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1) Create an item Cons 1 in Inventory Master with the following attributes.
a) Apply template purchased item for enabling it in the functional area inventory and
purchasing to facilitate stackable, transact able and purchasable.
b) Enable use approved supplier and give a list price of 1.
c) Go to the General Planning tabbed region and scroll down to Vendor Managed
and enable the attribute Consigned and save.

2) Assign the item to your organization, say M1.

3) Define consumption transaction rules ([N]=> Setup=> transactions=> Consigned/VMI

Consumption- Enable Consigned and SI transfer as transaction type. The weight value
allows you to set the processing order. For example, if three transactions satisfy the
transaction criteria, the system processes the transaction with the highest weight.
Give a value of 1. From S1 must be an expense Sub Inv. Materials from vendor will
be received into this S1. To S1 must be asset S1. [A S1 can be made as expense sub
inv. By unchecking the Asset Sub Inventory check box in the SI definition form].

4) Go to PO Resp. and create a supplier sup_con1 with Supplier as type in the

classification tabbed region.
5) Create a site S1 with all address filled (necessary for sending the cheques to the
supplier) and contact person details in the contacts tabbed region. Ensure Pay and
Purchasing are only enabled in the general tabbed region.

6) Go to Purchasing tabbed region, self billing block in the site. Select Use for
pay on and Consumption Advise for Invoice Summary Level fields.

7) Create an ASL for item cons1 with sup_con1 as a direct approved supplier under
Record details. Ensure Global is selected as yes.

8) Create a BPA for Cons1 with the approved supplier sup_con1. Do not mention
anything in Pay on in terms button. Adapt the best practices for this powerful
document BPA even though we use it as a mere setup for consigned inventory [i.e.
Effective dates in terms button, cumulative pricing in agreement tabbed region, (pur
officers efficiency) and allow price override in price reference tabbed region to meet
Indian scenario.

9) Under the attributes button of the ASL for our item cons1, mention the BPA number
under source documents and enable consigned from supplier and zero days as

billing cycle.

10) The setups are complete which can be tested by making a release for this BPA.
When you fill the line number, the system will pop up a message indicating that you
cannot create releases for the consigned material. This Successful failure to create
a release indicates that you have made the setups properly.(Congratulations)

11) Create a SPO for 100 quantities with our approved supplier for our consigned
item. Receipt routing must be Direct Delivery and Std. and Ins. Routings are not
applicable as the material will be received at the suppliers consigned sub inventory
and it will be his property till we transfer the items to regular.

12) Receive it at the expense SI mentioned in step 3. The location field is not
mandatory (normally for a direct receipt) as it a consigned material.

13) Check the qty under On-Hand availability and ensure that the owning party is
Cons_sup1 site s1.

14) Make a consigned transaction for say 45 [Nav: Transactions- Consigned

transactions] with a transaction type as Transfer to Regular from the owning party
(sup_con1-S1). This will automatically trigger the S1 transfer from his expense S1 to

our asset S1 as mentioned in the consigned setups. I could not check this functionality
in our Oracle instance as the profile option INV: Allow Expense to Asset Transfer is
set to NO and it is un-updatable under all levels site, application, responsibility
and user. Please check. This profile setup requires Audit clearance at your clients
location as this transaction increases the asset value of your org.

15) Check again the on hand quantity under on hand availability. The line would have
got split into two indicating both our material and the partys material.

16) Run the concurrent create consumption advice (if this not available under your
resp. add it under your request group in sys admin.) for our supplier sup_con1 site S1
for our item con1 in org M1.
Consumption Advice is the document used for billing consigned material. It is a formal
document used to communicate to the supplier, the quantity and value of the
consigned material consumed in a warehousebased on the supplier who produces the

17) Run the concurrent Pay on Receipt Auto Invoice (again add it your request group)
with a transaction source of ERS_AND_USE for our inventory receipt number. This
will take the data from the Consumption Advice and populate the interface tables
of payables. Pay on receipt will also automatically spawn the child concurrent
Payables Open Interface Import for pulling the data from the interface table to the

Base table of Payables.

18) Switch resp to Payables and enquire the creation of unvalidated, distributed
Invoice [Nav: Invioces=> Inquiry=> Invoices] for our supplier. Check the balance owed
to him also [a button in the bottom of the inquiry form].
19) validate the Invoice and create accounting [creation of liability owed to the
supplier]. Check for funds available in the bank and make a full payment from our
internal bank in our payment document and make final accounting. This will facilitate
passing of the accounting entries to Cash Management for re-conciliation and manual
adjustments, if necessary before posting to General Ledger.