Consignment stock is any stock that the supplier has placed in the warehouse without charge. It remains the property of the supplier until it is actually used (issued) and should not be included in the value of the stock on hand. At the point of issue a liability to pay for the amount used is incurred - for conventional stock the liability occurs when the stock is ordered (commitment) and when it is received at the warehouse (accrual). When consignment stock is re-ordered, the purchase order needs to be marked as a "consignment stock replenishment" order to ensure that the supplier does not raise an invoice for it. The invoice is raised on the basis of the stock issued each month.
This documents describes how consignment stock is set-up and used in the OCS applications.
To understand how the system will treat consignment stock it is first necessary to understand the concept of sub-stock. Each stock item has its descriptive details established in the catalogue, its costing, usage and other quantitative details are held in the inventory system. A separate Inventory record is kept for each warehouse within each site within each company. Multiple inventory records can be maintained for the same stock number by appending a sub-stock number. This is a two digit number that acts as a suffix to the stock number to form a unique inventory identifier. Two different sub-stocks are essentially two completely different stock items except they share a common stock number and hence common catalogue descriptive details.
For an example, consider the following Catalogue and Stores Inventory tables:
Catalogue Item Table
|00001974||Cummins Fan Belt|
|00025056||Alternator Vee Belt|
They can be combined via Inventory Maintenance to give the following distinct stock items:
Stock No. Sub-Stock Description & Type 00001974 01 Cummins Fan Belt - Own Stock 00001974 02 Cummins Fan Belt - Consignment Stock 00001974 03 Cummins Fan Belt - Used 00001298 01 Cylinder Head - Own Stock 00001298 02 Cylinder Head - Consignment Stock 00001298 04 Cylinder Head - Repaired 00002279 02 Uncalibrated Dipstick - Consignment Stock 00002279 03 Uncalibrated Dipstick - Used
Whether or not a particular sub-stock is consignment stock is specified at stock item level and not by sub-stock code. Therefore it is good practice, although not essential, to use a consistent numbering scheme for all sub stocks to avoid confusing situations like the following:
|00001974||02||Cylinder Head - Own Stock|
|00001974||04||Cylinder Head - Consignment Stock|
|00001974||02||Uncalibrated Dipstick - Consignment Stock|
|00001298||04||Uncalibrated Dipstick - Own Stock|
Stock Item Maintenance
Consignment stock items are set up using the stock item maintenance screen just as for normal stock. The consignment checkbox must be ticked and the consignment supplier code must be entered.
To cater for the unlikely situation of the same part being on consignment from two different suppliers, two different stock numbers would be needed.
The following restrictions apply to consignment items. The consignment details cannot be changed on a stock item while their are any stock on hand figures. Only one sub-stock can be set to consignment per stock number. In a multi-site / multi-warehouse environment all consignment stocks for the one stock number must be sourced from the one supplier.
Consignment stock sitting in the store remains the property of the supplier until it is actually "used" via the stock issues function. Therefore it must not appear as an asset in the ledger and no financial transactions are generated at receiving time. The issues function still generates all of the normal transactions except the relevant consignment stock transaction codes must be used in both the data distribution module and inventory.
|Stock Type||Normal Issue||Credit Issue|
For consignment issues the accounting entries will still debit the relevant cost centre instead of crediting the stock asset account, the relevant purchase control account must be used - it is imperative that this is defined correctly by the system accountant in the data distribution module.
Data Distribution Module - Example Transaction Posting Table Entries:
Consider the situation where we take delivery on $100 worth of stock, issue $80 worth, return $10 back to the store and receive an invoice at the end of the month. For normal stock (order type 'SR') the invoice will be for the stock received and should be for $100. For consignment stock (order type 'CS') we are only invoiced on the basis of stock actually used hence the invoice should be for $70. The relevant account entries are summarised in the tables below:
|Transaction||DDM 'Tranpost'||Stock Asset||Expense Account||Purchase Control - SR||Creditors Control|
|Transaction||DDM 'Tranpost'||Stock Asset||Expense Account||Purchase Control - CS||Creditors Control|
Notice how the optional use of separate order types in the data distribution module transaction posting table record enables separate ledger control accounts to be maintained for consignment stock that has been "used but not invoiced", in parallel with the normal stock's "received but not yet invoiced" purchase control account.
Consignment invoices may have variations which if allowed will post to the transaction code SINV-PVCS, which will post to a variance account, this transaction posting table entry should be set up by the system accountant.
Requisition & Order Types
Consignment stock uses different requisition and order types to normal stock. These can be set-up in the requisition type and order type maintenance screens.
Two different requisition/order types must be set up for consignment stock. The first is the consignment replenishment requisition/order type, which is used for ordering consignment stock from the supplier. The second is the consignment usage requisition/order type which is used to track consignment usage and for invoice matching. ( When consignment stock items are issued a consignment usage order line is created automatically which is then used in invoice matching )
Ordering & re-ordering
The site master screen specifies the requisition type to be used for consignment stock re-orders. The normal replenishment procedures are used to order consignment stock, the only difference being the use of this requisition type instead of the normal stock replenishment type.
Requisition and purchase orders may be raised manually in the purchasing system but consignment stock items can only be raised using consignment replenishment requisition/order types.
Inspections are not permitted for consignment stock items.
Adjustments are not permitted for consignment stock items.
Stock takes may be performed on consignment stock but they will not adjust the quantity on hand. The stock on hand may only be adjustment by receipts, receipt amendments or goods outwards.
Consignment Stock Price
The price for a consignment reorder is calculated as per normal stock, either an agreement price, supplier price or manually entered price will be used. The consignment stock record holds and average unit price which is recalculated with each new delivery as per any other normal stock.
The average unit price is then used to determine the price of goods that are issued and hence the price that the goods will be invoiced at. This price will be shown on the consignment usage report which forms the basis of the invoice.
Consignment Usage Report
The consignment usage reports shows the quantity and value of consignment stock used for a month. This report should be sent to the consignment supplier to show the amount of consignment stock used. The supplier should then invoice you the amount shown on the report.
Invoices may be entered and matched against consignment deliveries or non-consignment deliveries, but not a mixture of both.
For stock that is carried on a consignment basis, the issue function creates delivery records and purchase order lines. A separate purchase order is created for each consignment stock item that is issued, the purchase order number is the same as the stock number.
Delivery records are summarized at a stock item level within year and period. (eg. 0001 is the 1st period of 2000), and the delivery docket contains one line for each consignment stock item issued in that period, the total of the delivery line will be the sum of all issues and credit issues for that stock item in that period.
When entering a supplier invoice, the user enters the document search criteria by entering the consignment replenishment order type and entering a delivery docket number (year and period), all consignment stock items issued in that period will be listed, enabling the user to select them for the invoice.