About Consignment Stock at your Warehouse

General

Having consignment stock means that you have access to products which are still owned by the supplier. You are not charged until the products are used or sold, i.e., until they are moved out from the consignment stock. This functionality is best used when there is a close relationship between the customer and supplier and the consumption of material is frequent.

Basics

The use of consignment stock is initiated on the combination supplier for purchase part. When you enter a purchase order line, the system checks whether consignment stock should be used by checking the in the setup in the Supplier for the purchase part/General tab. If the default ownership setting is set to Consignment the system manages the receipt as consignment stock handled when receiving parts from this specific supplier. Consignment is one of the different ownership types in inventory.

Refill of Consignment Stock

The refill of consignment stock can be processed in two ways:

Since you can treat the consignment stock as your normal inventory stock (performing order point runs, using order point quantities, using safety stock, etc.), you know when the consignment stock needs to be refilled. Your company is in charge of the refilling of the consignment stock. The normal purchase requisition routines can be used, e.g., order point runs. These requisitions can later be converted into purchase order lines which are sent to the supplier. The purchase order flow for a consignment handled part is identical to the normal flow. Only inventory registered purchase parts can use consignment stock.
The supplier determines the need of refill, based on your consumption reports. For this method to be used, you need to enable the VMI (Vendor Managed Inventory) option on the inventory part found in Inventory part/Supply and Demand Controls area . This means that the system will not create any purchase requisitions for the demands; the vendor will know the inventory balance of the consignment stock and, therefore, send you the needed parts without notification from you. This affects all the sources of automatically created requisitions, such as MRP, order point runs, customer order, and so on. Since this option is placed on the inventory part, it indicates that the handling of the part is done this way, regardless of the suppliers from whom you are buying.

Receipt

When the supplier is in charge of the refill of the consignment stock, it is uncertain that you know when a refill is initiated by your supplier; the goods could arrive without any purchase order from your company. When the goods arrive, you do not have any corresponding purchase order line on which to enter the arrival. Therefore, you need to create a purchase order line afterward. Entering the arrival can be performed directly from Register Purchase Order Arrival.

When the parts are received into stock, they are considered as consignment stock handled. The lines are not visible for the supplier invoice matching until they are consumed.

Inventory locations

The following inventory types can be used as consignment stock:

picking location
floor stock
production line

A consignment stock is treated as a normal inventory location where you can check the order point level, use order point quantity, and safety stock. However, inventory transactions and inventory value reports will be affected. As long as the parts are in consignment stock, they are not considered as yours financially. This means that the parts are not received as regular parts; they have their own arrival transactions. The parts in consignment stock will not be taken into consideration when generating inventory value reports, e.g., Received Not Yet Invoiced.

Conditions for creating a consignment stock:

An inventory location cannot keep both normal stock and consignment stock for the same part.
An inventory location can keep both normal stock and consignment stock for different parts.
An inventory location cannot be used as a consignment stock for several suppliers, regardless of whether the parts are identical.

Note: If Allow multiple owners for Inventory Part on one Location option is enabled in the Site/Warehouse Management/General tab, the same inventory location can have different ownership types and/or owners stock for the same part.

Also if you try to duplicate any of the key values mentioned below for the different ownership types and/or owner in the same location and part then an error message will be raised stating that the stocks do not uniquely identify the ownership information and you are not allowed to perform this transaction. The key values are Site, Part No, Configuration ID, Location No, Lot Batch No, Serial No, Eng Chg Level, W/D/R No and Activity Seq.

Return or scrap parts in consignment stock

Sometimes, parts in stock are found to be faulty or damaged, and you need either to return the parts to the supplier or to scrap them. When the financial burden should be placed on the supplier, you will use the return to supplier option. If your company should take the financial burden, you will scrap the parts in the normal way. Scrapped parts are considered as consumed and will be displayed in the invoice matching.

Count at consignment stock

When you decrease a consignment stock in connection with counting, the accounting will be the same as when consuming parts. When you increase a consignment stock in connection with counting, the accounting will be the same as when receiving parts but there will not be any new receipt entered for this. Instead the latest receipt where Consignment Qty can be increased will get updated. If no such receipt exists an increase of the consignment stock quantity will not be allowed to perform.

Consume or do not consume when moving parts

When you move parts between inventory locations, you have a choice of whether to consume the parts. Make this choice in the dialog that is shown when moving the parts from a consignment stock location.

Note: Moving consignment parts between locations can only be done if the locations belong to the same site.

Move without consuming

If you choose not to consume the parts, you can transfer the parts to:

another inventory location that contains consignment handled parts from the same supplier.
another inventory location that is empty.

However, to transfer the parts to an inventory location that contains regular parts and also consignment handled parts from a different supplier, the Allow multiple owners for Inventory Part on one Location option in Site/Warehouse Management/General tab must have been enabled.

Move and consume

If you choose to consume the parts, you can transfer the parts to:

another inventory location that contains regular parts.
another inventory location that is empty.

However, to transfer parts to an inventory location that contains consignment handled parts, the Allow multiple owners for Inventory Part on one Location option in Site/Warehouse Management/General tab must have been enabled.

Consignment Consumption

When parts are consumed, i.e., issued from stock, the information concerning the consumption is created and entered in the system. The consignment consumption lines are displayed in the Supplier Consignment Stock Consumption page, as well as in the overview page. From these pages, you can print two different lists and also a consumption report to notify the supplier:

Consumed parts - detailed list, displaying information such as the date and time for each consumption.
Consumed parts - summarized list, displaying information such as the total quantity issued within the indicated period.
Notify Supplier - printout of summarized list, identical to the summarized list except that this report generates Supplier Notified status on the consumptions.

Consignment consumption lines can have the following statuses:

Entered, which means that the parts are considered as consumed but not yet reported to the supplier.
Supplier Notified, which means that the supplier is informed about the consumption, i.e., the Notify Supplier report is printed and considered as sent to the supplier.

When you issue parts from the consignment stock, you could need to notify your supplier that you have bought the parts and that you expect an invoice. When the notify supplier report is printed, the supplier is considered as notified.

From the Supplier Consignment Stock Consumptions page, you can also print a summarized list for multiple selected parts to notify the supplier.

Notify Supplier for Parts - printouts of summarized list for all selected parts, identical to the summarized list except that this report generates Supplier Notified status on the consumptions and includes more than one part.

Note: If the Notify Supplier of Consignment Consumption option is enabled on the Company/Supply Chain Information/Procurement tab, it indicates that the supplier notification is a mandatory step. That is, when a consignment stock is being consumed, the consumed stock will not appear for invoice matching until a notification to the supplier has been sent.

Inventory Transactions for Consignment Stock

The consignment stock feature uses its own transactions and posting types.

Inventory Valuation Method

Inventory valuation method for a part is specified in the Inventory Part/Main/Cost Control tab. If parts are consignment handled, it is only possible to use Standard Cost as the inventory valuation method for the specified part.

Use of Delivery Overhead with Consignment Stock

When using a factor for the delivery overhead together with a consignment handled part, the system will create a delivery overhead posting at every consumption, taking into consideration the factor and the number of pieces consumed.
When using a fixed delivery overhead together with a consignment handled part, the system will create a delivery overhead posting with the whole amount at every consumption.