The Supplier Consignment Inventory module lets you plan, order, receive, stock, track, and report supplier-consigned inventory using an automated system that reconciles inventories between suppliers and customers. Receiver matching and accounts payable (AP) transactions are deferred until the inventory is used. Customer use includes transfer, shipping, manufacturing, or distribution to its own customers.

This chapter describes how to set up and manage consigned inventory. It also gives an overview of the reporting tools available for reviewing and tracking consignment activity.

Overview of Supplier Consignment Inventory
Introduces the Supplier Consignment Inventory module and describes many of its functions.

Planning and Setup
Details the setup and prerequisite data and processes necessary to use the module.

Managing Consigned Inventory
Lists and describes the key management functions of the module and illustrates how to create transaction history, order, receive, and use consigned inventory, make inventory adjustments, process returns, rejects, and corrections, track, and manage consigned and aged inventory.

Reporting Supplier Consignment Inventory Data
Describes the reports and inquiries that allow evaluation and management of accounts and inventory.

The module extends the purchase order process by providing new transactions to receive material and identify it as consigned. These transactions also delay the standard AP process until material is consumed but allow the consigned items to be visible for planning. When items are consumed, such as in a manufacturing process, the receiver becomes available for receiver matching.

When consumption is reported back to the supplier, the supplier can transfer liability for the material in their system and issue an invoice if self-billing is not being used.

Using consigned inventory alleviates the need for the supplier to buy back the excess sent to the customer or remaining at the end of the consignment period. Because the supplier still owns the inventory, any excess is simply returned.

Figure 2.1 shows the complete consignment inventory workflow beginning with the contract and ending with accounts payable.

A contract is created between a customer and a supplier that dictates the items to be sold on consignment (step 1 in Consignment Inventory Business Flow). The contract is either a standard purchase order, a blanket purchase order, or a scheduled purchase order. It includes clauses on deferring liability. The contract may also include a maximum number of aging days that a customer is permitted to hold items without liability of payment. This ensures that inventory will be consumed in a timely manner.

As consigned inventory arrives, it is handled by the standard receiving process (step 2 in Consignment Inventory Business Flow). The inventory is immediately nettable to MRP and available for allocation according to the inventory status of the stock location.

Cumulative receipt quantities are automatically updated for scheduled purchase orders. Because the consigned inventory is not yet available for receiver matching, any supplier invoice process selecting open receipts bypasses receipts of consigned inventory until it is consumed.

Only shipping-related charges (trailer and freight) can be matched with the supplier invoice at the time of receipt.

The consigned inventory is eventually consumed by the customer (step 3 in Consignment Inventory Business Flow). Consumption occurs in the following ways:

See Using Supplier Consigned Inventory.

Consumption activity is logged (step 4 in Consignment Inventory Business Flow) for audit purposes and for batch processing. When reported to the supplier (step 5 in Consignment Inventory Business Flow), it triggers the transfer of liability. Consumption can be reported manually or using EDI eCommerce.

Once the inventory is consumed, the receiver is available for receiver matching, but only for the amount consumed. This can be a partial amount and may not always be the total amount on the receiver. The system tracks how much of the receiver is available for receiver matching. A cumulative quantity is kept to track the total material consumed on the contract.

Supplier Invoices are created either manually using functions in Accounts Payable (AP) or automatically by Evaluated Receipts Settlement (ERS). Both distinguish between receipt of consigned inventory that has been consumed and receipt of consigned inventory that has not been consumed; for example, when only a portion of an order has been consumed.

Because receiver matching follows standard processing, it is not discussed in this chapter.

See QAD Financials User Guide for details on AP processing.

Enterprise Material Transfer (EMT) lets you translate sales orders into purchase orders automatically and transmit those purchase orders to secondary business units (SBU) electronically using EDI eCommerce. By definition, the system creates all lines of EMT purchase orders as non-consigned. You cannot change the consignment setting on these system-maintained orders.

See QAD Sales User Guide for information on EMT.

Supplier Consignment Inventory Programs lists programs included in Supplier Consignment Inventory.

Figure 2.2 shows the sequence in which the Supplier Consignment Inventory module processes data.