valuated company stock.
Why is there no price in a consignment PO item?
The receipt does not transfer ownership or create the normal liability. The consignment price used for withdrawal valuation and settlement is maintained in the consignment purchasing info record.
Does the supplier send an invoice for every withdrawal?
No. The buyer periodically settles eligible withdrawals and can send a settlement message or credit-memo information to the supplier. The exact operational schedule should be agreed with the supplier.
When does a liability arise in SAP MM consignment?
A liability arises when material is withdrawn from supplier consignment stock or transferred into the company’s own stock. Merely receiving material into supplier consignment stock does not create that liability.