Scenario 10 — Consignment Procurement (Vendor Stock at Our Plant)
📊 Business Case — When & Why You Use This
Consignment is a special procurement model where a vendor parks their own stock at your site, but the goods stay the vendor's property until you actually withdraw and consume them. You only create a payable at the moment of consumption — not at receipt. It's the classic "use it, then pay for it" arrangement, and Pakistani textile and construction businesses lean on it heavily for high-volume raw materials.
🕐 When to use it
When a supplier agrees to stage material at your plant or DC and bill you only for what you draw — common for cement, fasteners, packaging, and other fast-moving raw materials you want on hand without tying up cash.
❓ Why it matters
It frees up working capital: stock is available immediately but you carry no liability and no expense until you consume it. Cash flow improves because payment is deferred to actual usage, settled periodically via MRKO.
👤 Who triggers it
Purchasing sets up the consignment info record and arranges delivery; the storekeeper receives special stock K; production/maintenance consume it; accounts payable run the periodic MRKO settlement.
🔁 The key distinction
The vendor owns the stock until you withdraw it. Goods receipt creates no liability — the payable is born only at consumption (and paid only at MRKO settlement). Until then you hold the vendor's goods on your shelf at zero cost.
💰 Financial Impact — The Easy-Money Example
DG Cement places 2000 bags of cement (₨650/bag) at PakSteel's Karachi DC on consignment. Watch when the money actually moves — the receipt is a non-event, and liability only appears the moment cement is withdrawn:
The big idea: with consignment, receiving stock is financially silent — no expense, no payable. The liability is created only at consumption (201-K), and it's only converted into a payable invoice at the periodic MRKO run. That deferral is exactly why consignment improves cash flow versus buying outright.
🇵🇰 The Business Story
🎯 What you'll learn
- Special Stock K — "vendor consignment stock" at our location
- Item Category K on PO (or special info record category)
- No invoice at GR — only when consumed (mvt 411-K) or settled via MRKO
- Liability only created at consumption — improves cash flow
- Stock visible in MMBE under "Vendor Consignment" column
HAWA-CEMENT-01 (HAWA, trading good — bought to resell) — create steps. First time? the why behind every field.
🔧 Step-by-Step
📦 Master Data
10.1 — Create Consignment Info Record · ME11
- ME11 · Vendor VEN-CONSIG (DG Cement) · Material HAWA-CEMENT-01 · Purch Org PKLO · Plant PK01
- Info Category: Consignment (option 2 on selection screen)
- Net Price:
650PKR/bag · Validity from-to - Save
🔄 Transaction Flow
10.2 — Receive consignment stock · MIGO mvt 101 with Special Stock K
- MIGO · Goods Receipt · "Other" (no PO needed — info record is enough)
- Mvt 101 · Material HAWA-CEMENT-01 · Qty 2000 BAG · Plant PK01 · SLoc GNRL
- Special Stock Indicator:
K(Vendor Consignment) · Vendor: VEN-CONSIG - Post
FI effect: NONE. No expense, no liability. Stock visible only as "vendor consignment" in MMBE.
10.3 — Consume consignment stock · mvt 201-K (consumption with K)
- MIGO · Goods Issue · Mvt
201· Special Stock K · Vendor VEN-CONSIG - Material HAWA-CEMENT-01 · Qty 500 BAG · Cost Center: any (e.g., PKKHI-MAINT)
- Post
NOW liability is created:
| Consumption (410000) | Dr 325,000 (500 × 650) | Cost Ctr |
| Vendor Consignment Liability (160100) | Cr 325,000 | — |
10.4 — Periodic settlement · MRKO
Monthly: settle consigment liability into a normal vendor invoice for payment.
- MRKO · Company Code PSPK · Vendor VEN-CONSIG · Plant PK01
- Settlement Period (this month)
- Execute → creates an invoice doc → vendor liability moves from "consignment" to "AP"
Pay normally via F-53/F110.
✅ Verification — Confirm Scenario 10 Worked
- MMBE → HAWA-CEMENT-01 → "Vendor Consignment" column shows 1500 BAG remaining
- MB54 → Consignment Stock report → see vendor's stock at our plant
🎓 Interview-Ready Answers
Q: When is a liability created in consignment procurement?
Not at goods receipt — receiving consignment stock (mvt 101 with special stock K) posts no FI document, because the goods are still the vendor's property. The liability is created only at consumption (mvt 201-K): the system debits a consumption account and credits a Vendor Consignment Liability account. That liability is then converted into a real payable at periodic MRKO settlement.
Q: What is special stock indicator K and how do you see it?
K is "vendor consignment" — stock physically at your plant but owned by the vendor and valued at the consignment info-record price. It's tracked per vendor, not in your own valuated stock, so it appears in the Vendor Consignment column of MMBE and in the consignment stock report MB54, not in your normal inventory G/L.
Q: What does MRKO do?
MRKO settles consignment (and pipeline) withdrawals for a period. It takes the accumulated consumption that posted against the consignment liability and creates a vendor invoice document, moving the balance from the consignment liability account into normal accounts payable so it can be paid via F-53 or F110.
Q: Why does consignment improve cash flow versus buying outright?
Because payment is deferred to actual usage. Buying outright creates a payable at goods receipt whether or not you use the material. Consignment lets you hold stock on your shelf at no cost, create a liability only when you consume, and pay only after the periodic MRKO settlement — so working capital isn't tied up in idle inventory.