KB114: Effectively Manage Your Inventory Using Microsoft Dynamics 365 Business Central

Inventory Management

KB114: Effectively Manage Your Inventory Using Microsoft Dynamics 365 Business Central

KB114: Effectively Manage Your Inventory Using Microsoft Dynamics 365 Business Central 1600 900 Shrutidhara

Inventory Management can be defined as the process of managing raw materials, components as well as finished products along with other warehousing & processing activities. Effective management of inventory is extremely crucial for any business be it discrete industries like Machine Manufacturing or process industries like Plastic, Polymer & Rubber Industry.

In this blog, we explore how the inventory management functionality of Microsoft Dynamics 365 Business Central (MS D365BC) empowers businesses to overcome different challenges such as limited visibility, overstocking, inaccurate data, inconsistent tracking, supply chain disruptions amidst the Covid-19 pandemic and streamline their business processes.



MS D365BC provides businesses with the option of registering each item as an item card. Item card essentially comprises of all the information necessary for buying, storing, selling, delivering, and accounting of items. It can be categorized into different types such as Inventory, Service or Non-Inventory. This classification helps businesses in specifying the nature of an item. Besides, it enables them to purchase the same item from more than one vendor & connect those vendors to the item card in a hassle-free manner. With the Item Vendor Catalog Page, businesses can easily select an alternate vendor whenever required.


MS D365BC allows businesses to structure an item as the parent item with underlying child items in the Bill of Materials. They can use either an “Assembly BOM” or a “Production BOM” depending upon its use. Assembly BOM can be defined as the master data describing “which component items go into an assembled end item & which resources are used to assemble the assembly items.” Similarly, Production BOM can be defined as the master data “identifying a production item and the components that go into it”. However, for the assembly items, the production BOM should be certified. It should also be assigned to the production item before it can be used in a production order.


MS D365BC facilitates grouping of the different inventory items based on categories, attributes & variants. This helps businesses to effectively maintain an overview of their items & systematically organize them.


MS D365BC enables businesses to easily manage the items that they offer to their customers but do not keep in the inventory as “Catalog Items”. These items are different from “Non-Inventory Items” which have a low cost & are used internally. Nevertheless, whenever they want to manage such items in their system, businesses can simply convert them to normal item cards either through Catalog item card or Sales order.


MS D365BC allows businesses to efficiently count and adjust their inventory using documents. The Physical Inventory Order page helps them in organizing the complete inventory counting process such as one per location. The Physical Inventory Recording Page enables them to communicate and capture the actual count of items. For each physical inventory order, businesses can create one or more physical inventory recording documents. Thy can also enter the counted quantities, either manually or through an integrated scanning device.


MS D365BC aids businesses in adjusting the recorded inventory quantities. They can change the inventory ledger entries directly without posting business transactions by using an item journal. At the same time, they can also use item reclassification journal for changing attributes on item ledger entries.


MS D365BC provides businesses with a clear-cut picture of inventory availability based on location, period, or event (sales shipment or an inbound transfer receipt).


MS D365BC allows businesses to create transfer orders for transferring inventory items between different locations. With this, they can ship the outbound transfer from one location and receive the inbound transfer at the other location. This helps them in streamlining the warehouse operations and ensures that the inventory count is being updated in a correct manner.


MS D365BC authorizes businesses to reserve items against service orders, assembly orders, production orders, sales order, and purchase orders. At the same time, they can also reserve items on inventory, inbound documents, journal lines and so on.


MS D365BC enables businesses to allocate serial numbers, lot numbers, and package numbers to any outbound or inbound document. This helps them in “tracing items and reduces errors as well as uncertainty caused by double allocations.”


MS D365BC facilitates “setting up a cross reference between the item description that businesses use for an item and the description that the vendor of that item uses. By doing so, the vendor’s item description is automatically inserted on purchase documents for the vendor whenever they fill in the Cross-Reference No. field. It also applies for customer item numbers on sales documents.” This helps businesses in synchronizing their item information with Vendor’s or customer’s item information.


MS D365BC allows businesses to locate an item-tracked item. They can view how and when it was received or produced, transferred, sold, consumed, or returned. They can also look at all current instances of a specific serial or lot number in the database. This helps in identifying defective components & ensures quality control.


MS D365BC enables businesses to block an item from being entered on lines in sales or purchase documents. They can also block it from being posted in any transaction. This helps in identifying items with known defect. Whenever a customer chooses a blocked item on a sales or purchase document, a message will inform them that the item is blocked.


MS D365BC provides businesses with responsibility centers which helps them in effectively handling their administrative centers. For instance, it can be a cost center, a profit center, an investment center, such as sales office, purchasing department for several locations etc. The integrated database enables businesses to manage their inventory in multiple locations by facilitating better planning & decision-making.

Simply put, the Inventory Management feature of Microsoft Dynamics 365 Business Central empowers businesses to deliver cross channel inventory visibility. It provides clarity in terms of “what item needs to be stocked, how many & when do they need to be ordered”. It enables businesses to replenish their stock based on demand and availability. This helps them in streamlining their production processes, improves accuracy, reduces overstocking & stock-outs, minimizes carrying costs and improves management of non-conforming material.

Our team at Dhyey (https://dhyey.com/) works round the clock to assist businesses in their growth journey. If your company is looking for ERP services in Vadodara or anywhere in India or around the globe, drop us an email at enquiry@dhyey.com. We would be glad to set up a free demo for your brand.