Consignment Stock

The consignment stock functionality enables the management of goods owned by an external owner (for example a supplier) within a warehouse. This means that quantities of goods under consignment are not included in inventory evaluation reports and have no effect on item costs.

The process of managing consignment goods in M3 BE is described in the schematic process below.

Terms used

Term Description
Consignment stock Consignment stock is stock legally owned by a supplier, but held in own warehouse.
Own stock Term used to differentiate the stock in goods that is owned by the warehouse and goods under consignment. The term "Own stock" represents the stock that is owned by the warehouse.
Consignment replenishment order A purchase order which updates the on-hand balance but where the stock is still owned by the supplier.
Sell-back order A ’Return to supplier’ order which changes the ownership of own stock to consignment stock.


Before you start

  1. Activate consignment agreement in 'Supplier. Define Purchase Financial' (CRS624) to allow creation of consignment agreement for the supplier.
  2. Create a consignment agreement type in 'Purchase agreement type. Open' (PPS110).
  3. Create a consignment agreement in 'Purchase Agreements. Open' (PPS100).
  4. Create a purchase order type in 'Purchase order type. Open' (PPS095) with order category 25, Consignment replenishment.
  5. Create a purchase order type in (PPS095) with order category 26, Consignment usage.
  6. Define consignment usage order type on 'Settings - Purchase' (CRS780/H).
  7. Create a return to supplier order type with order category 4 (sell-back) in 'Return Order Type. Open' (PPS399).
  8. Create a requisition order type in 'Req/Distr Order Type' (CRS200). Select 'Next man fnct' '7' and activate parameter ‘Sell-back’ on the G panel.
  9. Set ‘Consignment lvl', ‘Usage rule’ and ‘Seq – sup usage’ on 'Item. Connect Warehouse' (MMS002/J).

Settings descriptions

Program ID/Panel

Heading Description
(CRS624/E) Consignment agreement Allows creation of consignment agreement for the supplier.
(PPS110/E) Consignment agreement Indicates that it is consignment agreement type.
(PPS110/E) Invoice frequency Controls how long an invoice period is. Consignment purchase is summed up to the period it belongs to, that is, the transaction date of the purchase.
(PPS095) Purchase order category 25 Replenishment order. This order category is used to replenish inventory, and is used in the same way as the normal order category, but the purchase price of the item is always zero, and purchase orders cannot be invoice matched.
(CRS780/H) Usage PO type This is the order type that is used when creating usage purchase orders. purchase order category 26 is required.
(PPS399) Return to supplier category 4 This type of order is used when own stock should be returned to the consignment stock.
(CRS200/G) Sell-back Activates the sell-back parameter to use in the sell-back process. The order type is added as the requisition order type on the return-to-supplier type. The field is only visible for transaction type 41 (requisition order) and if next manual function is 7.
(MMS002/J) Consignment level Activates consignment functionality for a specific item or warehouse. Set parameter = 1 to use consignment on warehouse level.
(MMS002/J) CS usage rule Indicates if own stock should be consumed before or after stock under consignment owned by external owner. Available settings are 1 (use own stock first) or 2 (use external owner’s stock first)
(MMS002/J) Seq – sup usage Indicates the priority order of which supplier consignment goods are to be used. Available settings are 1 2 3 (First receipt date – Last receipt date – Suppliers prio) or 2 1 3 (Last receipt date – First receipt date – Suppliers prio).

Replenishment of consignment goods

To order consignment goods, a specific type of purchase order category must be used: PO category 25. This order category requires that a valid consignment agreement exists.

All logistic functionality is the same for order category 25 as the normal order category (category 20). The differences between the two order categories are the price and the financial transactions. A consignment replenishment order always has purchase price zero, no charges connected to the orders, and no financial transactions are created in the goods receiving flow. Since the goods are still owned by the supplier, no invoicing occurs for these orders.

Receiving goods from a normal purchase order category (not 25) results increases your own stock balance and not the consignment stock balance.

Consumption of consignment goods

Consumption of consignment goods takes place when items are reported issued. Any warehouse activity where balance is reported with a negative transaction triggers the calculation of consignment usage. If the item is configured for consignment, the transactions consuming consignment goods are:
  • Customer Order (CO), pick list issue
  • Distribution Order (DO), pick list issue
  • Requisition Order (RO), pick list issue
  • Manufacturing Order (MO), material issue
  • Work Order (WO), material issue
  • Stock adjustment and stock take, negative reported transaction

Positive reported transaction of consignment goods

Positive warehouse transactions of items configured with consignment, increases own goods item balance and does not impact consignment goods accumulators. Those warehouse transactions are:

Positive reported transactions use current cost price according to inventory accounting method, handled in 'Item. Connect Facility' (MMS003).

Warehouse activities for consignment goods

The outbound process for an item with consignment functionality activated in item or warehouse follows the same process as if consignment was not activated. This means that demand order lines are allocated per current logic and are not affected by consignment functionality. The decision of which supplier to buy consignment goods from, and what quantities, are taken at issue reporting of demand order line during the usage calculation.

In-house activities such as movements and reclassifications do not affect consignment balances. The quantity under consignment is not considered in inventory evaluation reports since it is considered as still owned by the supplier.

Any stock adjustment via physical inventory counting follows the same process as any other stock reduction or increase. Note that an increase of stock results in increasing own stock while a reduction of stock goes through the usage calculation and might result in a change of ownership from goods under consignment to own goods.

The parameter consignment level set to 1-'WHS level' indicates that consignment balances are stored on warehouse level. This means that current consignment stock balances can be found in accumulators in 'Item. Connect Warehouse' (MMS002) and (MMS003).

Accumulator MBCSTQ, 'Consignment OHB', is the quantity of consignment goods available for change of ownership or purchased from supplier. This accumulator includes all goods reported as approved during put away of consignment replenishment purchase orders.

Note: Since it is possible to issue report goods with status under inspection and rejected, also balances in these statuses (without reporting number) are included.

Accumulator MBCQUW, 'Consignment OHB inspection', is the sum of all balance identities with status under inspection and still not reported for put away (still with receiving number). This accumulator only increases during the receiving process of consignment replenishment purchase orders.

Accumulator MBCRJQ, 'Consignment OHB rejected' is the sum of all balance identities with status rejected and still not reported for put away (still with receiving number). This accumulator only increases during receiving process of consignment replenishment purchase orders.

Information of current stock balances for goods under consignment per owner is displayed in function 'Consignment Owner Quantities. Open' (MWS020).

Change of ownership

At the point of issue reporting, or reducing stock during stock take variance reporting, a usage calculation is executed to calculate if a purchase of goods under consignment should be executed or if own stock should be used.

This calculation is controlled by two parameters in (MMS002):

One important detail worth mentioning is how the system calculates the on-hand balance of own goods. This is an important part of the calculation logic that is performed to know the exact quantity to buy from each supplier at issue reporting.

Own stock = Own_stock1 + Own_stock3 + Own_stock2 - inTransit


Addend Own_stock1 is the part of the own quantity that is under inspection (quantities of stock balance IDs with status = 1).

Addend Own_stock3 is the part of the own quantity that is rejected (quantities of stock balance IDs with status = 3).

Addend Own_stock2 is the part of the own quantity that is approved (quantities of stock balance IDs with status = 2).

Addend inTransit is the part of the own quantity that is at a transit location.

Own_stock1 = QUQT - CQUQ - QUQTwithREPN

All quantity under inspection (QUQT) is deducted with consignment quantity under inspection (CQUQ) and deducted with quantity under inspection with reporting number still on balance identity (QUQTwithREPN).

Own_stock3 = RJQT - CRJQ - RJQTwithREPN

All quantity with status rejected (RJQT) is deducted with consignment quantity in status rejected (CRJQ) and deducted with quantity in status rejected and reporting number still on balance identity (RJQTwithREPN).

Own_stock2 = STQT - CSTQ

All quantity in status approved (STQT) is deducted with all quantity under consignment ready for usage calculation (CSTQ).


The sum of balances that are at a transit location. These balances have already been issue reported, but not yet reported as received at the receiving warehouse. This sum is therefore not to be considered as available for usage calculation.

If the usage calculation yields the result that a purchase of consignment goods must be performed, it uses settings in item/warehouse to determine from which supplier to buy. The worktable is used both during the calculation of quantities to purchase (so simultaneous jobs do not use the same quantities in the calculation) and as a basis for purchase of consignment goods, and is called 'Pending Consignment Transactions. Open' (MWS025). This table can also be used for tracking issues occurred during the purchase of consigned goods, since records are not deleted in that case.

When the usage calculation has determined that consignment stock is to be used, this quantity needs to be purchased. The supplier’s goods cannot be issued without being purchased first. This purchase is done automatically by creating two PO receipt transactions. This is what purchase order category 26 is used for, that is, purchase of consignment stock. If no PO exists to be used for the receipt, a new PO is created. The consignment PO type defined in (CRS780) is used to create the PO. When the PO is created, it is connected to the right invoice period, the reported transaction date is within the invoice period.

Before the actual issue is performed two PO receipt transaction (transaction type 25) are created in the stock transaction history (MWS070). The first transaction is a negative issue which reduces consignment stock. This transaction does not create any cost accounting transactions. The second receipt is the actual purchase. This transaction updates the received quantity on the usage PO and creates the cost accounting transactions. This transaction is the base for the invoice matching.

As a logical consequence of reducing goods under consignment and increasing own goods at the change of ownership, accumulators in item/warehouse, item/facility and quantities per consignment owner are updated.

Note: If the item is lot managed, the usage calculation is done within warehouse, item and lot number. This means that the usage calculation is performed and evaluated within the allocated lot number. No automatic change of allocated lot number should be performed due to result of a usage calculation.

Invoice periods

The invoice period is the period for which all consignment usage transactions should be accumulated to. The length of the invoice period is controlled by the ’Invoice frequency’, defined on the agreement (PPS100), or self-billing agreement in 'Purchase Agreement. Open for Self-Billing' (PPS112).

When an issue transaction is processed, which triggers a consignment usage purchase, the transaction date of the issue controls which invoice period should be accumulated. If self-billing is used, the ’Next invoice date’ on the self-billing agreement controls which period to accumulate.

When a consignment purchase is triggered from an issue transaction, a PO is created for the corresponding invoice period. If a PO already exists, a PO line is created, if needed. The create invoice periods are displayed in 'Period for Consignment Invoice. Open' (PPS135) and which purchase orders are created to each period is displayed in 'Consignment Invoice Period. Open Lines' (PPS136). To create a consignment usage specification for an invoice period, 'Consignment Consumption. Print' (PPS545) is used. (PPS545) can be called from (PPS135) or started from the menu. If the purchase order is marked as complete in (PPS545), the printed POs are closed for additional usage transactions. If new transactions are needed, a new PO is created.

Inventory evaluation

When printing an inventory value list including items with consignment activated, it is recommended that you include balances with all statuses (approved, under inspection, and rejected).

For Items with consignment functionality activated, goods under consignment are not included in the list since they are owned by one or several external suppliers.

Purchase invoice of bought consignment goods

There is no difference in the invoice process for the purchase of consignment goods. The difference is what the invoice is based on. The replenishment PO is an order to fill up the inventory, but it is not purchased. The invoice is instead based on what has been used, that is, the received quantity on the usage PO. A report can be created in (PPS545) which lists all purchase transactions (detailed or summarized). This report can be sent to the supplier. Based on this, the supplier can create an invoice which can be matched to the usage PO.

Claim of consignment goods

Claim of consignment goods follows the normal process. If goods are rejected in the QI control, the rejected quantity can be returned to the supplier. No PO transactions are created for change of ownership when the goods are issued.

Consignment termination

When a consignment relationship ends with a supplier, all consignment stock must be purchased. If the stock is kept in consignment, it is available in the system, but cannot be issued, that is, there are error transactions in 'Pending Consignment Transactions. Open' (MWS025). To purchase all consignment stock from the supplier, use option 30 (Consignment termination) in 'Supplier. Define Purchase & Financial' (CRS624). This option moves ownership transactions from consignment to own stock, and sets all open consignment agreements to status 90 (Canceled) .

This option is only valid if:

Consignment sell-back

Sell-back is the process when own stock is sold back to the supplier. This requires two order types to be set up:

Follow these steps

Use this process to work with consignment stock:

  1. Create a consignment replenishment purchase order, that is, order category 25. When the order is received, the received quantity increases the consignment stock for the supplier. Information of current stock balances for goods under consignment per owner is displayed in 'Consignment Owner Quantities. Open' (MWS020).
  2. Report issue transactions. The issue transactions accumulate the consignment purchase by adding receive transactions to the usage PO. All issue transactions that accumulate consignment purchase go via the worktable MWWCSP (Pending consignment transactions). Messages that occurred during consignment purchase process can be seen in 'Pending Consignment Transactions. Open' (MWS025) if the purchase could not be executed for some reason.
  3. Print the consignment usage report (PPS545) and send to the supplier, so an invoice can be created. When the invoice is received, the invoice matching can be carried out.

Use this process for consignment sell-back:

  1. Create an order in 'Return to Supplier. Open' (PPS390) with order type 4-'Consignment sell-back'. The claim is created with parameter ’Credit to issue' activated.
  2. Create lines in 'Claim. Open Lines' (PPS391) and enter the quantity to return.
  3. Print the claim in 'Return to Supplier. Print Document' (PPS820). Once the claim is printed, one requisition order and one purchase order is created. The requisition order is created to issue goods as a normal claim.
  4. The purchase order is created to receive the goods into consignment and to generate transactions to the invoice matching. Both orders are automatically reported.
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