Supply Chain Management Inventory Optimization
Inventory optimization in Dynamics 365 Supply Chain Management is mostly configuration and routine, not new software. Supply Chain Management covers inventory, warehouse and transportation management, procurement and sourcing, master planning, and manufacturing and production, so the planning engine is already there. What many mid-market manufacturers leave undone is the upkeep: coverage settings applied once at go-live, safety stock levels inherited from the old system, items never classified by value, parts used by field technicians that never reach planning, and an annual stocktake instead of cycle counting. Fix those, in that order, and stock comes down while shortages of the parts that matter go with it. Solzet implements Supply Chain Management and runs this review for manufacturers and distributors.
Why is inventory too high and still short at the same time?
Because the planning parameters set at go-live tend to become the planning parameters forever. During migration, one set of coverage rules often gets applied to every released product, at every site and warehouse, and nobody revisits it. Demand moves, lead times move, the range changes, and the plant ends up carrying stock it does not need while expediting the same handful of parts every month. Master planning is doing exactly what it was told. The instructions are stale.
Which coverage settings should a planner revisit first?
Start with the coverage method, and set it per item, and per site and warehouse where demand differs. Ordering exactly against each demand line, batching demand into periods, refilling between a minimum and a maximum, and taking an item out of planning altogether behave very differently. Applying one order per demand line to everything because it was the default produces a purchase order for every sales line: technically correct, operationally unusable, and the reason planners drift back to spreadsheets.
Then look at the time fences, which is where the money actually leaks:
- The planning horizon. If it is shorter than your longest purchase lead time, long-lead parts are planned too late however good the forecast is.
- How far ahead planning may use supply that already exists. Too short and planning ignores the container landing next week and orders again; too long and it spends stock that is needed months out.
- How long planning waits for a late order before proposing a new one. Too short and every delayed shipment spawns a duplicate; too long and real shortages surface late.
- A frozen near horizon, so buyers are not re-planned every night on orders suppliers have already confirmed.
Group items by lead time and demand volatility rather than by product family, and set those values per group. That change usually does more for planned-order noise than another forecasting exercise.
How should safety stock be recalculated?
In many deployments the minimum quantities are numbers a planner typed during implementation, copied from the old system, which copied them from the system before. Demand has moved since; the numbers have stayed put. Recalculate safety stock from recent issue history, item by item and per site and warehouse, with a service level chosen per class of item. Use a comparable past period for seasonal items rather than a rolling average, review the proposals, and apply only the ones that survive a planner's judgement. Done every quarter, it is an afternoon's work in Supply Chain Management.
Why does ABC classification matter for planning?
Without classes every item gets identical treatment: the same coverage rules, the same counting cadence, the same planner attention. That is expensive in both directions. Class A parts, where a stockout stops a line, deserve a tight planning horizon, careful safety stock and frequent counts. Class C fasteners deserve a generous minimum and maximum, a long period and to be left alone. Classify released products by value, and by margin or revenue where that helps, then refresh the classes on a schedule so they follow demand. Left unclassified, planners treat everything like an A part and Supply Chain Management produces more planned work than anyone can action.
What should planners do with the messages master planning produces?
Read them. Running master planning and then looking only at planned orders wastes much of what it produces. The messages about existing orders (bring this one forward, push that one out, increase this, reduce that) and the warnings about demand at risk of arriving late are the difference between planning that rebalances the supply you already have and planning that only buys more. Make working through them part of the daily routine, class A items first.
How does field technician stock affect Supply Chain Management planning?
This is the gap on the boundary between Supply Chain Management and Customer Engagement. When technicians carry parts in their vans and record usage on work orders in Dynamics 365 Field Service, that consumption has to reach Supply Chain Management, or the ERP keeps showing a pump seal on hand that was installed weeks ago. Planning does not reorder it, the next job for that part comes up short, a technician buys one locally, and the consumption never enters demand history. The safety stock recalculation above then understates exactly the parts that fail most often.
Dual-write provides near-real-time, bidirectional integration between customer engagement apps and finance and operations apps through Dataverse, but which data moves is a design decision, and parts consumption is easy to leave for a later phase that never comes. Treat each van as a warehouse in both systems, post field consumption into Supply Chain Management on a schedule, and reconcile weekly rather than at year end. The manufacturing industry page covers how Solzet designs that CRM and ERP link for plants with a field team.
Does a plant still need an annual stocktake?
Usually not. A full count once a year gives one accurate day followed by months of drift. Cycle counting by class, A items often and C items rarely, plus counts triggered when stock in a location runs low, gives planning a number it can rely on all year. The usual objection is that nobody has time to count, which is a data-capture problem rather than a policy problem: a Power Apps app on a rugged scanner, writing counts back to Supply Chain Management on a schedule, is a short build.
Close inventory every month as well. Until the close runs, item costs and inventory value are provisional, and a carrying-cost argument put to the CFO rests on numbers the finance team is right to question.
Does the same advice apply to distributors and to Business Central?
Mostly, yes. Distributors carry the same problems minus the production orders: stale coverage, inherited minimums, unclassified items and drifting counts. The distribution and wholesale industry page covers how Solzet approaches that operation on Business Central and Supply Chain Management. If you are still deciding which ERP fits, read our Business Central vs Finance and Operations comparison. Business Central covers inventory, planning and warehouse management for small and mid-sized organizations, and the same housekeeping applies there.
Where should a manufacturer start?
In order, because each step makes the next one easier:
- Classify items and split coverage groups by lead time and volatility.
- Set the planning horizon, the supply look-ahead, the late-order tolerance and the frozen horizon per group.
- Recalculate safety stock and apply the proposals that survive review.
- Get field consumption posting back into Supply Chain Management.
- Move counting from an annual stocktake to class-based cycles.
Most of that is configuration and process work in Supply Chain Management, with no development at all. What does need building is the layer around it: the capture app, the write-back from the field, the exception alerts and a dashboard that makes excess and obsolete stock visible. Solzet implements Supply Chain Management and builds that layer with Power Platform, with Dynamics 365 consulting on the Customer Engagement side, so the ERP and the field data are designed together. More notes like this are on the Solzet blog.
Many mid-market manufacturers run Dynamics 365 Supply Chain Management on the coverage settings they were handed at go-live, keep safety stock levels inherited from the old system, leave items unclassified and let field technician stock drift away from the ERP. Those gaps, rather than the planning engine, are why inventory is too high and still short of the parts that matter. Fix them in order: classes and coverage groups, time fences, safety stock, field consumption, then cycle counting.
What do readers ask?
What does inventory optimization in Dynamics 365 Supply Chain Management involve?
Mostly configuration and routine rather than development. Review coverage methods and time fences per group of items, recalculate safety stock from recent issue history, classify items by value, make sure parts consumed by field technicians reach planning, work through the messages master planning produces, and replace the annual stocktake with cycle counting by class. Supply Chain Management already covers inventory, master planning, warehouse management and manufacturing; the work is keeping its settings in step with the business.
Which coverage settings matter most in Supply Chain Management?
The coverage method and the time fences. Ordering per demand line, batching by period, refilling between a minimum and a maximum, or taking an item out of planning each suit different items, so one default for every product creates noise. The planning horizon must be longer than your longest purchase lead time, the look-ahead for existing supply decides whether planning orders again for stock already inbound, the tolerance for late orders decides whether delays spawn duplicates, and a frozen near horizon stops nightly re-planning of confirmed orders. Set them per group of items with similar lead time and volatility.
How often should safety stock be recalculated?
Every quarter is a sensible rhythm, and more often for volatile items. Recalculate from recent issue history per item, site and warehouse, use a comparable past period for seasonal items rather than a rolling average, review the proposals and apply only the ones a planner agrees with. Minimums typed in during implementation and copied from a legacy system rarely match current demand.
Why does Field Service van stock cause problems in Supply Chain Management planning?
Because parts used on work orders in Dynamics 365 Field Service often never reach Supply Chain Management. The ERP keeps showing stock that was installed weeks ago, planning does not reorder it, the next job comes up short and the local purchase stays outside demand history, so safety stock is understated for the parts that fail most. Treat each van as a warehouse in both systems, post field consumption into Supply Chain Management on a schedule, and reconcile weekly. Dual-write moves data between the two through Dataverse, but which data moves is a design decision.
Do we need an annual stocktake with Supply Chain Management?
Usually not. A full annual count gives one accurate day and months of drift, while cycle counting by class, frequent for A items and rare for C items, plus counts triggered when a location runs low, keeps on-hand reliable all year. Make counting easy with a Power Apps app on a rugged scanner that writes counts back on a schedule, and close inventory every month so costs and inventory value are numbers finance trusts.
Does Solzet implement Dynamics 365 Supply Chain Management?
Yes. Solzet implements Dynamics 365 Supply Chain Management as part of Finance and Operations, alongside Dynamics 365 Finance, Customer Engagement and Power Platform. We handle implementation, X++ extensions, integrations, data migration and Dynamics AX upgrades, and we design the link between Supply Chain Management and Field Service so field consumption reaches planning.
Does this advice apply if we run Business Central instead?
Largely, yes. Business Central covers inventory, planning, assembly, manufacturing and warehouse management for small and mid-sized organizations, and the same housekeeping applies: review coverage settings, recalculate safety stock, classify items and count by class. The settings and screens differ, and Solzet implements Business Central as well as Supply Chain Management.
What should a manufacturer fix first in Supply Chain Management inventory?
Classify items and split coverage groups by lead time and volatility first, because every later step depends on those groups. Then set the time fences per group, recalculate safety stock, get field consumption posting back, and move counting to class-based cycles. Each step makes the next one easier, and most of it needs configuration and process changes rather than development.