Vendor Managed Consignment process

[susheel_tiwari2]

Introduction:  Vendor consignment process in SAP-MM is a special kind of external procurement process. Consignment order is placed to external vendor who delivers the materials at company premises on a given schedule but ownership will remain with vendor. In normal procurement, liabilities to company is booked as soon as good is received by company but liabilities to company is only booked in case of consignment process when actual goods are consumed.

In  normal consignment process, company has to keep on placing the order against any increase in demand or any future forecast which is very time consuming process to place the PO every time.

This document will explain about How we can set up a process where vendor can take care of  complete Management of consignment inventory. Vendor will have complete responsibility to ensure availability of stock. Company will place only one time PO for 1 year. Vendor will take care of all further requirement without any further PO even if demands are raised more than PO qty.

Company will place a consignment PO of lump-sum  qty for complete year based on historical consumption data. Vendor will plan for delivery based on requirement on daily basis unlike normal consignment process where complete lot is delivered at company process.

We will have to set up some configuration and master data to dispatch current stock and future demand information to vendor on daily basis so that vendor is updated about current stock and replenishment needed to meet the demand.

This process will have following benefit:

1) Lower Inventory level

2) Less over head

3) Lower Inventory handling cost

4) Vendor will have better information about customer demand which will help vendor in planning

5) Reduced replenishment duration

Below Process has been mapped without any development. This will set up automation between  Vendor and Customer.

Process Involved: We can Understand complete process flow chart from below picture:

We can see from the flow, there are following steps are involved in the cycle.

1) Manual Blanket PO creation: Blanket PO is created manually with some validity and item category K. Tolerance in PO is also defined to give flexibility to vendor to adjust the delivery in case any short fall or additional demand is ascertained through PROACT message type. Tolerance limit is defined as 99.9%.

2) Purchase Order output through EDI: PO is transmitted to vendor via message type ORDERS

3) Transferring stock and sales data via EDI: Message category PROACT is used to send current stock and historical/forecast sales data for a particular material to vendor

4) Planning replenishments at vendors end: Vendor can plan replenishment qty based on current stock and future demands.

5) Confirmation from vendor side: vendor will send confirmation against delivery. A IDOC will be created with message type ORDRSP and create a line item under confirmation tab in PO.

6) Despatch Advice: When material is ready to be despatched, vendor will send  advice to customer. Information will come in the form of an incoming IDOC with message type DESADV and will create inbound delivery number against PO placed to vendor. This IBD will be updated under confirmation tab

7) Good Receipt : When material arrives at company premises, GR is done against IBD and stock will be posted with movement type 101 K and stock will be appearing under consignment stock

Configuration Involved to set up Vendor managed Consignment process:

1) Creation of output message  for PO: As PO has to be transmitted to  vendor via EDI so an output type should be created followed by maintenance of condition record so that when PO is created, system should propose an output type for EDI. It is simple to set up output type for PO so I will not touch upon configuration process. Standard output type is NEU so we can create our own message type ZNEU copying from NEU followed by NACE set up for EDI with partner type LS.

2) Setting up partner profile for EDI for message type ORDERS: We need to set up partner profile for electronic transmission.

Menu Path: SPRO-->Material Management-->Purchasing-->Messages-->EDI-->Set up Partner Profile.

We can also access it via transaction code WE20

A new screen will open where we need to maintain  Partner no and partner type.

1) Partner no-Logical .System name

2) Partner Type-LS

Once it is done, we need to maintain information for Outbound Parameter which are given below

1)  Partner Role-LS

2) Message Type-ORDERS

3) Receiving port- As defined

4) Transfer IDOC-Immediately

5) Basic Type-ORDERS05

We also need to maintain message control as listed below:

1) Application-EF

2) Message type-ZNEU (As defined above for PO)

3)Process Code-ME10

3) Setting up partner profile for PROACT message type sending to vendor: Here we also define partner no, partner type as defined above.

We need to maintain following outbound parameter:

1)  Partner Role-LS

2) Message Type-PROACT

3) Receiving port- As defined

4) Transfer IDOC-Immediately

5) Basic Type-PROACT01

Once Partner profile is maintained, we also need to maintain profile for sending stock/sales data to vendor. We can access SPRO via following path

SPRO-->MM-->Purchasing-->Messages-->EDI-->Profile for sending stock/sales data

We need to maintain control profile on screen appeared. Say XYZ profile was maintained.

We also need to maintain controlling parameter

Transfer STOCK level

  Forecast of Qty sold

Once it is done, maintain Stock Type as shown below

Stock Type-INSME

Stock type-LABST

Now Maintain Sales data Access

Qualifier-004

Info Structure-S094

Version-XXX

Plant-WERKS

Qty-MNG02

4) Version Activation for Info Structure S094: Now we need to activate version created above A00.

Access following Configuration Path

SPRO-->Integration with other MySAP.com components-->Data transfer to the SAP Business information Warehouse -->Settings for Application specific data source (PI) -->Logistics-->Managing transfer Information structures -->Setup of Statistical data -->Application specific set up of statistical data --> Perform Set Up - Inventory Controlling

5) Set up for Message type ORDRSP for confirmation from Vendor:  Here we need to set up for incoming IDOC  in partner profile. Run We20 transaction and set up inbound parameter

Partner no-XXXX

Partner type-LS

Inbound Parameter:

Message Type-ORDRSP

Process Code-ORDR

6) Set up for Message type DESADV for Delivery Advice from Vendor: Here we need to set up partner profile for incoming IDOC for IBD against PO.

Partner no-XXXX

Partner type-LS

Inbound Parameter:

Message Type-DESADV

Process Code-DELS

Now System is ready for consignment process.

Now Create  a blanket PO for full year

When PO is Released, System will send EDI to vendor for PO information.

Now Create PROACT message to send current stock and future demand information to Vendor

Run WVM2 transaction and enter all required details

When you execute the report, System will output all stocks details as shown below

Now Click on Send IDOC button to  trigger PROACT IDOC to vendor. We can see IDOC created via WE02 transaction as shown below:

Now When Vendor sends confirmation against PO, Incoming IDOC with message type ORDRSP is received as shown below

This Information is  updated in PO under confirmation Tab as shown below. System insert AB line

Now When Delivery is ready to get dispatched, vendor sends information via DESADV message type and system create IBD and update in PO as shown

below:

Now Receive the goods against IBD

PO will be updated with IBD qty