# SAP Consignment Stock vs Owned Inventory Cost Calculator

> Source: https://netray.co/tools/sap-consignment-vs-owned-stock-cost-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Weighs the carrying cost you avoid with supplier-owned consignment stock against the price premium suppliers usually ask for, and finds the break-even premium.

## Category

sap

## Erp

SAP S/4HANA

## Audience

- SAP MM consultant
- Buyer
- Procurement manager
- Controller

## Tool

**Kind:** calculator

**Currency:** $

**Inputs:**

#### Average stock held on consignment

**Key:** avg_qty

**Type:** number

**Default:** 2000

**Min:** 0

**Step:** 50

**Unit:** units

#### Unit price

**Key:** unit_cost

**Type:** number

**Default:** 18

**Min:** 0

**Step:** 0.5

**Unit:** $

#### Annual consumption

**Key:** annual_usage

**Type:** number

**Default:** 24000

**Min:** 1

**Step:** 500

**Unit:** units

#### Annual carrying cost rate

**Key:** carry_pct

**Type:** number

**Default:** 20

**Min:** 0

**Max:** 60

**Step:** 1

**Unit:** %

**Help:** Capital cost, storage and insurance. Obsolescence risk shifts to the supplier under consignment.

#### Consignment price premium

**Key:** premium_pct

**Type:** slider

**Default:** 2.5

**Min:** 0

**Max:** 10

**Step:** 0.5

**Unit:** %

**Help:** Extra price the supplier charges for holding the stock.

#### Extra annual admin cost

**Key:** admin_cost

**Type:** number

**Default:** 1200

**Min:** 0

**Step:** 100

**Unit:** $

**Help:** Periodic settlement with MRKO, reconciliations and stock counts at the supplier.

**Outputs:**

#### Working capital not tied up

**Key:** wc_freed

**Expr:** avg_qty * unit_cost

**Format:** currency

#### Carrying cost avoided

**Key:** carry_saved

**Expr:** wc_freed * carry_pct / 100

**Format:** currency

#### Premium paid on consumption

**Key:** premium_cost

**Expr:** annual_usage * unit_cost * premium_pct / 100

**Format:** currency

#### Net annual benefit of consignment

**Key:** net_benefit

**Expr:** carry_saved - premium_cost - admin_cost

**Format:** currency

**Primary:** true

#### Break-even price premium

**Key:** breakeven

**Expr:** (carry_saved - admin_cost) / (annual_usage * unit_cost) * 100

**Format:** percent

**Primary:** true

**Description:** Highest premium at which consignment still pays.

**Chart:**

#### Net annual benefit vs consignment premium

**Type:** line

**X:** premium_pct

**From:** 0

**To:** 10

**Steps:** 20

**Series:**

- net_benefit

**Disclaimer:** Ignores stockout benefits, supplier risk, price lock-in and any one-time setup cost. Confirm contract terms, including ownership of obsolete stock, before deciding.

## Content

**Intro:** In SAP, consignment stock (special stock K) is owned by the supplier until you withdraw it, and you pay when you consume it, usually through settlement with transaction MRKO. It frees cash but suppliers rarely do it free. This calculator shows whether the trade is worth it.

**Sections:**

#### How to use the calculator

**Body:** Enter the average quantity you would hold on consignment, the unit price, yearly consumption and your carrying cost rate. Then set the premium the supplier asks and any extra administrative cost. The tool reports the working capital you avoid tying up, the carrying cost saved, the premium you would pay, the net benefit and the break-even premium. Slide the premium to see where the benefit turns negative.

**Bullets:**

- Use average, not peak, consignment stock
- Include internal admin effort
- Ask suppliers for the premium in writing

#### The economics

**Body:** Owned stock costs unit price times quantity times carrying rate each year. With consignment the supplier holds that capital, so you avoid the carrying cost, but the supplier recovers its own cost through a higher price on every unit consumed. Net benefit is carrying cost avoided minus premium paid minus extra admin. Break-even premium is carrying cost avoided less admin, divided by annual spend. If the supplier asks for more than break-even, you are paying more for the service than it is worth to you.

#### Operating notes for SAP

**Body:** Consignment needs an info record of category consignment, a purchase order or scheduling agreement item with the consignment item category, and goods receipt into special stock K. Liabilities are created only at withdrawal and settled with MRKO. Consignment stock appears in MMBE, but is not valuated on your balance sheet. It is still planned by MRP, so reorder logic continues to work. Reconcile quantities with the supplier regularly.

#### Common mistakes

**Body:** The usual mistakes are comparing consignment to zero stock rather than to the stock you would actually hold, and ignoring the supplier risk when a single source holds your inventory. Another is allowing slow-moving items on consignment without a clause about who owns obsolete stock after a set period.

**Bullets:**

- Agree a maximum consignment period
- Define scrap and obsolescence ownership
- Count stock jointly each quarter

**Cta:** Netray can pull consumption and stock history from SAP to identify which suppliers and materials are good candidates for consignment, read-only.

**Faq:**

#### Is consignment stock on my balance sheet?

**Answer:** Generally no. It is supplier-owned until withdrawal, so it is not valuated in your inventory, though it remains visible in stock overviews as special stock. Check your accounting policy with your auditors.

#### What is MRKO used for?

**Answer:** MRKO settles consignment liabilities and pipeline withdrawals. It reads withdrawals since the last settlement, creates the liability to the vendor and posts accounting entries against the consumption already recorded.

#### Will suppliers always charge a premium?

**Answer:** Not always. High volume customers or suppliers who gain visibility and sales security may accept little or no premium. Use the break-even figure as your negotiating limit.

#### Does consignment affect MRP?

**Answer:** Consignment stock counts as available stock in MRP, so reorder logic and planning still work. Withdrawals reduce the quantity, and replenishment is triggered like normal stock.

## Search terms

sap consignment stock cost benefit, consignment vs owned inventory calculator, sap vendor consignment mrko, sap special stock k, consignment inventory break even premium, sap consignment info record, vendor managed consignment savings

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