1) This document describes a process for vendor-managed consignment inventory where the vendor takes responsibility for maintaining stock levels and replenishing inventory based on daily demand information from the customer. 2) Key aspects of the process include setting up EDI messages to send the customer's blanket PO and daily stock/demand data to the vendor, and for the vendor to send order confirmations and delivery advices. 3) The process aims to reduce inventory levels and handling costs for the customer by leveraging the vendor to monitor and replenish stock without additional POs from the customer.

1. VendorManaged Consignmentprocess
Introduction: Vendorconsignmentprocess inSAP-MMisa special kindof external procurement
process. Consignmentorderisplacedtoexternal vendorwhodelivers the materialsatcompany
premises onagivenschedule butownership will remainwithvendor. Innormal procurement, liabilities
to company isbookedas soonas goodis received bycompany butliabilities tocompany isonly booked
incase of consignmentprocesswhenactual goods are consumed.
In normal consignmentprocess, company hastokeeponplacingthe orderagainstany increase in
demandor any future forecastwhichisvery time consumingprocess toplace the POevery time.
Thisdocumentwill explainaboutHow we cansetup a process where vendorcantake care of complete
Managementof consignmentinventory. Vendorwill have completeresponsibility toensure availability
of stock. Company will place only one time POfor1 year. Vendorwill take care of all further
requirementwithoutany furtherPOevenif demands are raisedmore thanPOqty.
Company will place aconsignmentPOof lump-sum qtyforcomplete yearbasedonhistorical
consumption data. Vendorwillplanfordelivery basedonrequirementondaily basisunlike normal
consignmentprocess wherecomplete lotisdelivered atcompany process.
We will have tosetup some configuration andmasterdatato dispatch currentstockand future demand
information tovendorondaily basissothatvendorisupdatedaboutcurrent stock and replenishment
needed tomeetthe demand.
Thisprocess will have followingbenefit:
1) LowerInventory level
2) Lessover head
3) LowerInventory handlingcost
4) Vendorwill have betterinformation aboutcustomerdemandwhichwillhelpvendorinplanning
5) Reducedreplenishmentduration
Below Process hasbeenmappedwithoutany development. Thiswill setupautomation
between VendorandCustomer.
ProcessInvolved:We can Understand complete process flow chartfrombelow picture:

2. We can see fromthe flow, there are followingstepsare involved inthe cycle.
1) Manual Blanket PO creation: BlanketPOiscreatedmanually withsome validity anditemcategory K.
Tolerance inPOis alsodefined togive flexibility tovendortoadjustthe delivery incase anyshortfall or
additional demandisascertained through PROACTmessagetype. Tolerance limitisdefined as99.9%.
2) Purchase Order output through EDI: PO istransmitted tovendorviamessage type ORDERS
3) Transferring stock and salesdata via EDI: Message category PROACTis usedtosend current stock
and historical/forecast salesdatafora particularmaterial tovendor
4) Planningreplenishments atvendorsend: Vendorcanplan replenishmentqtybasedoncurrentstock
and future demands.
5) Confirmationfrom vendor side:vendorwill sendconfirmation againstdelivery. A IDOCwill be
createdwithmessage type ORDRSP andcreate a line itemunderconfirmation tabinPO.
6) Despatch Advice:When material isready tobe despatched, vendorwillsend advice tocustomer.
Information willcome inthe formof an incomingIDOCwithmessage type DESADV andwill create
inbound delivery numberagainstPOplacedtovendor. ThisIBDwill be updated underconfirmation tab
7) Good Receipt: Whenmaterial arrivesatcompany premises, GRisdone againstIBD and stock will be
postedwithmovementtype 101 K and stockwill be appearingunderconsignmentstock
ConfigurationInvolvedto set up Vendormanaged Consignmentprocess:

3. 1) Creation of output message for PO: AsPO has to be transmittedto vendorviaEDI so an outputtype
shouldbe createdfollowed bymaintenance of condition recordsothatwhenPO iscreated, system
shouldpropose anoutputtype forEDI. It is simple tosetupoutputtype for POso I will nottouchupon
configuration process. Standardoutputtype isNEUso we can create our ownmessage type ZNEU
copyingfromNEU followed byNACEsetupforEDI withpartnertype LS.
2) Settingup partner profile forEDI for message type ORDERS: We need to setup partnerprofile for
electronictransmission.
Menu Path:SPRO-->Material Management-->Purchasing-->Messages-->EDI-->SetupPartnerProfile.
We can alsoaccess itvia transaction code WE20
A new screen will open where we needtomaintain Partnernoand partnertype.
1) Partnerno-Logical .Systemname
2) PartnerType-LS
Once it isdone, we needtomaintaininformation forOutbound Parameterwhichare givenbelow
1) PartnerRole-LS
2) Message Type-ORDERS
3) Receivingport- Asdefined
4) TransferIDOC-Immediately
5) Basic Type-ORDERS05
We alsoneed tomaintainmessage control aslistedbelow:
1) Application-EF
2) Message type-ZNEU(Asdefined above forPO)
3)Process Code-ME10
3) Settingup partner profile forPROACT message type sendingto vendor: Here we alsodefine partner
no, partner type as defined above.
We need tomaintainfollowingoutbound parameter:
1) PartnerRole-LS
2) Message Type-PROACT
3) Receivingport- Asdefined

4. 4) TransferIDOC-Immediately
5) Basic Type-PROACT01
Once Partnerprofile ismaintained, we alsoneedtomaintainprofileforsendingstock/sales datato
vendor. We can access SPROviafollowingpath
SPRO-->MM-->Purchasing-->Messages-->EDI-->Profile forsendingstock/sales data
We needtomaintaincontrol profile onscreen appeared. SayXYZprofile wasmaintained.
We alsoneed tomaintaincontrollingparameter
TransferSTOCK level
Forecastof Qty sold
Once it isdone, maintainStockType as shown below
Stock Type-INSME
Stock type-LABST

5. Now MaintainSalesdata Access
Qualifier-004
InfoStructure-S094
Version-XXX
Plant-WERKS
Qty-MNG02
4) VersionActivation for InfoStructure S094: Now we need to activate version createdabove A00.
AccessfollowingConfiguration Path
SPRO-->Integration withotherMySAP.comcomponents-->Datatransfertothe SAP Business information
Warehouse -->SettingsforApplication specificdatasource (PI) -->Logistics--
>Managing transferInformationstructures -->Setupof Statistical data-->Applicationspecificsetupof
statistical data--> PerformSetUp - Inventory Controlling

6. 5) Set up for Message type ORDRSP for confirmation from Vendor: Here we need tosetup for
incomingIDOC inpartner profile. RunWe20transaction andset upinbound parameter
Partnerno-XXXX
Partnertype-LS
Inbound Parameter:
Message Type-ORDRSP
ProcessCode-ORDR
6) Set up for Message type DESADV for DeliveryAdvice from Vendor:Here we needtosetuppartner
profile forincomingIDOCforIBDagainstPO.
Partnerno-XXXX
Partnertype-LS
Inbound Parameter:
Message Type-DESADV
ProcessCode-DELS
Now Systemisready for consignmentprocess.
Now Create a blanketPOfor full year

7. WhenPO isReleased, Systemwill sendEDItovendorforPO information.

8. Now Create PROACTmessage tosendcurrentstock andfuture demandinformation toVendor
Run WVM2 transaction and enterall required details
Whenyouexecute the report, Systemwilloutputall stocksdetailsasshownbelow

9. Now Clickon SendIDOCbuttonto triggerPROACTIDOC to vendor. We can see IDOCcreatedviaWE02
transaction as shown below:
Now WhenVendorsendsconfirmation againstPO, IncomingIDOCwithmessagetype ORDRSP is
received asshownbelow

10. ThisInformation is updated inPOunderconfirmation Tabas shownbelow. SysteminsertABline
Now WhenDelivery isready togetdispatched, vendorsendsinformation viaDESADV messagetype and
systemcreate IBD andupdate inPO as shown
below:

11. Now Receive the goods againstIBD

12. PO will be updated withIBDqty