Unit 6: Special Procurement Processes
Three procurement variants leave a footprint in Inventory Management that differs sharply from a standard stock purchase: vendor consignment (goods on your premises that still belong to the supplier), subcontracting (your components sitting at the supplier) and pipeline (material that is never stored at all). Knowing which special stock indicator, which organizational level and which valuation behaviour belongs to each is a classic certification topic.
Lesson 1 · Performing the Process of Vendor Consignment
After this lesson you can
- Explain the master data and purchasing documents needed for supplier consignment
- Post receipts, transfers and withdrawals for consignment stock
- Settle consignment liabilities and describe the resulting accounting entries
Key concepts
In a consignment arrangement the supplier places goods in your warehouse but keeps legal ownership of them. You only owe the supplier money at the moment you actually take material out of the consignment stock (for consumption or by transferring it into your own stock). Until then the quantity is visible and plannable in your system, but it carries no value on your balance sheet.
No special material master is needed: the consignment quantity is simply kept under the same material number as your own stock, so planners see one material with several stock segments. The supplier is the normal supplier (business partner with supplier role). The decisive extra object is a purchasing info record of info category Consignment for every supplier/material combination. Without it, a goods receipt into consignment stock is rejected, and its price is the basis for valuing every withdrawal. If the same material is consigned by three suppliers, three consignment info records are required.
The consignment info record is created with ME11 (or the corresponding Fiori app) for the standard purchasing organization of the plant that holds the stock (if the plant is assigned to only one purchasing organization, that one is used automatically). Its conditions may use the full condition technique: foreign currency, validity periods, alternative order units, discounts, price and quantity scales.
| Object | Role in consignment |
|---|---|
| Material master | Same material number as own stock; no separate master record needed |
| Supplier (business partner) | Identifies whose consignment stock is held; part of the special stock key |
| Info record, category Consignment | Mandatory before the first GR; supplies the price used for withdrawals and settlement |
Item category K | Used in POs, requisitions and outline agreements to request consignment goods |
| Special procurement key (MRP 2 view) | Optional: makes MRP generate requisitions with item category K automatically (standard key 10 = consignment) |
Special stock indicator K | Identifies supplier consignment stock in every goods movement |
The consignment purchase order item (item category K)
- A material number is mandatory (no text items).
- No price or conditions can be entered on the item – the price lives in the consignment info record.
- A goods receipt is required; it lands in supplier consignment stock and is not valuated.
- No invoice can be entered against the item – settlement happens later on withdrawals, not on receipts.
Consignment stock in Inventory Management
Supplier consignment is a supplier-related special stock with indicator K, managed at storage location level because the goods are physically in your storage locations. It supports the three stock types unrestricted use, quality inspection and blocked, and it counts as available stock in availability checks and MRP – but it is not valuated.
| Evaluation | What you see |
|---|---|
| MMBE Stock Overview | A cumulative consignment line per storage location; double-click for the split per consignment supplier |
| MB54 Consignment stocks | Several materials at once, optionally filtered per supplier (menu: Inventory Management › Environment › Consignment › Consignment from Supplier › Stock) |
| Stock – Multiple Materials | Predefined view for supplier consignment, with the special stock filter preset to K |
Goods movements for consignment stock
| Movement | Movement type | Remarks |
|---|---|---|
| GR for consignment PO | 101 | Special stock K is set automatically from the PO item; can go to unrestricted, QI or blocked |
| GR without PO | 501 / 503 / 505 + K | Unrestricted / QI / blocked; you enter K and the supplier |
| Initial entry of stock balances | 561 / 563 / 565 + K | Legacy data transfer of consignment quantities |
| Stock-type transfer | e.g. 321, 343, 349 + K | Nonvaluated |
| Storage location / plant transfer | 311 / 301 + K | One-step procedure only |
| Withdrawal for consumption | e.g. 201, 261 + K | Only from unrestricted-use consignment stock; creates a liability |
| Scrapping / samples | 551-555, 333-335 + K | Possible from all three stock types |
| Transfer to own stock | 411 + K | Own valuated stock increases; no consumption is posted; creates a liability |
All receipts and internal transfers inside the consignment segment are quantity-only postings. The moment value arises is the withdrawal or the 411 K transfer: the system values the quantity with the consignment info record price valid on the posting date and posts a liability towards the supplier.
Typical accounting entries
| Event | Debit | Credit |
|---|---|---|
GR 101 into consignment | No FI document (nonvaluated) | |
Withdrawal for cost center 201 K | Consumption account (GBB-VBR) | Consignment liabilities (KON) |
Transfer to own stock 411 K | Stock account (BSX) – with standard price, any difference goes to PRD | Consignment liabilities (KON) |
| Settlement MRKO | Consignment liabilities (KON) + input tax | Supplier account (payable) |
Process flow
System steps
- Create the consignment info record with ME11: supplier, material, standard purchasing organization, plant, info category Consignment; enter the consignment price.
- Create a PO with ME21N using item category
K; no price field is available on the item. - Post the GR with MIGO (movement type
101); check in MMBE or MB54 that the quantity appears as consignment stock of the supplier. - Withdraw material with MIGO, e.g.
201+ special stockK+ supplier + cost center; or take over the stock with411 K. - Run MRKO (Consignment and Pipeline Settlement): select unsettled withdrawals by company code, plant, supplier, material, posting date or material document and settle them. The system creates an invoice-like settlement document and an output of type
KONSto tell the supplier which withdrawals were credited.
Configuration (IMG)
SPRO › Materials Management › Purchasing › Purchasing Info Record › … (info categories are standard; no activation needed)
SPRO › Materials Management › Valuation and Account Assignment › Account Determination › Account Determination Without Wizard › Configure Automatic Postings (OBYC) › transaction KON
Settlement is "invoice-less" by design: the supplier cannot see your withdrawals, so instead of waiting for a supplier invoice you send them a self-billing credit memo created by MRKO. Schedule MRKO as a periodic job (e.g. weekly or monthly as agreed with the supplier).
In SAP S/4HANA the supplier is always maintained as a Business Partner (BP) with the supplier role; the old vendor master transactions are redirected. Consignment quantities, like all stock, are derived from the single material document table MATDOC instead of the former aggregate tables (e.g. MKOL is now a compatibility view).
- Required master data: material, supplier, consignment info record (no customer master, no source list).
- Item category
K: no price on the PO item, GR is mandatory and nonvaluated, invoice receipt not possible. - Special stock
Kis held at storage location level, nonvaluated, with all three stock types. - Consumption only from unrestricted consignment stock; scrapping/samples from all stock types.
- Transfer to own stock =
411 K; liability valued at the info record price on the withdrawal date; liability account keyKON. - Settlement with MRKO; output type
KONS.
Lesson 2 · Performing the Process of Subcontracting
After this lesson you can
- Describe the subcontracting PO item and its component subitems
- Provide components to a subcontractor using the different available tools
- Post the GR of the finished product and subsequent adjustments for over- or underconsumption
Key concepts
In subcontracting you buy a processing service rather than a complete product: you send some or all of the components to an external supplier, the supplier manufactures or refines the end product (the "assembly") and delivers it back. From the inventory viewpoint the components leave your warehouse but remain your property, so they must be tracked as a special stock at the supplier.
| Step | What happens |
|---|---|
| 1. Subcontracting order | PO item with item category L for the end product, with one or more component subitems |
| 2. Provision of components | Transfer posting from own unrestricted stock into "stock of material provided to supplier" (special stock O) |
| 3. GR of the end product | Receipt of the assembly plus automatic consumption of the components from stock O |
| 4. Subsequent adjustment | Correction if the supplier reports that more or fewer components were used |
| 5. Invoice | Supplier bills the processing service in Logistics Invoice Verification (MIRO) |
Subcontracting in Purchasing
The item category L (subcontracting) requires at least one component subitem. If a bill of material exists for the end product, the components are exploded from it into the item; you can also add components manually or re-explode. The PO price represents only the subcontractor's charge (processing plus any material the subcontractor itself contributes). Conditions can be stored in a subcontracting info record.
Stock of material provided to supplier (special stock O)
- Supplier-related special stock, managed at plant level (the goods are not in any of your storage locations).
- It is valuated (still your property) and relevant for planning. Subcontractor MRP areas can be used to plan the components separately per subcontractor so that provided quantities are not mixed into the plant's available stock.
- Possible stock types: unrestricted use and quality inspection only – no blocked stock. Consumption by the subcontractor is possible only from unrestricted use.
- The stock must be included in physical inventory.
- Report: MBLB (Stock with Subcontractor), selectable by supplier, plant, material, company code.
Ways to provide components
| Option | Tool | Notes |
|---|---|---|
| With PO reference | MIGO / Post Goods Movement, transfer posting 541 referencing the subcontracting item | Components and quantities proposed from the PO; not written to PO history (stock O is not PO-specific) |
| Without PO reference | MIGO transfer posting 541 | Material, quantity and subcontractor entered manually |
| From the cockpit | ME2ON Subcontracting Cockpit, or Fiori Subcontracting Cockpit / Display Subcontracting Stocks by Supplier | Shows requirements, stocks and pegged requirements per component; post the GI directly or create an outbound delivery (requires shipping data in Customizing, material master and the subcontractor's business partner) |
| Direct delivery from a third supplier | Component PO with the subcontractor as delivery address and the SC Vendor indicator set | The GR of the component PO posts straight into stock O of the subcontractor; this GR cannot be skipped |
The provision itself is a transfer posting from unrestricted use to stock O: one step with 541, or a two-step procedure (the handbook names 30A/30C), typically in combination with a delivery. In the Fiori Subcontracting Cockpit you can filter by subcontractor, component, assembly, plant and shipping status, post the GI per document item, create deliveries and calculate a component's stock balance at plant/supplier level (including direct deliveries in transit to the subcontractor). For refurbishment subcontracting in Plant Maintenance there is a separate monitor ADSUBCON.
Transfer postings within stock O
| Allowed transfer | Movement type |
|---|---|
| Plant to plant (one step) | 301 + O |
| Material to material | 309 + O |
| Quality inspection → unrestricted | 321 + O |
A transfer from one subcontractor to another is not supported.
GR of the end product
The GR is posted like any PO receipt with movement type 101. For the subcontracting item the system automatically adds one goods issue line per component (movement type 543, special stock O). So one material document contains the receipt of the assembly and the consumption of the components. If the subcontractor already tells you at delivery that consumption deviated, you simply change the component quantities before posting.
| Typical FI line | Account key | Debit/credit |
|---|---|---|
| End product stock (fee + component value) | BSX | Debit |
| Processing fee to GR/IR clearing | WRX | Credit |
Component consumption from stock O | GBB-VBO | Debit |
| Component stock reduction | BSX | Credit |
| Offset for component value in the end product | BSV (change in stock) | Credit |
Subsequent adjustment
If excess or under-consumption is only reported after the GR, you correct component consumption with a subsequent adjustment – possible only after at least one GR exists for the subcontracting item.
- MIGO: business transaction Subsequent Adjustment with reference to the PO item. For excess consumption enter only the additional quantity; for underconsumption also set the Underconsumption/Short Receipt indicator, which returns the quantity to stock
O(reverses consumption). - Post Subsequent Adjustment (Fiori, since S/4HANA 2021): enter the purchasing document, open item details and, per component, choose Overconsumption, Underconsumption or leave No Posting, then post.
Process flow
System steps
- Create the PO with ME21N, item category
L; check the component overview of the item (BOM explosion or manual entry). - Provide components via ME2ON (select by supplier, post GI) or via MIGO transfer posting
541. - Check stock
Oin MBLB or MMBE. - Post the GR of the end product with MIGO (
101); verify the543component lines in the material document. - If needed, post a subsequent adjustment with MIGO or the Fiori app.
- Enter the supplier invoice for the processing charge with MIRO.
Configuration (IMG)
SPRO › Materials Management › Purchasing › Subcontracting Cockpit (settings for delivery creation)
SPRO › Materials Management › Valuation and Account Assignment › Account Determination › … › Configure Automatic Postings (OBYC) › GBB / account modifier VBO, BSV
The Post Subsequent Adjustment app is available from SAP S/4HANA 2021 (stated in the handbook). The Fiori Subcontracting Cockpit complements the GUI cockpit ME2ON; the older ME2O is still found in many systems but ME2ON is the recommended GUI transaction.
- Subcontracting is represented by an item category (
L), not by a special stock indicator in the PO. Special stockOis the result in Inventory Management. - Stock
O: plant level, valuated, MRP-relevant, stock types unrestricted + QI only (no blocked stock). - Provision =
541; components consumed at GR =543; GR of end product =101. - Allowed transfers for
O:301,309,321; supplier-to-supplier is not allowed. - Provision with PO reference does not update the PO history.
- Subsequent adjustment only after a GR; underconsumption flag returns components to stock
O. - Third-party business (supplier delivers directly to a customer) is NOT subcontracting – a typical distractor.
Lesson 3 · Operating Pipeline Processes
After this lesson you can
- Explain the master data required for pipeline material
- Post withdrawals from the pipeline and settle them
Key concepts
Pipeline material flows straight into consumption through a pipe or line – oil, gas, water, electricity. It is never stored in your warehouse; it is simply "always there" and can be drawn in any quantity at any time. Unlike consignment, there is no purchase order and no goods receipt: the only inventory event is the withdrawal, which immediately creates a payable to the supplier.
| Master data | Purpose |
|---|---|
| Material master (with purchasing and accounting views) | Material type must permit pipeline handling (standard: PIPE) |
| Supplier | Owner of the pipeline material |
| Info record, category Pipeline | Mandatory; price used to value withdrawals; created for the standard purchasing organization of the plant |
| Source list (optional) | Defines the preferred supplier when several pipeline info records exist |
Material type PIPE and other material types
The material type controls (per valuation area) whether pipeline movements are mandatory or merely allowed. For type PIPE pipeline handling is the only option:
- Only pipeline movements can be posted in all valuation areas; no other goods movements.
- The material is neither procured via Purchasing nor planned by MRP.
- It is not stored and not inventoried; no inventory management takes place.
- Any quantity can be withdrawn at any time; it can be backflushed as a component in production orders.
If another material type only allows pipeline movements, the material can be stock-managed normally and also withdrawn from the pipeline.
Supplier determination
With only one pipeline info record, its supplier is proposed automatically. With several, the preferred supplier comes from the source list; if none is maintained, MIGO picks the supplier with the most favourable conditions. Other entry transactions require you to choose the supplier manually.
Withdrawals
Movement type + P | Consumption for |
|---|---|
201 | Cost center |
261 | Order |
281 | Network |
291 | Any account assignment |
The liability equals withdrawn quantity × pipeline info record price. Pipeline withdrawals do not change warehouse stock and do not affect availability. Settlement uses the same function as consignment: MRKO, again producing a settlement document and an output of type KONS. In account determination, the liability is posted via transaction key KON (the pipeline case is distinguished by account modifier PIP).
Process flow
System steps
- Create the pipeline material (type
PIPE) with purchasing and accounting data. - Create a pipeline info record with ME11 (info category Pipeline); optionally maintain a source list with ME01.
- Post the withdrawal with MIGO (Goods Issue, e.g.
201, special stockP, supplier, cost center). - Settle with MRKO (Inventory Management › Environment › Consignment › Consignment from Supplier › Liability).
Configuration (IMG)
SPRO › Logistics - General › Material Master › Basic Settings › Material Types › Define Attributes of Material Types (OMS2) › Pipeline mandatory / Pipeline allowed (per valuation area)
- Pipeline: no PO, no GR – only withdrawals; special stock indicator
P. - Required master data: material, supplier, pipeline info record (no customer master).
- Material type
PIPE: no procurement, no planning, no stock, no physical inventory; backflush possible. - Settlement for both consignment and pipeline: MRKO.
Unit summary & exam focus
| Feature | Consignment (K) | Subcontracting (O) | Pipeline (P) |
|---|---|---|---|
| Owner of goods | Supplier | You | Supplier |
| Org. level of special stock | Storage location | Plant | – (no stock) |
| Valuated | No | Yes | – |
| Stock types | Unrestricted, QI, blocked | Unrestricted, QI | – |
| Purchasing document | PO item category K | PO item category L | None |
| Info record category | Consignment | Subcontracting | Pipeline |
| Liability / invoice | MRKO on withdrawal | MIRO for service | MRKO on withdrawal |
T-codes in this unit
| T-code | Purpose |
|---|---|
| ME11 | Create purchasing info record (consignment / pipeline / subcontracting) |
| ME21N | Create purchase order (item category K or L) |
| MIGO | Goods movements: GR, provision 541, withdrawals, subsequent adjustment |
| MMBE | Stock overview |
| MB54 | Supplier consignment stocks |
| MRKO | Consignment and pipeline settlement |
| MBLB | Stock with subcontractor |
| ME2ON | Subcontracting cockpit |
| ME2O | SC stock monitoring for supplier (older cockpit) |
| ADSUBCON | Subcontracting monitor for refurbishment (PM) |
| MIRO | Enter supplier invoice |
| ME01 | Maintain source list |
| OMS2 | Define attributes of material types |
| OBYC | Automatic account determination |
| BP | Maintain business partner (supplier) |
Self-check questions
- Which master data must exist before you can post a GR into supplier consignment stock?
Answer
Material master, supplier (business partner) and a purchasing info record of category Consignment for that supplier/material and the plant's standard purchasing organization. - At which point does a liability arise in vendor consignment, and how is it valued?
Answer
On withdrawal for consumption or transfer to own stock (411 K); valued with the consignment info record price valid on the posting date of the withdrawal. - Can you post blocked stock for material provided to a subcontractor?
Answer
No. StockOsupports only unrestricted use and quality inspection. - Which movement types appear in the material document of a subcontracting GR?
Answer
101for the end product and automatically generated543(special stockO) lines for each consumed component. - Which transfer postings are allowed for stock
O?Answer
Plant to plant one-step (301), material to material (309), QI to unrestricted (321). Supplier-to-supplier is not possible. - Why is the provision of components with PO reference not visible in the PO history?
Answer
Because stock of material provided is managed per supplier, not per PO – the PO is only used as a template for the proposal. - What restrictions apply to a material of type PIPE?
Answer
Only pipeline withdrawals can be posted; it is not procured, planned, stored or inventoried; it can be withdrawn at any time in any quantity and backflushed in production orders.