Overview: Consignment Inventory

You can accept components or raw material items on consignment from a vendor and not process payment to the vendor until you consume the item. Consignment inventory remains the property of the vendor supplying it until it is "used" (e.g., moved to on-hand or picked to a manufacturing order). You have options for scheduling consignment replenishment: either the vendor manages the shipment of inventory to you or you can track receipts through the procurement process, providing better visibility of anticipated supply.

When the vendor manages the shipment of inventory to you, you simply receive it with Receiver Maintenance (IRC). This process assumes the vendor knows your consumption pattern and is restocking your consignment inventory without the need of any form of formal communication. This may simply mean that the vendor's sales representative stops in periodically to determine what items need to be shipped to your location in anticipation of future needs.

If demand patterns are not well known to the vendor and you want to control the supply flow of material into your location, you can use PowerShift's procurement process as follows:

Vendor Consignment Order Maintenance (VCE) creates and maintains consignment orders. Items ordered on vendor consignment orders are accumulated to the on order quantity and are considered a supply in the planning process. When received, the consignment quantity rather than on hand is updated. VCE is very similar to PO Maintenance (VOE) and consignment orders follow purchase order approval rules. You may opt to set up different approval hierarchies for consignment items; the item status code could be used for this purpose.

Vendor consignment orders are numbered separately from other order types. Numbering System Setup (XOC) defines how numbers are assigned to vendor consignment orders.

Vendor Consignment Order Print (VCP) outputs and distributes the vendor consignment order document. Document Output Parameters Maintenance (TDOC) specifies how vendor consignment orders are printed and distributed. Vendor Consignment Order Print Queue Maintenance (VCPPM) maintains the print queue for new vendor consignment orders.

When consignment goods arrive, they are received like a purchase order with the exception that received stock is accumulated to the consignment inventory balance and there is no associated general ledger or accounts payable update, as you have not taken ownership in the stock.

When you consume or use a consignment item, the system automatically creates a purchase order that can be used by accounts payable to process payment or, if the vendor is an ERS vendor, the AP batch will be created for you.

This topic has these subtopics:

Setup
Receiving Items for Consignment
Transferring a Consigned Item
Obligating Components

Setup

After you have agreed with your vendor on the item and price, you can define the item in the system as consignment. These are the necessary steps:

Enter a new item into your database with the Enterprise Item Maintenance (IM) program.
In the Vendor Maintenance (VM) program, create a new vendor record if appropriate. To automate payment for items moved from consignment inventory to on-hand inventory, select the appropriate ERS vendor option (either Y or C). When the system moves inventory from consignment to on hand, it will create an invoice in a PROFORMA batch. See Background: AP Invoice Entry.
In the Branch Item Maintenance (IMB) program:

Enter the vendor number in the Preferred vendor field
Select the Consignment? field.
Enter a quantity greater than 0 in the Lot size field if you want the system to move a set quantity at each transfer or enter 0 if you want the system to move only the necessary quantity.

In the Vendor Price Maintenance (VMM) program, select the required fields for a consignment item:

QA approved?
Preferred item?
Select M or L for material or labor
Select the purchasing unit of measure.
Enter a unit price for a quantity of 1

Receiving Items for Consignment

When your vendor ships your inventory for consignment, use the Receiver Maintenance (IRC) program to receive the items.

If you created a consignment order (i.e., in Vendor Consignment Order Maintenance) to schedule receipts, clicking the Pur order button to receive the goods. If you don't schedule the receipts, simply click the Consignment button and enter the item number and quantity. PowerShift also offers an RF application for receiving consignment stock.

Inspection on consignment items is the same as any other item. You have the option to flag items for inspection regardless of item maintenance settings. The Rejected Material Disposition (MRB) program accepts consignment items for disposal or you may return the item to the vendor, which will stock the item in consignment, create a purchase order, and ship it back to the vendor on that PO with no expectation of a return.

Transferring a Consigned Item

There are two ways to transfer a consigned item: automatically or manually. Automatic transfer requires that the System Options Maintenance (XM) Inventory Control Auto-pick consignment items? option to be selected.

Automatic Transfer

When you obligate a manufacturing order that has a consignment component, the system checks whether the quantity required is in on hand inventory. If not, the system checks consignment inventory.

The system moves a quantity from consignment to on hand so the order can be filled. The quantity moved depends on your entry for the Lot size field in the item's record in the Branch Item Maintenance (IMB) program.

If zero, the system moves the quantity required for manufacturing. For example, suppose that the order quantity is 10 and the quantity per assy is 1. The system would transfer 10 from consignment to on hand.
If a quantity other than zero, the system moves that quantity. For example, you may set the Lot size field to 100 because your vendor does not want to invoice small quantities. In this case, the system transfers 100, even though this order requires only 10. However, 90 would be available for subsequent manufacturing orders.

Manual Transfer

In addition to moving consigned inventory automatically, you can use the Move Consigned Inventory (IVM) program to manually select the item from a list and then specify the quantity to move from consignment to stock on hand. Use IVM to transfer consignment stock to on-hand inventory in support of upcoming customer shipments. This feature is for those of you that sell vendor-received items to your customer base!

Transfer Process

When the transfer is completed the system will create a purchase order number and a receiver for the transferred quantity. Material History Inquiry (MHI) will show the transactions to reduce the consignment balance and increase the quantity on hand. If the item is controlled, you select the control number(s) to be moved. If the item is stocked in multiple locations, you will select the "from" warehouse and bin and provide the new stocking location.

Obligating Components

If you allow the picking of components, you can use any of these programs to obligate components: Manufacturing Order Maintenance (MIM), Material Usage Maintenance (MUA), Manufacturing Order Picking Selection (MSS), Picking Confirmation (MPK) program, or Secured Picking (SMPK). You will first be prompted to select the consignment stock details and then you can obligate stock moved to on hand to the manufacturing order.