Consigned Inventory in Oracle Cloud

In this article, we will review the concepts of Consigned Inventory in general followed by the setups required in Oracle Cloud.

Consigned Inventory:

Consigned inventory denotes a unique arrangement where ownership and possession diverge. While one entity, the consignor, retains legal title to the goods, another entity, the consignee, takes physical custody and responsibility for their sale. This mutually beneficial agreement allows the consignee to offer a diverse product range without upfront investment, while the consignor expands their market reach and mitigates risk on unsold items.

Believe it or not, consignment inventory pops up all around us! Here are a few places you might have encountered it without even realizing.

Boutique clothing stores: Often feature independent designers' work on consignment, reducing upfront costs for both the store and designer.

Seasonal stores: Like Halloween shops or Christmas tree lots, often operate solely on consignment inventory, minimizing the risk of holding onto unsold seasonal items.

Art galleries: Showcase artwork from individual artists on consignment, giving artists valuable exposure while taking a commission on sales.

This article examines the key steps involved in implementing the Consignment flow within the Oracle Cloud. We will guide you through essential configuration aspects and provide a overview of the setup process.

1. Consignment Agreement: Formalizing a consignment relationship with your supplier, this agreement governs the rights and responsibilities related to selling their goods.From Procurement- Create Agreements, select the style : Consignment Agreement

Consignment Agreement includes the consignment terms, items, delivery details and quantities. Consumption advice frequency and Billing cycle closing date will be considered for creating the consumption advise.

2. Purchase Order Creation for Consignment items:

In this step a purchase order is logged for the items specified in consignment agreement.

3. Receive Purchase Order

Items received through a consignment purchase order are considered consignment stock. While buying organization possess them, the supplier retains ownership.

4. Consume the Material

Ownership of the material changes from the supplier to buying organization once the material is consumed.

• Consumption Rules can be defined to trigger the ownership change.

Navigation:

Setup and Maintenance -- Manufacturing and Supply Chain Materials Management -- Inventory Management -- Manage Consumption Rules

5. Transfer to Owned

As part of a consignment agreement, the supplier and buyer may define an aging period for unsold inventory. This period sets the timeframe after which ownership potentially transfers, as stipulated in the agreement's specific terms.

Inventory Managers can review the aging details of the consigned inventory from the screen - "Manage Consigned Inventory Aging". This screen provides ability to search by items, Aging Expiration and other fields like shown below.

Once the aging expires, application does not currently transfer the ownership automatically. Inventory Manager needs to make a "Transfer to Owned" transaction.

6. Consumption Advice:

Imagine consumption advice as a regular report card for your consigned inventory. It's a detailed summary of how much of the supplier's goods you've used or sold within a specific period, known as the consumption advice frequency. This frequency could be daily, weekly, monthly, or any timeframe agreed upon by both parties.

ESS Job: Create Consumption Advice

Process can be run by Supplier , Supplier Site.

The consumption advice generation frequency is determined by adding the consumption advice frequency (Daily, Weekly, or Monthly) to the closing date of the billing cycle. Both these parameters are available for selection in Consignment Agreement in Consignment Terms section.