Consigned Inventory: It exists when inventory is in the possession of one

party, but remains the property of another party (Manufacturer).

Inventory physically at a customer site remains the financial possession of the
vendor and vendor is the owner. Inventory is considered transferred only
when agreements specify it is physically consumed.
The ownership transfer of the inventory can occur at the following places.
Sub inventory transfer
Back flush transactions
Move order transfer
Sales order pick
Transfer of ownership transaction

Steps:
1) Create a master item consigned item
2) Assigned it to ND1
3) Create a supplier with required fields checked and create sub
inventories.
4) Define consumption transaction rules (here we choose sub inventories
defined above and transaction types that you are planning to use for
ownership transfer)
5) Defined ASL for the item and supplier combination
6) Created BPA 1000207
7) Attached BPA to ASL
8) Defined sourcing rule : named as consigned sourcing
9) Assigned sourcing rule: named assignment set as consigned
assignment

10)
Define self-billing option at supplier level( Pay on field as USE
and Invoice summary level as consumption advice
11)
Next create standard purchase order against the blanket PO to
receive goods in store, approve and create receipts for this PO
12)
to see the owner of this quantity in our subiventory navigate to
Onhandquantity where we can see owning part is supplier only
13)
Now create consigned transactions and check On hand qty
14)
If on hand qty is nil then we are the owner. In this scenario we
can see that for the qty we created standard po we will be the owner
and for rest of the qty the supplier will be the owner
15)
Now run these concurrent programs Create consumption
advice, PO on receipt autoinvoice, Pay on receipt auto invoice and
this will create invoices.

Setup Steps in detail

1)Create a master item
Purchased, purchasable ticked
Consigned ticked under general planning
2) Assign to org
3) Create two subnventories
Setup -> organization -> Subinventories)
One sub inventory (consigntst) should be expense only sub inventory.
This means Asset Sub Inventory should be turned OFF.

 Second sub inventory (toconsign) should have the check box Asset
Sub Inventory turned ON.
4) Defining Consumption Transaction Rules (Setup -> Transactions ->
Consigned/VMI Consumption). Please note that this step has to be performed
after having a supplier ready / created.

Select the organization and transaction type (Subinventory Transfer,

Backflush Transfer, Sales Order Pick, Move Order Transfer).
You can enter only the transaction types that you are planning to use for
ownership transfer.
The organization has to be the item organization we defined earlier.
The weight value allows one to set the system processing order. The
system picks the transactions that have highest weight. Enter the value
1 in the column Weight.
The Consigned check box has to be turned ON
Enter the expense only sub inventory (consigntst) in From
Subinventory column.
Enter the second sub inventory (toconsign) in To Subinventory
column.
Enter the inventory item we created in earlier steps.
5) Creating a supplier (Supp_consign) with the following parameters
(Supply Base -> Suppliers)
In the Classification Tab, set Supplier as the value for type field.
Create a site (S1) with proper address, contact information.

 In the general tab of Site, make sure only Pay and Purchasing
check boxes are ON.
In the Purchasing tab of Site, in the Self-Billing section select the value
Use for Pay On field and Consumption Advice value for
Invoice Summary Level field.
Make sure the Ship-To and Bill-To locations are appropriately set
6) Creating ASL
(Supply Base -> Approved Supplier List) we will create ASL and associate
the blanket purchase agreement for our consigned item.
Create ASL for item test_consigned_item with supplier
supp_consign as a direct and approved supplier. This can be done by
setting the value of Business field to Direct and Status field to
Approved respectively.
In Record Details Tab, ensure that the value for field Global is set
to Yes.

7) Creating BPA
(Blanket Purchase Agreement)
Create a BPA for item test_consigned_item with the approved
supplier supp_consign
Make sure Pay On field in the Terms window is null
Save and Approve the BPA
Note down the BPA number 4419

8) Associating ASL with BPA number (Supply Base -> Approved Supplier
List->Attributes)
Click on the attributes button in the ASL screen and this will open the
Supplier Item Attributes window.
In the Source Documents Tab, enter a record by specifying the value
in Type field as Blanket and Number field with the previously
created BPA number4419.
In the Inventory Tab, Turn ON the Consigned from Supplier check
box and also specify the Billing Cycle (Days) field with value
0(zero)

With the above setups, we can say that the required setups are complete for
consigned inventory transactions via sub inventory transfer method. To
validate if the setups are appropriate or not, try creating a Release for the
BPA we created. The system should throw up a message You cannot create
releases for Consigned material. This indicates that the setups are
appropriate.