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 this 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 of 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.