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Consignment is one of those quiet superpowers in SAP Materials Management (MM): the vendor places stock at your site, you keep it on-hand, but you only pay when you actually use it. Done right, it improves cash flow, boosts supply flexibility, and simplifies replenishment—without adding accounting noise at goods receipt.

Below is a practical, end-to-end guide you can hand to analysts, buyers, and warehouse leads. It covers the process flow, the master data you need, movement types, settlement, reports, and real-world tips.

TL;DR (What makes consignment different?)

  • Ownership stays with the vendor until you consume the material.
  • No liability or inventory value at goods receipt; it’s tracked as vendor special stock (type K).
  • You pay on consumption (or when you transfer to own stock), typically via MRKO settlement.
  • Cash-flow friendly: you carry stock physically without tying up working capital.
  • Great for fast-movers and uncertain demand where you want availability without over-buying.

The Business Idea in Plain English

With consignment, vendors place materials in your warehouse or at point-of-use locations. You scan/receive them into SAP, but the goods are tagged as consignment stock visible and usable, yet not owned or valued by you. When production or maintenance actually uses the material (or when you explicitly transfer it to your own stock), SAP records consumption and later settles those quantities and prices back to the vendor. Think of it as “stock on your floor, vendor on the hook until you consume.”

Core Process Flow (with common T-Codes)

  1. Create Consignment Info Record – ME11
    Create a purchasing info record of type Consignment for material/vendor/plant. Maintain the price and relevant conditions here; this is the reference used for settlement later.
    Tip: Treat this price like a contract price keep it current; it drives what you’ll pay at settlement.
  2. Create Purchase Order – ME21N
    Use item category K (Consignment). The PO often has a zero net price line, because the actual payable amount is determined during settlement from the info record conditions. No account assignment is needed.
  3. Goods Receipt to Consignment – MIGO
    Post GR against the PO. The stock appears in your warehouse as consignment special stock (K).
    • No accounting document is created at GR.
    • Stock is visible in MMBE as “Consignment.”
    • You can store it anywhere (bin, storage location) just like regular stock.
  4. Consumption (Goods Issue) – MIGO (or other GI transactions)
    When production, maintenance, or a cost center uses the material, post a goods issue from consignment. This reduces consignment stock and marks those quantities as billable to you.
    • Typical movement types include 201 K (to cost center), 261 K (to production order), 221 K (to project), etc.
    • You may also transfer consignment to own stock using 411 K if you want ownership before actual consumption (e.g., for resale or internal staging policies).
  5. Settle with the Vendor – MRKO
    Settlement aggregates all posted consumptions/transfers (e.g., 201 K / 261 K / 221 K / 411 K) over a date range, uses the consignment info record price, and generates the vendor credit memo. This is when the liability is recognized and the vendor gets paid.
    Good practice: Run MRKO on a cadence (weekly or monthly) with a variant by purchasing organization/plant.

Why Businesses Use Consignment (Benefits)

  • Better cash flow: You avoid tying up cash at receipt; you only pay when materials truly leave consignment.
  • Inventory flexibility: You can hold a wider buffer for critical or variable-demand items without financial penalty.
  • Supplier partnership: Vendors gain share-of-shelf at your site; you gain service level. It’s a mutual trust play.
  • Operational simplicity: Day-to-day handling is familiar to warehouse teams; the key difference is stock category and later settlement.

Master Data & Configuration Touchpoints

1) Material Master

  • Standard MRP, storage, and unit settings apply. No special material type is required.
  • Ensure correct valuation class and price control for when stock is transferred to your ownership (411 K) or consumed and settled.

2) Vendor Master

  • Standard purchasing data; consignment doesn’t require a special account group.
  • Make sure the vendor is flagged correctly for your purchasing org and plant.

3) Purchasing Info Record (Consignment) – ME11

  • Create an Info Record of category “Consignment.”
  • Maintain conditions/prices; these are crucial for MRKO settlement.
  • Maintain tax and inco terms as needed. MRKO will use pricing/tax data.

4) PO Setup – ME21N

  • Item Category K is the differentiator. Schedules can be used for planned deliveries.
  • Often price in the PO is informational; settlement price comes from the info record.

5) Settlement – MRKO

  • Configure variants for plants/purchasing orgs.
  • Coordinate with AP on posting period and tax behavior.
  • If you use output or interfaces for vendor docs, align with finance on the posting and credit memo flow.

Movement Types Cheat Sheet (Common Ones)

  • 101 (GR) to consignment via PO item category K: puts stock into consignment special stock, no accounting.
  • 201 K / 261 K / 221 K (GI from consignment): consumption to cost center, order, or project; drives settlement.
  • 411 K (transfer consignment → own stock): you take ownership; drives settlement.
  • Returns/Corrections mirror the above with appropriate reversal movement types (e.g., 262 K etc.).

Note: In S/4HANA, most historical MB1A/MB1B transactions are consolidated in MIGO; power users can still post these movement types there.

Reporting & Controls You’ll Actually Use

  • MMBE / Stock Overview: See consignment quantities alongside own stock; look for the Consignment bucket.
  • MB54 – Consignment Stocks: List consignment stock and related liability preview.
  • MRKO – Settlement: Display and settle consumptions by vendor/material/plant and date range.
  • ME2 purchasing lists:* Track open POs and delivery status for consignment items.
  • Physical Inventory: You can count consignment stock by vendor (special stock K) using the standard MI* transactions with the vendor specified.

How Consignment Interacts with MRP & Operations

  • Availability: Consignment stock is physically present and available for use. From a planning perspective, most businesses treat it much like unrestricted stock because it is on the floor.
  • Netting in MRP: In standard practice, consignment quantities can be considered in net requirements. Verify your local settings and planning procedures; your planners should understand that it’s usable inventory, just not yet owned.
  • Replenishment: Vendors typically replenish based on VMI, min/max agreements, forecasts, or your scheduled consignment POs. The PO (K) is still the logistics object to receive against.

What Actually Hits Finance (and When)

  • At GR to consignment: No accounting entry. Inventory isn’t valued, since it’s not owned.
  • At Consumption/Transfer (e.g., 201 K / 261 K / 221 K / 411 K): Quantities become eligible for settlement.
  • At Settlement (MRKO): The vendor credit memo is posted:
    • Debit: consumption/cost (or inventory if you did 411 K to take ownership first)
    • Credit: vendor payable
      Taxes and freight/conditions are applied per the consignment info record and MRKO logic.

When Consignment Shines (Use Cases)

  • High-usage, cost-sensitive consumables (fasteners, chemicals, MRO items).
  • Demand variability: items with unpredictable draw where you still need availability.
  • Supplier-managed replenishment: when vendors are willing to monitor and refill on your behalf.
  • Ramp-ups or NPI: keep materials on-hand during uncertain early demand without capitalizing everything.

Common Pitfalls (and How to Avoid Them)

  1. No Consignment Info Record Price
    • Symptom: MRKO can’t settle or settles at the wrong rate.
    • Fix: Maintain accurate prices and validity periods in ME11 (Consignment).
  2. Wrong Stock Type at GR
    • Symptom: GR posted to own stock instead of consignment, creating unwanted inventory value/liability.
    • Fix: Ensure item category K on PO and verify the MIGO line shows consignment special stock.
  3. Goods Issues Without ‘K’
    • Symptom: Consumption posted from own stock (no ‘K’) when it should have reduced consignment, leaving consignment balances stuck.
    • Fix: Train warehouse teams: when consuming from consignment, use movement types with K (e.g., 201 K, 261 K).
  4. Infrequent Settlement
    • Symptom: Large swings in vendor payables at month-end, unhappy suppliers, or audit surprises.
    • Fix: Schedule MRKO routinely (weekly/monthly) with a shared calendar between Purchasing and AP.
  5. Physical Inventory Gaps
    • Symptom: Book vs. floor differences linger.
    • Fix: Include consignment special stock K counts in cycle counting and year-end procedures; involve the vendor if required by contract.

A Quick Walk-Through Example

  • Set up a consignment info record (ME11) for Material M-100, Vendor V-200 at Plant P-300 with a valid price.
  • Place an order via ME21N with item category K for 1,000 units.
  • Receive 1,000 units in MIGO. Stock is visible as consignment in MMBE; no accounting document is created.
  • Use 400 units for a production order (261 K). Later, transfer 100 units to your own stock (411 K) for resale staging.
  • Settle week-end via MRKO: the 400 consumed + 100 transferred are priced per the info record. A vendor credit memo posts; AP pays per standard terms.

Implementation Tips & Governance

  • Define your cadence for MRKO and who owns it (Purchasing? AP?). Publish a short SOP with screenshots.
  • Train on movement types—especially the “K” variants—using a one-pager for warehouse and production.
  • Align tax and conditions with Finance early. MRKO isn’t MIRO; ensure downstream reporting matches expectations.
  • Monitor MB54 & MRKO regularly to spot anomalies (stagnant consignment stock, missing prices, unusual consumption patterns).
  • Start with a pilot (one plant, few materials, one vendor) before scaling.

Key Transactions (Quick Reference)

  • ME11 – Create Consignment Info Record
  • ME21N – Create PO (Item Category K)
  • MIGO – GR to consignment / GI from consignment (e.g., 201 K, 261 K, 411 K)
  • MMBE – Stock Overview (see Consignment bucket)
  • MB54 – Consignment Stocks
  • MRKO – Consignment Settlement (and display)

Final Word

Consignment in SAP MM is a win-win when processes and master data are clean. You get the service level of local stock without the capital burden of immediate ownership. Vendors get sticky, predictable demand and closer collaboration. Set up your info records correctly, train on the “K” movement types, and run MRKO like clockwork and consignment will quietly do what it does best: keep materials flowing and cash free for what matters.

The author, Ray Hornbrook, has many years of SAP functional and technical experience.  Ray started his career in SAP as a MM/PP Subject Matter Expert (SME) for a SAP implementation and is now a Senior Level SAP Consultant.  Since Ray has worked both sides of SAP, business end user and IT professional, he is able to communicate effectively with both IT and Business team members. Having a background as an SAP business end user has helped Ray greatly in his consulting career.  The business background helps him better communicate with the business members of the team.  As well as helping bridge gaps in communication between the IT and Business team members.

To find out more about Ray Hornbrook please check out his LinkedIn profile by clicking HERE.

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