Business Central Inventory | What, Set-up and Manage

Inventory management is pivotal in maintaining efficient business operations, ensuring optimal stock levels, reducing costs, and enhancing order fulfillment. Business Central inventory management is a robust module that enables businesses to streamline inventory tracking, optimize stock movements, and improve supply chain efficiency.

This article provides an in-depth look at Business Central’s inventory management capabilities, covering its benefits, key features, and analytics-driven insights.

What is Inventory Management for Business Central?

Inventory Management is a module in Business Central that helps SMBs manage their inventory and other operations within a single platform. SMBs can track, manage, and optimize stock levels across locations.

The Business Central inventory management module also allows you to receive goods, store them, and fulfil orders. You can use this module to ensure the right products are available at the right time.

Inventory management modules allow you to:

• Stock tracking
• Purchase order management
• Receiving and put-away
• Picking and packing
• Sales order fulfillment
• Inventory valuation

How to Setup Inventory Management in Business Central

Proper inventory setup in Business Central is essential to ensure accurate stock tracking, streamlined workflows, and seamless operations. The key steps include:

Define Item Master Data

Go to the "Items" section within your Dynamics 365 Business Central inventory management system, select "New" to open a new item card, and then fill in the following details:

• Item number
• Description
• Category
• Costing method
• Unit of measure
• Sales information
• Purchasing information

The appropriate sales and purchasing details are crucial points that will help you automate pricing and order processing.

Configure Locations and Bins

Set up multiple warehouses under Location Master to track stock across different locations. Define storage areas using Bins to enhance warehouse organization.

Establish Inventory Posting Groups

Navigate inventory set up in Business Central, then click on Posting Groups to link inventory with general ledger accounts for accurate financial reporting.

Enable Lot and Serial Number Tracking

To configure items for lot tracking, navigate your inventory management system's product settings. Select the specific item you want to track, and within the "Inventory" tab, choose "By Lots" in the traceability section. For serial tracking, select "By Unique Serial Number," allowing you to assign a unique serial number to each item within a batch.

Define Inventory Replenishment Policies

Using reordering policies your system would monitor current inventory levels and trigger a purchase order when the stock falls below a predefined "reorder point." You can choose either "Fixed Reorder Quantity," "Maximum Quantity," or "Lot-for-Lot," depending on the item and desired inventory strategy.

Fixed Reorder Quantity: Order a set amount when hitting the reorder point.

Maximum Quantity: Order enough to reach a maximum inventory level.

Lot-for-Lot: Order exactly the amount needed to meet upcoming demand.

Benefits of Using Business Central for Inventory Management

Implementing Dynamics 365 Business Central inventory management module offers many benefits for SMBs. This is how:

1. Control of Inventory Centralized

You can monitor multiple locations, warehouses, and sales channels all within a single platform, Dynamics 365 Business Central. As a result, companies can:

• Monitor inventories in real-time.
• Oversee the movement of supplies between locations.
• Cut down on disparities with automatic stock reconciling.

2. Increased Accuracy and Order Fulfillment

You can optimize your inventory stocks using Dynamics Business Central. The all-in-one software tracks sales and purchasing data in real time and instantly changes inventory data. This helps your business to optimize the stock level, eliminating stock outs or overstocking. It ensures on-time deliveries, enhancing customer satisfaction.

You can also use the Order Promising tool to improve customer experience. It calculates expected shipment dates based on lead periods and stock availability to guarantee on-time delivery.

3. Cost optimization and profitability

inventory management in Business Central supports multiple inventory costing methods, such as FIFO, LIFO, Specific, Average, and Standard. This allows businesses to:

• Determine the accurate cost of goods sold (COGS)
• Optimize procurement based on demand fluctuations
• Reduce carrying costs by automating stock replenishment

4. Advanced Lot & Serial Number Tracking

For businesses requiring traceability, like manufacturing, pharmaceuticals, and food distribution, Business Central ensures compliance with regulations by enabling:

• Lot number tracking for batch-based items
• Serial number tracking for individual items
• Expiration date tracking to prevent selling expired goods

5. Seamless Integration with Supply Chain & Finance

The Business Central inventory module ensures end-to-end supply chain visibility by integrating with Business Central's purchasing, sales, finance, and warehouse management systems. Without requiring human reconciliation, automated workflows assist companies in tracking expenses, keeping an eye on inventory movements, and producing financial reports.

Extensive Features for Inventory Management

The Dynamics Business Central inventory management module offers several features that simplify inventory management. Listed below are the features.

Item Masters

The inventory management module's Item Master is an essential component. Businesses can keep track of every product's details, including types, descriptions, and unique identifiers. From the Item List on the home screen, users can manage all their items effectively.

Key fields in the Item Master include:

General Information: This section helps you define the item uniquely with a number and description and classify it based on item type.

Inventory Tab: This helps you track shelf numbers, current stock levels, and projected inventory, including quantities from purchase orders or sales orders.

Cost and Posting: This functionality helps you set costing, such as FIFO, LIFO, Specific, Average, or Standard and automatically update unit costs based on transactions.

Price and Sales: You can set a default transaction price and configure units of measure for sales and purchases. It also allows you to restrict sales of an item.

Location Master and Multi-Location Management

Managing inventory across multiple warehouses or locations using Dynamics Business Central is simple. Businesses can utilize Location Master, which lets you define and manage your numerous storages.

Irrespective of the number of warehouses, you can get accurate stock levels across locations with inventory management in Business Central. Location Master treats each warehouse as a different location.

For instance, you can have multiple warehouses within Ontario or in different cities, like Vancouver, Montreal, and Toronto.

Each location can be configured with specific details such as:

Location Card: You can access detailed information about each warehouse, such as address and contact information, real-time inventory, and custom fields for different locations.

General Tab: You can assign code and name to your inventory for tracking purposes. You can also customize it according to your convenience.

Address and Contact Information: It stores all address and contact-related details critical for accurate shipping and receiving.

Warehouse-Specific Operations: You can manage tasks like picking slip generation, put-away processes, and advanced bin management for detailed tracking.

Bins Tab: You can utilize this for more granular control over inventory to manage storage areas like receiving, shipping, and production zones.

Serial and Lot Number Tracking

In sectors where traceability is crucial, Dynamics 365 Business Central also performs exceptionally well. With lot and serial number tracking, companies can closely monitor their inventory. In sectors such as pharmaceuticals, where batch traceability and expiration dates are crucial, Business Central guarantees that businesses may monitor products at every stage of their lifecycle:

Lot Number Tracking: Customers can trace an item's progress through the sales and purchase processes by providing the lot number for each item.

Serial Number Tracking: Every item has a unique serial number that allows for complete traceability from the point of sale to the point of purchase.

Business Central also excels in industries where traceability is paramount.

Bin Management

Bin Management is an essential component of inventory management in Business Central. It refers to organizing inventory within specific storage locations, known as bins, within a warehouse. Bins allow businesses to track inventory more accurately, improve picking efficiency, and optimize warehouse space.

Bins are defined storage areas that help organize and manage inventory in a warehouse. Bins can represent physical locations like shelves, racks, or pallets.

Bin-level tracking in Business Central allows businesses to manage inventory with real-time updates for accurate stock levels.

Transfer Orders

Transfer Orders streamline the process of moving inventory between multiple locations or warehouses. Microsoft Dynamics 365 Business Central ensures seamless tracking of inventory levels during transfers, reducing discrepancies and improving stock visibility across all locations.

These key functionalities directly impact inventory accuracy and operational efficiency but don't require detailed descriptions like the other features unless they are specifically relevant to the user's business needs.

Automated Stock Counts

One of the key challenges in inventory management is maintaining accurate stock levels. Business Central simplifies this by automating the stock counting process through Physical Inventory Journals:

Automated Inventory Calculation: The system automatically calculates available inventory based on real-time data.

Stock Count Preparation: Once the journal is open, users can specify the posting date, warehouse, and document number to initiate the stock count.

Adjustments and Cost Management: Business Central calculates the adjustment needed once the physical count is completed. The system automatically highlights negative adjustments (for shortages) or positive adjustments (for overages), updating inventory and cost.

Make Analytics-Driven Decisions Using the Report

Businesses can create Business Central inventory reports from different data used to manage the inventory. You can utilize the in-built reporting feature to create an intended report. Or integrate Dynamics 365 Business Central with Power BI for customized dashboards and reports.

Pre-Built Business Central Inventory Reports

Using these in-built reporting templates, you can create the Business Central inventory report for:

Stock Availability: Displays on-hand quantities per warehouse.

Inventory Valuation: Shows item costs based on selected valuation methods.

Aging Inventory: Identifies slow-moving or obsolete items.

Item Ledger Entries: Tracks the movement of each item across transactions.

Connect with Power BI

You can create detailed and customized dashboards and reports as per your requirements. This can help you understand:

• Inventory turnover ratios
• Stock movement trends
• Warehouse efficiency metrics

How to Manage Inventory in Business Central

Effective inventory management involves regular monitoring, order processing, stock movement tracking, and reporting. Dynamics 365 Business Central provides the following tools for efficient inventory control:

Stock Movements & Adjustments

Utilize "Item Journals" to record all stock adjustments like positive or negative adjustments and transfers. Perform regular "Physical Inventory Counts" to compare the system inventory records with the actual stock levels on hand. It reconciles any discrepancies and ensures inventory accuracy. 

Order Fulfillment & Replenishment

Process Sales Orders for outgoing stock and Purchase Orders for replenishment. Use the Order Promising feature to calculate shipment dates based on stock availability.

Warehouse & Bin Management

Assign Bins to control item placement in warehouses for efficient picking and packing. Automate Put-away & Picking workflows to reduce manual errors and optimize warehouse operations.

Tracking & Reporting

Monitor Inventory Turnover Ratio to analyze stock efficiency. Generate Inventory Aging Reports to track slow-moving or obsolete stock. Integrate with Power BI for real-time analytics on inventory trends and warehouse performance.

How Dynamics Square Helps Your Business?

Business Central inventory management module can be the game changer for your business. However, its implementation requires expertise to tailor the solution to your business needs. This is where Dynamics Square, a trusted Microsoft Partner, offers:

• End-to-End Business Central Implementation
• Customization & Optimization
• Seamless Integration
• Data Migration & Upgrade Services
• Ongoing Support & Training
• Call our experts to discuss implementing the right solutions.

People Also Ask:

1. What are the four types of inventory management systems?

The four main types of inventory management systems are:

Just-in-time (JIT): A strategy that aims to reduce inventory levels by only receiving goods when they are needed.

Perpetual inventory: A system that uses technology to track inventory levels in real time.

Periodic inventory: A system that involves physical inventory counts at regular intervals.

Material requirements planning (MRP): A system that helps businesses calculate the materials needed to produce a certain number of products.

2. How to increase inventory in Business Central?

To increase inventory, create a Purchase Order (PO) in Business Central, receive items via the Purchase Receipt, or use Item Journals with positive adjustments to specify you are adding more items. Go to Inventory, Select Item Journals, and click "New" to create a new journal entry.  

In the "Entry Type" field, select "Positive Adjustment" to indicate adding inventory. Then enter item details, like quantity, item numbers, and quantity. Then, double-check all entered details for accuracy and click "Post" to finalize the inventory adjustment and update your stock levels.

3. How to do physical inventory in Business Central?

Go to "Inventory" > "Physical Inventory Journals," choose the items you wish to count, enter the counted quantities, and then submit the changes to your inventory in Business Central to reconcile it. The system automatically calculates any differences between your recorded inventory and the physical count, which will then update your inventory records to reflect the correct stock levels.

4. How do you create an inventory period in Business Central?

To set up an inventory period in your system, go to inventory setup, select "Inventory Periods," click New, set the Starting Date, and review and close previous periods if necessary.

Inventory periods can help track stock transactions within a defined timeframe, ensuring accurate reporting and preventing changes to finalized inventory records.