Consumption-based ownership change

If the ownership change is consumption based according to the contract drawn up between the supplier and the customer, the ownership of the goods changes from the supplier to the customer when the customer consumes the items for production or sale. After the customer becomes the owner, the customer must pay for the goods.

Issues of consigned items from the VMI warehouse involved in warehouse transfers might or might not be consumptions that make the ownership of the goods change from the supplier to the customer.

For information on updating the supplier's administrative warehouse with consumption details, see Inventory consumption handling and To update the administrative warehouse. For information on updating the customer's administrative or "real" VMI warehouse, see Consumption records and To update the administrative warehouse.

Consumption criteria

Usually, the contract between the supplier and the customer determines whether a warehouse issue is a consumption. In the Usage at Warehouse Transfer field of the Logistics Terms and Conditions (tctrm1140m000) session, you can specify whether a warehouse transfer is a consumption.

For warehouse issues not covered by contracts, you can specify whether an issue is a consumption in:

  • The Usage at Warehouse Transfer field of the Warehouse - Item (whwmd2110s000) session, for specific items in specific warehouses.
  • The Usage at Warehouse Transfer field of the Warehouses (whwmd2500m000) session, for specific warehouses.
  • The Usage at Warehouse Transfer field of the Outbound Order Lines (whinh2120m000) session, for a specific outbound order line.

For example, if the Usage at Warehouse Transfer field of the Logistics Terms and Conditions (tctrm1140m000) session is set to Only between Clusters, and consigned stock is transferred from the VMI warehouse to another warehouse within the same cluster before being consumed, the supplier remains the owner. If the stock is transferred from the VMI warehouse to a shop floor warehouse in another cluster for production, this transfer is a consumption and, therfore, the customer becomes the owner.

Consumption records

If the issue is a consumption according to the Usage at Warehouse Transfer parameter, LN creates a consumption record when the outbound order for which the goods will be issued for consumption is created. Consumption records are displayed in the Consigned Consumptions (whwmd2551m000) session.

When the shipment containing the consumed goods is confirmed or, if no shipment procedure is defined for the outbound order lines, outbound advice is released, the consumption record is updated. The status of the consumption record then changes from Allocated to Used.

The consumption records are linked to the purchase order and the receipt for which the consumed goods were originally received in the warehouse.

LN uses this information together with the shipment ownership records or outbound advice ownership records to create:

  • A purchase payable receipt that handles the payments for the consumed goods that the customer is to make to the supplier. Based on the purchase payable receipts, the invoicing procedures start up. Purchase payable receipts are displayed in the Purchase Payable Receipts (tdpur4130m000) session.
  • Integration transactions in Financials.

For further details on outbound advice or shipment ownership records, see Outbound Advice Ownership (whinh4128m000) and Shipment Line Ownership (whinh4138m000).

The purchase price that the customer must pay the supplier is determined by the setting of the Price Determination Based on field of the Order Terms and Conditions (tctrm1130m000) session.

For information on how LN decides which stock is to be issued, see To determine the stock to be issued.

Note

If an issue for a consumption is performed on the sales side, that is, in the supplier's administrative warehouse, LN creates a consumption record in the Inventory Consumptions (tdsls4140m000) session. For more information, refer to Inventory consumption handling.

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