Create Consignment Fill-Up Sales Orders Using SAP APO SNP

  • by Pradeep Vijay, Specialist Master, Deloitte Consulting LLP
  • January 20, 2016
Follow these prerequisite, configuration, and implementation steps to model the automatic creation of consignment fill-up sales orders in SAP ERP Central Component (ECC) using Supply Network Planning (SNP) deployment functionality in SAP Advanced Planning and Optimization (SAP APO). This process enables the automatic planning and creation of sales orders from SAP APO. It minimizes the dependence on the customer service team to monitor shortages and excesses and eliminates the need to create the necessary sales order manually for consignment.
Learning Objectives

Reading this article, you will learn how to:

  • Activate vendor-managed inventory (VMI) and the consignment process in SAP ERP Central Component (ECC) and Advanced Planning and Optimization (SAP APO)
  • Set up the configuration for consignment planning in ECC
  • Set up the configuration for consignment planning in SAP APO
  • Set up the master data for consignment planning in ECC
  • Set up the Core Interface (CIF) integration model for the consignment process
  • Set up the master data for consignment planning in SAP APO
  • Create the consignment fill-up sales order in ECC and SAP APO
  • Validate the result in ECC and SAP APO simultaneously
Key Concept

The vendor-managed inventory (VMI) process in SAP Advanced Planning and Optimization (SAP APO) is modeled using standard functionalities to enable the consignment planning process. The VMI process is a means of optimizing supply chain performance. The manufacturer is responsible for maintaining the distributor’s inventory levels. Under VMI, the manufacturer generates the order, not the distributor. In the case of consignment inventory, the supplier places inventory at a customer’s location and retains ownership of the inventory. Payment is not made until the item is actually sold. A VMI relationship may or may not involve consignment inventory.

Following are the end-to-end configuration and implementation steps to model the automatic creation of consignment fill-up sales orders in SAP ERP Central Component (ECC). The process uses Supply Network Planning (SNP) deployment functionality in SAP Advanced Planning and Optimization (SAP APO). It also enables the sales order-purchase order (SO-PO) push relationship between the vendor-managed inventory (VMI) supplier and the consignment customer. This concept opens up an opportunity for you to model this or similar requirements using the standard vendor-managed inventory (VMI) functionalities in SAP APO SNP.

Customer Consignment Features and Processing in ERP

The consignment process keeps the stock in the customer’s premises, but until the customer consumes or sells it, it will be a part of the company stock. (It is not mandatory that you stock the consignment stock in the customer’s premises. You can store it in the company premises too.)

Consignment Features

In the customer consignment process, the customer delegates the responsibility for efficient stock management of a material to a supplier. The supplier manages the stock of a specific material at the company‘s site. The supplier can be in charge of the replenishment task. The supplier owns the consignment material until the material is taken out of stock for use in production or consumption or the customer decides to post the material in its own stock. The customer pays the supplier after the material is taken out of the consignment stock.

In consignment stock processing in SAP ERP, consignment goods are stored at the customer location but owned by the supplier company. The customer pays for these goods when they are removed from consignment stock. Billing is based on the actual quantity taken. Consignment stock is part of the supplier valuated stock in SAP ERP. It is managed as special stock in inventory management and is assigned to specific customers.

There are four main transactions for consignment processing:

  1. Create a consignment fill-up (to send material to the customer consignment stock owned by the supplier)
  2. Create a consignment issue (to issue material from the customer consignment to the customer)
  3. Create a consignment pick-up (to return material from customer ownership to the customer consignment)
  4. Display a consignment return (to pick up consignment stock and move it to the plant stock)

The first two transactions are important to understand:

Consignment fill-up (Figure 1): Consignment fill-up is used to supplement the customer’s consignment stock. Goods issue of the appropriate stock is posted from the unrestricted-use stock to consignment stock (special stock). The goods remain in the possession of the vendor. When the supplier ships the consignment stock to the customer, the transaction is recorded by creating a consignment fill-up order (standard order type KB). In this process you have a consignment fill-up order and a consignment fill-up delivery.


Figure 1
Consignment fill-up process

Consignment issue (Figure 2): A consignment issue enables the customer to take consignment goods from the special stock for its own use or to sell. Consignment issue involves removing the goods from the special stock and making it the property of the customer. When the customer removes consignment stock to use or sell, you record the transaction in the system by creating a consignment issue order (standard order type KE). In this process you have a consignment issue order, consignment issue delivery, and a consignment issue invoice. (The flow is very similar to normal sales order processing wherein the materials are issued from the consignment stock instead of plant stock unrestricted.)


Figure 2
Consignment issue process

Pradeep Vijay

Pradeep Vijay is a specialist master (manager) at Deloitte Consulting India Pvt. Ltd and based out of Bangalore office. Pradeep has 15 years of overall experience and 13.5 years of SAP experience. He has core production planning and shop floor control domain experience in the steel manufacturing industries. He has SAP consulting experience in the areas of SAP Advanced Planning and Optimization (SAP APO) Production Planning and Detailed Scheduling (PP/DS), Supply Network Planning (SNP), Global Available to Promise (GATP), and Core Interface (CIF). He also has experience with SAP ERP Central Component (ECC) Production Planning (PP) and Production Planning for Process Industries (PP-PI). He has experience in various end-to-end project life cycles in different vertical industries.

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Comments

10/4/2017 10:23:06 AM
VMI in ECC

I have setup VMI in APO in past companies. Except my current employer doesn't have APO installed. I am considering having an MRP SLOC act as a store level inventory to drive demand and we'd reduce the inventory at the sloc. The sloc would then have a reorder point to drive manufacturing. We have to maintain a given stock level for certain customers . Have you created a document that does that when the only system is ECC? Maintain customer level inventory at a store level.?
10/4/2017 10:22:56 AM
VMI in ECC

I have setup VMI in APO in past companies. Except my current employer doesn't have APO installed. I am considering having an MRP SLOC act as a store level inventory to drive demand and we'd reduce the inventory at the sloc. The sloc would then have a reorder point to drive manufacturing. We have to maintain a given stock level for certain customers . Have you created a document that does that when the only system is ECC? Maintain customer level inventory at a store level.?

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