Consigned Inventory Consumption

Ownership changes from the supplier to the buyer when the buying organization consumes the consigned inventory. This process is referred to as consumption.

These factors are important regarding the consumption of consigned inventory:

• Ownership change

• Explicit or implicit transaction

• Lot and serial

• Consumption transaction pricing

Ownership change

You can define consumption rules to specify whether the transfer of consigned inventory between two inventory locations triggers an ownership change (consumption). When you execute a transfer between organizations, your previously defined consumption rules determine whether or not the transfer results in an ownership change.

There are two types of consigned inventory transactions:

• Transfer to Owned: Transfers consigned inventory to owned inventory. This transaction transfers the ownership of the inventory from the supplier to the internal organization.

• Transfer to Consigned: Transfers ownership of the inventory from the internal organization to the supplier.

Explicit or Implicit Transaction

You can choose to perform consumption transactions both explicitly and implicitly.

With explicit consumption, you specify the external owning party whose goods will be transferred to the internal organization.

With implicit consumption, consumption is a result of an inventory transaction such as a sales order issue. Most transactions occur through implicit consumption. You can configure the transaction types that trigger consumption through the setup of consumption rules.

For implicit consumption, the application generates two separate inventory transactions. The first transaction represents the consumption (change in ownership). This table shows a Transfer to Owned transaction. This transaction records the change in ownership between the original owning party (Allied Supplier) and the new owning party (Organization M1).

Transaction Type	Item	Quantity	Owning Party	Owning Party
Transfer to Owned	100C	10	Allied Supplier	Organization M1

The second transaction represents the movement of inventory. This table shows the transaction to record the movement of inventory. The consumption rules indicate that ownership changes when Item 100C transfers from source subinventory FGI to destination subinventory Stores.

Transaction Type	Item	Quantity	Source Subinventory	Destination Subinventory
Subinventory Transfer	100C	10	FGI	Stores

The two, separate transactions allow the segregation of transactions involving the change in ownership and the movement of material.

Lot and Serial

You can select lot and serial controlled items for a specific owning party when executing consigned inventory transactions.

Consumption Transaction Pricing

When the consumption transaction takes place, the application uses the terms of the associated consignment agreement to calculate the price that's in effect at the time of consumption. The calculated price is based on the date of consumption since this represents the point when ownership transfers from the supplier to the internal organization. Oracle Inventory Management interfaces with Oracle Purchasing to determine the current price from the consignment agreement.