Cycle Counts and Consigned Inventory

When the subinventory you're counting contains both consigned and nonconsigned quantities for the same items, the Generate Count Sequence process creates two count sequences:

• One for the consigned quantity (owned by the supplier)

• One for the nonconsigned quantity (owned by the organization)

To get an accurate physical count of the items owned by the organization, both quantities must be verified when counting the subinventory.

Adjustments that you make to the quantity of items not owned by the organization (consigned items) have a different financial impact because the supplier owns the items. Therefore, they must be counted separately from the nonconsigned items owned by the organization.

Adjustments for Nonconsigned Items

When you approve a cycle count adjustment for nonconsigned items, the cycle count process makes the adjustment when the count sequence approval is submitted. The application updates the on-hand inventory, and the books for the organization are updated to reflect the adjustment.

Adjustments for Consigned Items

When you approve a negative adjustment for consigned items, two things happen:

1. First, an implicit Transfer to Owned transaction occurs for the item.

2. Then, the cycle count adjustment takes place on the owned items. The consigned item is basically consumed by the organization, resulting in the generation of a consumption advice.

For positive adjustments of consigned items, these steps occur:

1. An implicit Transfer to Owned transaction takes place.

2. Then, a cycle count adjustment happens on the owned item.

3. Finally, an implicit Transfer to Consigned transaction occurs.

Positive adjustments for consigned material are more restrictive because the final quantity after a positive adjustment can't exceed the total quantity received from the supplier for the consigned items.