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Special Procurement Processes in MM - Presentation Transcript

January 31,

NAZRIN RIZAL PUBLICATIONS 2012

Special Procurement Processes

Vendor Consignment

Consignment basically something that vendor provides you and you store in your warehouse but you do
not have to pay for it, until you use it. In this case, the vendor still remains as the owner of the stocks.
Only when we consume these materials, then we will be charged / liable for it. Therefore, to settle these
liabilities, it is according to agreed periods with the vendor, for example monthly.

In order to start this consignment process, you will have to first have an agreement on the price per
quantity for the consigned materials. In SAP, we call this Consignment Info Record.

Remember earlier, I have mentioned that we will only be charged when we "Use/consume" the consigned
materials? So, when referring to this, the procurement cycle for Consignment is a little bit different. The
procurement cycle starts with a Purchase Order for Consignment Items, and it ends after receiving the
goods. This is because payment is required not after supply but after withdrawal.

Subcontracting
This procurement process is actually similar to the standard Procurement cycle. However, we would
provide some or all of the components required to produce the material.

The Process starts off with a Subcontract Order where you indicate the material which is to be delivered,
plus the components that you would provide to the Subcontractor.

So, when the vendor has received the Subcontract Order, he cannot start production until you have
provided him with the necessary components. You perform this transfer of components by means of
transfer posting where the materials are no longer physically in your location. It is now with the vendor for
him to consume in order to produce the end-product.

As soon as the subcontractor completes the production for the end/refined material, he would then deliver
it to you. This is now the Goods Receipt process. Unlike the standard Goods Receipt, here for
Subcontracting process we Receipt the end-material as well as Issue out the components that was used
by Subcontractor. These components are considered as subcontract consumption. In the end, the
subcontractor will send us an invoice for the service given.

Stock transfer with Stock transfer Orders

This is a unique type of procurement because it does not involve an external vendor. It is a procurement
method that is done within a company. The plant that needs the material will come up with an internal
order called Stock Transport Order directed to the other plant which will be providing the material.

The issuing plant who receives the Stock Transport Order, will then provide the materials by performing
Goods Issue with reference to the Stock Transport Order in SAP. After this is done, the receiving plant
performs Goods Receipt against this Stock Transport Order to receive the materials.

This process can also be simplified by means of Transfer Postings only. In this case, we do not have to
create a Stock Transport Order, but instead, perform Transfer Posting between receiving and issuing

plant straight away.
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