Sales Order

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

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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Special Orders vs. Drop Shipments: Understanding the Difference

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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