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BUSINESS CENTRAL

Business Central Reservation vs. Item Tracking: What’s the Difference?
21
Sep

Business Central Reservation vs. Item Tracking: What’s the Difference? 

When managing inventories in the Microsoft Dynamics 365 Business Central, you must have come across “Item Tracking” and “Reservation.” As a beginner, they may appear to be two similar concepts, since they both relate to having the right item reach its destination at the right time. Treating them as one may result in inflexible procedures, delays in fulfilling the order or compliance issues. So, what is the difference? It is simple; Item Tracking is about identifying while Reservation is about allocating. Now let us understand their operations and what could happen when you get them mixed up.  What Is Item Tracking?  In Dynamics 365 Business Central, the concept of item tracking is what enables your organization to assign an individual identity to its inventory. Item Tracking works with Serial Numbers (individually assigned per item) and Lot Numbers (per batch) to enable tracking of the real-life history of a product. Essentially, think about Item Tracking as the “passport” of your item.  Should your organization sell medical equipment, electronic goods, or perishable foods, it needs to know for sure which item went to which customer. Should a product recall take place, you must identify the item instantly. However, it should be noted that Item Tracking itself does not mean assignment of a specific item to a specific customer. The key point is that it enables you to track all the history of an item when it left your warehouse, how long it stayed there, expiration date, or warranty start date. Without item tracking, your computer is just a computer. With item tracking, you know its serial number and, thus, owner.  What is Reservation?  Reservation, on the contrary, is a rigid connection between supply and demand. It is a commitment. Once you generate a Sales Order and make a reservation for an inventory, you are telling Business Central, “Reserve 50 units of Item A exclusively for this customer.”  Reservation is a strong allocation technique to cater to VIP customers or to satisfy any production order. It ensures availability during the picking phase, irrespective of all other incoming orders in the warehouse. You can make reservations for available inventories as well as for expected supply such as Purchase Orders. In case your key client demands a huge quantity of products for the next month, making a reservation will ensure that regular walk-in customers do not reduce that inventory.  Working Together  Now here comes the fun part: Item Tracking and Reservation do not exclude each other. Quite often, the two go hand in hand. You can reserve a particular tracked item. If, for example, you need to deliver “Lot B” of a certain pharmaceutical product owing to its unique expiration date, then Item Tracking will help to find Lot B and Reservation to reserve it from any other order.  But if you employ Item Tracking without Reservation, the system will allocate your lot to another customer who completes the transaction faster. It is one of the frequent mistakes made by people, who confuse Item Tracking with Reserving. An item, although being tracked, does not have to be reserved, otherwise some other order will be able to take it. On the other hand, you may want to reserve any untracked items just for the sake of ensuring their availability, not specifying which one exactly.  Conclusion  Proper use of each function is essential in having an effective supply chain. Apply Item Tracking when there is a need for compliance, traceability, and warranty management. Apply Reservation when there is a need to ensure that there are enough for certain requirements, prioritize priority customers, and secure inventory for a production batch. Avoid reserving all your stock because it will restrict your ability to manage other clients’ orders. Similarly, avoid applying item tracking on simple and low-value inventory that only requires additional data entry. Remember that Item Tracking is the “what” and Reservation is the “who.” 
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Why Your Business Central Inventory Is Correct, but Your Reports Are Wrong
14
Sep

Why Your Business Central Inventory Is Correct, but Your Reports Are Wrong 

Has it ever happened to you that you have been sitting in front of your Microsoft Dynamics 365 Business Central screen, scratching your head? Your Item Ledger Entries are showing precisely 500 units of an item. Your physical inventory count is 100% accurate too. However, when you generate your financial report or even access your Power BI dashboards, your inventory is entirely wrong. You fee the system is lying. How is it possible that your inventory is spot on while your reports are just completely wrong?  It’s an irritating situation, but it happens quite frequently. What normally messes up is not the physical inventory but the process of costing, timing, and data relationships in Business Central. Here is the list of the most common mistakes.  “Adjust Cost – Item Entries” Batch Job  Initially, Business Central does not immediately account for the financial valuation of items when they are either received or shipped. Based on your cost flow method be it FIFO, LIFO, Average, or Standard. BC calculated the actual cost of goods sold asynchronously. If the “Adjust Cost – Item Entries” batch job doesn’t complete, there will be discrepancies between your Value Entries, which system uses for financial reporting purposes. And also your Item Ledger Entries, which record the physical quantities. When using Average costing, clear the difference by using the “Adjust Cost – Item Entries” batch job.  Item Ledger Entries versus Value Entries  In addition, it is imperative that one can distinguish between Item Ledger Entries and Value Entries. While the former captures the physical movement of materials that is, the quantity moving in and out and the later captures the financial implication of such moves that is, the dollars entered the General Ledger. While examining the Item Card, one sees entries that have been dictated by the Item Ledger Entries. The financial statements, such as Trial Balance, and Inventory Valuation reports, however, depend entirely on Value Entries. When there is any difference, it normally means that while an Item Ledger Entry has been made, the related Value Entry was either blocked, incorrectly set up, or delayed because of costing issues.  Date of posting as opposed to date of documentation is yet another reason for reporting confusion. As you receive or ship goods, you assign a posting date to these transactions. If you receive or ship the inventory on the last day of the month but receive the document five days after the month ends, BC accounts for this difference through “Expected Cost Posting.” While the actual inventory updates instantly, its value goes into an intermediate account in your accounting system. If you generate a report with a certain date filter, the posting of the transaction may fall outside the report range.  Dimensions Missing  Lastly, there may be incorrect report generation due to missing dimensions. This happens because of dimensions for segmenting the financial information for department/project reporting. If any item comes in without the correct global dimension value, the inventory value will exist in BC but not appear correctly in the dimensional report. The problem with dimensions is that there is correct global inventory but dimensionally it is incorrect. Make sure that default dimensions are set up properly on item cards and vendor cards to avoid incorrect data.  Summary  In conclusion, having correct physical inventory in Business Central does not mean that your financial report generation is correct. The discrepancy between physical inventory and accounting can be caused by costing batch jobs, the difference between ledger and value entries, correct date control and perfect dimension setup. If your report is wrong, do not recount the inventory. Instead, check the status of Adjust Cost batch job, value entries for missing amounts, dates used to produce the report and dimension setup. 
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Special Orders vs. Drop Shipments: Understanding the Difference
17
Aug

Special Orders vs. Drop Shipments: Understanding the Difference 

To increase the range of their products without having money locked away in inventory, companies often turn to such procurement approaches as Special Order and Drop Shipment. Since both imply selling the item that you do not possess now of selling, the terms are often confused with one another. Nevertheless, in the sphere of logistics and ERP systems like Business Central, they are distinct operations that must be performed in different cases. Below is the explanation of the difference between these procurement approaches.  Special Order  The special order refers to the customer who wants to buy an item not in your normal inventory. You purchase the item from your vendor. Although it will be done especially for this customer because the inventory will come to your warehouse or facility first.  After the inventory reaches your dock. You receive the item, inspect it if needed, and ship the Sales Order of the customer using your inventory yourself. You own the inventory for some time.  Drop Shipment  In a similar way, the drop shipment refers to selling the item out of stock to a customer. You will buy the item from the vendor as well. The only difference is that the inventory won’t reach your warehouse.  You will make the sales order and purchase order, but you ask the vendor to send the product to your customer’s shipping address. You play the role of an intermediary in this transaction.  Core Differences  Although the customer receives the product in both cases, the backend process differs significantly in the following ways:  1. Physical handling and quality control.  When you place a special order, you get involved in the physical handling of the product. That allows you to do quality control check. Also, to make sure the product does not damage during shipping and that complete order fulfils correctly before the delivery to the customer. In case of drop shipment, you lose the control, the vendor ships the product flawlessly or not.  2. The unboxing experience.  If your business builds around the unique unboxing experience for your customers (special boxes, tissue paper, personal note), then the special order is mandatory. Drop shipment means that you receive the product in the packaging of the vendor and even may include the vendor’s shipping slips and logo.  3. Shipping Fees and Time  Drop ships tend to be quicker since the product takes the direct path from the vendor to the customer instead of making a stop at your facility first. In addition, there is no “double freight”. No paying to ship the item to you and paying again to ship it to the customer.  4. Accounting and Inventory  In an ERP environment, a special order will affect your inventory accounting temporarily and needs to be received. A drop ship order does not affect your inventory; the purchase price goes directly to COGS on receipt of the invoice from the vendor.  How Do You Decide?  Utilize Special Order procedures when the item is of high value, if it requires quality inspection, it requires shipping with other items already in your inventory, or it is of importance from the branding perspective.  Utilize drop shipments when the item is bulky or heavy (e.g. patio furniture, industrial machinery), when you need the product immediately, or when you absolutely want to avoid any warehousing cost whatsoever.  By understanding these different workflows and incorporating them into your business operation in the proper way via your ERP system, you can safely increasing your inventory. 
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The Hidden Profit Killer: How to Track Material Consumption in Production Orders
10
Aug

The Hidden Profit Killer: How to Track Material Consumption in Production Orders 

Your raw materials are everything when it comes to manufacturing. However, there exists an unknown profit-drainer on many factory floors, incorrect tracking of material consumption.  While you might have designed a product, which requires ten pounds of steel to produce, your operators consume eleven pounds due to waste or defects. Consequently, your inventory levels will be incorrect, cost of goods sold will be off, and your company’s profitability will only be a guess.  For the sake of precision and efficiency in operations and accounting, correct tracking of what materials go out of your warehouse and into the production is essential. This is how it is done in modern manufacturing companies.  But Why Else Does This Matter?  Recording material consumption goes far beyond reconciling the materials in your inventory. Every time you consume materials during production, you’re setting in motion the financial mechanisms of your company. The value of that raw material moves from your Balance Sheet (Inventory Asset) to your Income Statement (Cost of Goods Sold). Lazy or inaccurate consumption recording will result in your financial statements reflecting inflated profits that you did not make.  The Three Approaches to Material Consumption Recording  Most ERPs, like Microsoft Dynamics 365 Business Central, have three different ways to record material consumption. Knowing when to apply each approach is crucial.  1. Manual Consumption Recording  The most accurate approach to consumption recording. Operators record every item, lot, and amount of material consumed by hand in the consumption journal.  For: Expensive items, materials with mandatory traceability (such as aerospace or pharmaceuticals), or customized production, when you need to keep track of every scrap produced.  The drawback: it slows down production with data input on the shop floor.  2. Forward Flushing (Auto-Consumption)  Forward Flushing involves the automatic subtraction of the expected number of materials from inventory the moment the production order status becomes either “Released” or “In Process.”  Ideal For: Products that are high in volume but low in value, such as nuts, bolts, or packaging materials where the cost of administrating them manually outweighs the cost of the materials themselves.  3. Backward Flushing  This method entails the system waiting for the production order to finish first. Once the completed product is posted, the system then automatically calculates the expected raw materials using the Bill of Material (BOM).  Ideal For: Lean manufacturing plants with predictable and repetitive processes.  The Risk: If the machine breaks down in the middle of processing and spoils the whole batch of raw plastic, backward flushing will not be able to detect it. It will just assume that all the materials were processed correctly.  The Importance of Scrap and Variance  No production system is absolutely accurate. Even if your BOM states that 5 gallons of paint are required, spilling 1 gallon of the same paint means that the gallon is gone despite not being used for any output.  To be able to measure the real situation, the consumption process must incorporate reporting of Scrap. Your operators should have an easy method of stating the fact that they used material without producing anything valuable out of it. Also, production managers must frequently analyse Consumption Variance Reports that show how close you are to the expectations of your BOM.  Best Practices for Success  Don’t adopt a one-size-fits-all solution. Employ manual tracking for high-value and traceable materials and flushing for cheap materials.  Empower the shop floor. Enable operators to employ barcode readers or tablet-based systems that allow them to enter consumption and scrap information without returning to a desktop computer.  Update BOM’s in real time. When a design or dimensional change happens for a component or material, update the BOM immediately. Any inaccuracy in the baseline data translates to inaccurate consumption tracking.  Effective material consumption tracking serves as a bridge between the physical shop floor and the finance team. With the proper tracking tools applied to the proper materials, you safeguard your material inventory, minimize your profit margin risks, and increase visibility over manufacturing costs. 
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Taming the Chaos: A Guide to Vendor Catalogue Management in Business Central
03
Aug

Taming the Chaos: A Guide to Vendor Catalogue Management in Business Central 

Imagine this: You have just received an enormous update on your company’s vendor’s spreadsheet. It comes with hundreds of new codes, descriptions, and changing prices. Now, somebody needs to go through all of that information, check which items your company already has, change prices, and make sure that all these items are available for purchase. If the described scenario seems familiar to you, then you know the problem of vendor catalogue chaos first-hand. In Microsoft Dynamics 365 Business Central, however, managing such influxes of data from vendors doesn’t have to be such a pain. This is how to manage vendor catalogues in Business Central.  The Core Problem: Different References  The core problem in the realm of managing vendor catalogues is that of translation. Your Internal Item Card might have the name “Steel Hex Bolt M10x20” with a proprietary SKU (e.g., SHB-1020), with pieces being tracked in your system. The vendor, on the other hand, might have his own name for it: “HB10X20SS,” and his own part number, and he might sell it in boxes of 100.  This language barrier is bridged by Business Central, without the need to change your internal nomenclature.  Managing Item Cross References  In terms of vendor catalogue management in Business Central, the absolute MVP is the Item Cross Reference table. In this feature, you may link a specific vendor’s part number to your internal Item Card.  When your purchasing agent creates a Purchase Order, he does not have to remember your SKU, instead, he types the vendor’s part number in the “Cross Reference No.” field of the purchase order line. Business Central finds the internal item, inserts the proper vendor item number in the purchase order. Even puts the vendor’s unit of measure on the purchase order line.  Simplifying Bulk Updating Using Excel  If the vendor is giving you a full updated catalogue containing new price rates or part numbers. Then it’s not necessary that you should be entering these one-by-one. Business Central enables you to export your “Item Vendor” information (that contains specific part numbers, lead times, and prices of the items from vendors) in Excel.  You can make use of Excel to match the vendor’s updated information with your existing data in just a few clicks. After that, again upload the updated Excel file to Business Central through configuration packages or Excel integration tool.  Working With Non-Stock Items  In some cases, vendor catalogue may include items that are not included in your usual stock of goods. Such parts are specifically ordered from vendors in response to requests from customers. Business Central solves the problem efficiently with “Non-Stock Items”.  A Non-Stock Item catalogue may be created, which works as a virtual database of all the things that you can purchase, but do not stock in your warehouse. In case a customer requires one of those. Business Central offers an option to convert Non-Stock Item to a regular Item Card right away, with automatically included vendor catalogue number and price.  Catalogue Management Best Practices  Establish Data Governance: Define how you would like to receive vendor data. The more compatible with your Excel template is their spreadsheet, the less time will be required to perform import.  Keep Cross References Neat: Do not save old and obsolete vendor part numbers in your cross-reference table. Archive them to speed up your searching capabilities.  Item Attributes Use: Assign item (vendor catalogue) attributes such as “Material” or “Colour” to enable your purchasing department to find vendor item using specifications and not part numbers.  Conclusion  Vendor catalogue management in Business Central is all about bridging the gap between how your vendors categorize their goods and how you categorize them within your company. With proper use of Item Cross References, bulk updates using Excel files, and non-stock items. You take out all friction associated with your purchases. You end up with a shorter PO process, reduced receiving mistakes, and procurement people who spend more time procuring than keying in data. 
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Streamlining Contracts: Managing Blanket Sales Orders in Business Central
28
Jul

Streamlining Contracts: Managing Blanket Sales Orders in Business Central 

Let’s take the case of your biggest client placing an order for buying 10,000 units of your product for a period of one year from now. But they do not want you to deliver 10,000 units at once but monthly in shipments of 830 units each. Preparing a dozen separate sales orders now will mess up your systems and forecasting as well. That is why Blanket Sales Orders of Microsoft Dynamics 365 Business Central can become your saviour.  The Blanket Sales Order is neither a shipping document nor a financial transaction. On the other hand, it is an agreement that includes the negotiated price and quantity to be shipped in parts according to schedule.  Look at how to handle Blanket Sales Orders in Business Central.  The Advantages of Using Blanket Orders  Before getting into the “how,” we first need to know the “why.” There are three reasons why using blanket orders makes sense:  Price Security: This ensures that the negotiated price will be protected for the customer from any changes in price in the future.  Forecasting: The quantities in a blanket order are known to the planning engine, giving you a forecast of what’s to come without making an inventory commitment at the present.  Efficiency: It saves you the trouble of having to enter all that customer information, item numbers, and negotiated prices every time a partial shipment is made.  How It Works in Business Central  In the Business Central solution, blanket orders are managed using the following straightforward two-tier structure: Blanket Sales Order (agreement) and Standard Sales Order (implementation).  While creating the standard sales order based on blanket order, Business Central will automatically calculate the remaining quantity of blanket order. Moreover, it reserves the quantity of “Blanket Order Quantity” on the item card for your supply chain.  Workflow  1. Creating Blanket Sales Order  Create a new Blanket Sales Order and provide the customer, delivery date(s), and line items. Enter the total agreed upon quantity on the lines.  2. Releasing the Order  Like regular orders, you need to change the status of the Blanket Sales Order to Released from Open. It indicates that the order is now official and ready for a partial fulfilment.  3. Making the Order  In case you want to deliver some part of the product, Make Order from already available blanket order with the quantity specification of the product that needs to be shipped.  This way system automatically creates a regular Sales Order that will have all the necessary information about customer, item, and prices filled. Next, you just need to process this order normally.  Best Practices for Success  Keep Your Statuses Clear: Do not keep any active agreements in the “Open” status when they have blanket orders. Always release them so that the planning engine can recognize the demand.  Use the Order Tracking Window: If you get notified by a customer that they want an increase in their monthly delivery of products, you can use the Order Tracking window in Business Central to identify the exact quantity allocated to blanket orders or other sale orders.  Close Them out: After the final delivery the “Quantity to Receive” becomes zero, close the blanket order. Having old, completed blanket orders on your platform will make your sales pipeline cluttered.  Make Use of Archiving: In case you need to see the original agreement details after several months, but you do not need them on your active list, take advantage of archiving functionality in Business Central instead of simply deleting them.  Conclusion  Handling long-term contracts does not necessarily mean trading off on day-to-day efficiency. Thanks to Blanket Sales Orders in Business Central, you will easily be able to separate the deal from its implementation. Not only does it keep your process from becoming inefficient, but it is also what will help the rest of your team in forecasting demands.  Do you use blanket orders to their full extent in your existing ERP system? If your system obliges you to manually manage partial deliveries, then maybe it’s time to consider Business Central as your sales solution.
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