1. Using Inventory Management
  2. Consigned Inventory Lifecycle

Consigned Inventory Lifecycle

The lifecycle of consigned inventory spans several tasks and products from creating the consignment agreement in Oracle Purchasing through the final step of paying the supplier in Oracle Payables.

The consigned inventory lifecycle includes these tasks and products:

  • Creating consignment agreement and consignment order (Oracle Purchasing)

  • Receiving consigned material (Oracle Receiving)

  • Calculating cost (Oracle Cost Management)

  • Consuming material and creating consumption advice (Oracle Inventory Management)

  • Generating invoice and paying supplier (Oracle Payables)

The following figure shows the lifecycle of consigned inventory and the products responsible for each task.

Consigned inventory process flow

Creating Consignment Agreement and Consignment Order

Purchasing enables the creation of the consignment agreement and consignment order. The buyer and supplier negotiate the terms of the consignment arrangement and these details are captured on the consignment agreement.

Demand often originates from an inventory application. Purchase orders are created by inventory in response to requisitions originating from sources such as min-max planning. For example, a min-max threshold can be set so that when the on-hand quantity dips below 100, a requisition is automatically created, followed by a purchase order. The consigned inventory process then follows.

Receiving Consigned Material

The Receiving application allows receiving personnel to receive and put away goods into inventory. Once consigned inventory is received, the goods are in the physical possession of the buying organization, but the supplier still retains ownership of the goods.

Calculating Cost

The Cost Management application lets you generate the necessary cost accounting to take ownership of the material. Cost Management doesn't accrue payable liability or record consigned inventory received as an asset owned by the company. Instead, it allows the value of consigned inventory to be tracked in a separate account so that it isn't considered as owned goods for financial reporting.

Consuming Material and Creating Consumption Advice

Consumption takes place in Inventory Management. Consumption represents the event point where ownership of the inventory is transferred from the supplier to the buyer. The buyer periodically generates a consumption advice to inform the supplier about the quantity of inventory consumed.

Generating Invoice and Paying Supplier

Oracle Payables processes invoices for the consignment order and makes payments to suppliers. Before making the payment, the invoice must be matched to the consumption advice lines. Every invoice has a one-to-one relationship with a consumption advice number. Also, if you set up the pay on use option on the consignment agreement, you can pay your supplier immediately upon usage of the consigned inventory.