Managing
Customer
Consignment
Inventory
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Managing Customer Consignment
• Agenda
 Consignment scenarios
 Benefits of consignment programs
 Determine products for consignment and agreements
 Internal controls for consignment
 Managing customer consigned inventory in Oracle –
Bill Only, Inventory Interface Workflow
 Oracle Set Ups
 Manual Consignment Pull Order Process
 Processing Errors
 Customizations to Improve Process
 Questions and Answers
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Managing Customer Consignment
Consignment Scenario
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Consignment Scenarios
• Consignment Scenarios
 Customer consigned inventory at customer
warehouse
 Customer consigned inventory at 3rd party
warehouse
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Consignment Definition
Customer Consigned Inventory is a
practice where you place and maintain
goods belonging to you at your
customer locations. Customer does not
take ownership of product until used
(pulled).
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Managing Customer Consignment
Benefits of
Consignment Program
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Benefits of Consignment Program
• Benefits of Consignment Program
Customer
 Customer Satisfaction
 Reduced time to Market for new product
 Shorter lead times
 Competitor edge
 Service parts for critical equipment
 Save expedite freight costs
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Benefits of Consignment Program
• Downside of Consignment
Inventory management ( scraps, cycle counts,
replenishment)
Managing of obsolete parts
Timely Pull notifications
Shipment notice (3rd Party Warehouse)
Customer forecast and supplier production
schedule conflicts
Invoice and payment
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Managing Customer Consignment
Consignment
Products
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Consignment Products
• Determine products for Consignment
 Customer
 Products with high-degree of demand uncertainty
Supplier
 Products with high-degree of sales potential but demand is
not reasonably known or stable
 New unproven products
 The introduction of existing product lines into new sales
channels.
 Very expensive products where sales are questionable.
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Consignment Products
• Consignment product characteristic
Transparent to the user
Requires no special handling in Shipping
and Receiving
Viewable as available in inventory
Non-nettable and not available for planning
Can be cycle counted
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Managing Customer Consignment
Consignment
Agreements
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Consignment Agreements
• Consignment Agreements
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Establish min/max inventory levels with a periodic review
Determine criteria for consigned item
Establish point of transfer of ownership
Frequency and means of communication for consumption advice
Consumption policy (eg. FIFO)
Modified payment terms and agreed payment process
Address stolen, lost, damaged, removal or destroyed consigned material
Means to share and review customer forecast and schedule
Determine who’s responsible for consignment material overhead cost (taxes,
insurance…)
Consigned item return policy
Determine responsibility for the physical security of the consigned item
storage location.
Inspection and cycle counting
Delivery performance measurements (Based on stock outs)
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Managing Customer Consignment
Internal controls
For Consignment
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Internal Controls for Consignment
• Internal control for consignment
Establish procedure to account for consigned
goods movement
Establish billing, shipping and receiving
procedure with necessary approval
Record adjustment for shrinkage and lost
Segregate consigned and non-consigned goods
Supplier agreement must be approved by
company lawyers and does not violate any
government regulations
Reconciliation and confirmation of consigned
goods by consignee
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Managing Customer Consignment
Oracle setups for
Customer
Consigned Inventory
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Consignment Workflow
Billing workflow
Send
consumption
advice
to supplier
Create consignment
sales order for
consignment
customer
Generate invoice
for billings
Replenishment workflow
Run min/max
planning for
consignment
subinventory with
restock = ‘Yes’
Customer
Import and
create internal
requisition
Create
internal sales
order via
order import
Pick release
and ship goods
to consignment
location
Supplier
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Inventory and Item Setups
Define Location
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Inventory and Item Setups
Define Consignment Organization and Assign
Location
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Inventory and Item Setups
Define Consignment Sub-Inventory
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Inventory and Item Setups
Enable Item in Consignment Org
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Inventory and Item Setups
Set Min/Max value for consigned Item
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Inventory and Item Setups
Move Inventory into Consignment SubInventory
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Price List Setups
Define Consign Customer Price List and
Assign Items
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Order Management Setups
Define Order Type
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Order Management Setups
Assign Line Flow - Bill Only with Inventory
Interface (Generic)
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Order Management Setups
Workflow Diagram (Generic)
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Order Management Setups
Assign Document Sequence to Order Type
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Order Management Setups
Enable Valid Ship Method to Consignment Org
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Customer Master Setups
Assign Order Type, Price List, Consignment
Org and Valid Ship Method
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Managing Customer Consignment
Order Process
Order process
for
Customer Consigned Inventory
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Order Process
Enter Order Header Details
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Order Process
Verify Consignment Warehouse Defaults
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Order Process
Enter Line Details
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Order Process
Enter Consignment Sub-Inventory on Line
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Order Process
Schedule Line
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Order Process
Book Order
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Order Process
Line Status Goes to Fulfilled
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Order Process
Workflow Proceeds to Invoice Interface
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Order Process
Line Status Goes to Closed
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Managing Customer Consignment
Invoice Process
Invoice process
for
Customer Consigned Inventory
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Invoice Process
Run Autoinvoice
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Invoice Process
View Invoice
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Verify Inventory Decrement
View Material Transaction
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Managing Customer Consignment
Replenishment process
for
Customer Consigned Inventory
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Replenishment Process
Run Min-Max planning report
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Replenishment Process
Create and approve internal requisition
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Replenishment Process
Create internal sales orders
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Replenishment Process
Order import
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Replenishment Process
Pick and Ship Confirm Replenishment
Inventory
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Verify Inventory Increment
View Material Transaction
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Process Errors/Issues
Booking Order with No Sub-Inventory
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Process Errors/Issues
Line Will Go to Booked without SubInventory – Workflow Stops
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Process Errors/Issues
Order Status Remains Booked-must reenter
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Process Errors/Issues
Workflow Error – No Sub-inventory or
Inventory with Custom WF
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Process Errors/Issues
Booking Order with Not Enough Inventory
– Line Status will Proceed to Fulfilled
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Process Errors/Issues
Line Status will Proceed to Closed and
Order is Eligible for Invoice
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Process Errors/Issues
If you have No for Allow Negative,
Inventory Transaction will get stuck in
Transaction Interface
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Process Errors/Issues
Reconcile Inventory and Resubmit
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Process Errors/Issues
• Other Standard Types of Error Messages
– Invalid Item
– Invalid Shipment Method (OK for Manual
Generic WF, errors in Order Import)
– Item not found on Price List
– Item not found on Secondary Price List
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Possible Customizations
• Add quantity check in WF
• Added a second check in WF to flag over consumption
of consignment inventory levels
• Customize Sales Order Workflow Report
• Create Custom WF Error Report
• Create Table to Store Customer and Sub-Inventory
Details for Automatic Processing
• Create Order Import Error Messages for EDI
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Possible Customizations
Bill Only with Inventory Interface
Workflow Customization
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Possible Customizations
Flow Stops if No Qty On Hand
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Possible Customizations
Status on Line Remains Booked until
Inventory is Reconciled
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Possible Customization
Sales Order Workflow Report – Order
lines Booked but not Fulfilled
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Possible Customization
Table to Store Customer and SubInventory Details for Automatic
Processing of EDI/Imported Orders
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Conclusion
• Standard Bill Only with Inventory Interface Workflow
will work for Manual Order Entry without
customization. Must understand:
– Flow will fulfill and go to Invoice Interface and Closed with
or without enough inventory
– Need to manage Negative Inventory conditions
– If user fails to enter Sub-inventory at time of booking – Order
is stuck in Booked
– Will not work for imported Orders – need to custom
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Conclusion
Q &A
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