How Does Dynamics 365 Business Central Helps Inventory Management?

Why should all SMBs be discussing the importance of an Dynamics 365 Business Central ERP for inventory management? Since inventory is one of the largest burdens on an SMB’s balance sheet.

However, most companies focus more on sales than on how they manage their inventory. Most still manage their inventory either on spreadsheets, disconnected accounting software (Tally, Busy, Ledger SMB, etc.), or legacy systems (Tally 6.3/7.2, FoxPro Accounting System, Oracle Financials, PeopleSoft Financials), which are mostly not scalable, however; they continue to use these systems even now.

In manufacturing SMBs, inventory can never be termed as a static stock. Instead, it serves as the flowing capital – raw materials, work-in-progress, subcontracted components, and finished goods. These are also constantly transitioning through different production stages. All SMBs will eventually reach an inflection point such as:

• Inventory records become precise and better only when reconciliation is done.
• When planning, production must have more space for more buffers (extra inventory, time, or capacity).
• Financial stakeholders do not believe the operational inventory numbers.
• When businesses expand, inventory risks increase, and they become even more than the risks involved with increased revenue.

The root cause of this entire issue is never people or processes.

It is primarily due to the lack of a unified inventory and the manufacturing system in place, and it can lead to discrepancies, inefficiencies, and increased costs for businesses as they start scaling.

Dynamics 365 Business Central for manufacturing inventory is a cloud ERP designed specifically for SMBs. When wanting to shift from reactive inventory control to a more predictable, data-driven inventory management – especially in manufacturing and distribution environments – it holds significant value. It is designed to address the specific complexities of this problem, particularly the absence of a unified process, and to function as an SMB ERP for inventory management. In Dynamics 365 Business Central, the manufacturing, inventory, and finance modules operate together on a singular transaction model instead of relying on disparate tools that enterprises typically use.

Also read: – How Can Dynamics 365 Transform Healthcare SMBs?

In What Fundamental Ways Does Dynamics 365 Business Central Differ?

Within Dynamics 365 Business Central, there is a single posting engine, and it can record the following:

• Item Ledger Entries: It can record the movement of the said physical quantities.
• Value Entries: It directly measures the impact of the cost.
• General Ledger Entries: It will take care of the financial results and details.

What can you get from it?

Every action in the manufacturing unit, like details around consumption of materials, posting of total output, scrap, and rework, will help update the inventory and finance within the same transaction. There is no need for batch reconciliation, or shadow spreadsheets, and there is no synchronization layer.

It is only due to this architectural foundation that Business Central can function as a production ready SMB ERP for inventory management rather than working as an add-on.

Check for Functional Consultant: – What is a Functional consultant in Dynamics 365?

What are the Core Inventory Management Capabilities (in the context of Manufacturing)

Dynamics 365 Business Central for manufacturing inventory works around the following capabilities:

1. Real-time visibility of different manufacturing locations

When you use Dynamics 365 Business Central for Manufacturing Inventory, you get the inventory segregated as per bins, locations, lot number, serial number, and variants.
For a specific manufacturing environment, it means the decision makers can find out more about:

• The availability of raw materials vs. the production demand
• They can notice the inventory committed to the released production orders.
• Materials caught in transit between the different plants and warehouses.
• The finished goods quantity, available and accessible to customers.

Availability of inventory is dynamically computed, and it can never be done from the available static balances. It means real-time data is essential for inventory management and decision-making.

2. Regulating the Manufacturing Inventory via the Bill of Materials (BOMs)

When using Dynamics 365 Business Central for manufacturing inventory, the BOM is not a reference document. Instead, it serves as a completely executable structure. 

• Exact component requirements can be defined by multi-level BOMs. 
• Native handling of units of measure conversions is possible. 
• Before releasing the production, use of BC will make component availability validation easier by providing real-time data on inventory levels ensuring all the necessary components are adequately accounted for before beginning manufacturing. 
• Managing the reduction of inventory during production that automatically reduces consumption becomes easier. 

By this approach, a manufacturing enterprise can ensure maintaining a raw material inventory aligns with the actual production reality. 

3. Business Production Orders and Work-in-Progress (WIP) Accuracy

Using the ERP tool called Business Central, an SMB enterprise can effectively support planned, solidly organized, and released production orders. 
In addition to these features, the ERP tool provides thorough and precise control over inventory behavior. 

• Components are divided into reserve or consumption segments based on the stage data that has been made public. 
• WIP will get capitalized until further posting of the finished products. 
• You could put a cost on the output and the scrap variances in real time

SMB leadership, when looking through the lens of the Business Central data, can work without the black hole effect wherein WIP absorbs the cash without creating suitable clarity around it or showing any measurable progress

4. Material requirement planning (MRP) is necessary in situations where inventory aligns with demand

SMB ERP for inventory management through BC can help evaluate the MRP engine

• The MRP Engine operates based on sales orders and forecasts 
• Production BOMs 
• Lead times can get more transparency 
• Helps identify current inventory and safety stock 

Through use of Dynamics 365 Business Central for manufacturing inventory, it will generate actionable suggestions around these: 

• Purchase orders created for raw materials 
• Production orders for different assemblies 
• Transfer orders for various locations 

When using BC, enterprises can easily forego the static forecast planning they once did with static Excel spreadsheets and develop system-calculated decisions instead. This can easily bring down the complaint of shortages as well as prevent creating excess buffers in the first place. 

5. BC supports inventory valuation and cost control for manufacturing SMBs

Determining the right costing without having a complicated reconciliation can happen when Business Central is used since it supports FIFO, average costing, and standard costing (extremely essential for analysis of manufacturing variance). 

With each consumption, output, and with every adjustment, you will see the following: 

• Updating inventory value 
• Regular posting to the general ledger 
• Automatic COGS (Cost of Goods Solved) adjustments 

In this way, you could just remove the manual cost roll-ups and the multi-system mismatches, which could lead to inaccuracies in the financial reporting process and hinder effective decision making. This is extremely critical for CFOs who are running on tight margins. 

Why is Business Central Most Suited to Work as an SMB ERP for Inventory Management? 

When you consider BC from a decision-making standpoint, you must know that it can very clearly help with the following: 

• Scaling is effortless with BC in full swing for production and different production-related complexities, such as managing inventory levels, tracking stock movements, and optimizing supply chain processes. 
• You can easily avoid enterprise ERP customization debt, so it can lower the operational risk significantly. 
• It is cloud-based; it can lower operational risk significantly. 
• BC can easily integrate with Excel and Power BI for running proper analysis. 
• BC could help your work remain auditable without the actual manual controls in place

These are the few reasons why BC is most suited for manufacturing SMBs in growth mode, where the risk around inventory is more potent than the headcount risk. 

Do you seem convinced that BC can be the best SMB ERP for inventory management? Here, we cite a used case that we have worked around. 

Used Case Referencing from Vastasys 

• Rotoliptic is into designing novel technological solutions around artificial life space issues for Dynamics 365 Business Central.

One of the fastest-growing companies faced three different challenges before approaching Vastasys for a change. 

• They had a manual approval process, but it obviously consumed more time and was more prone to errors leading to significant delays in order processing that impacted the overall efficiency level. 
• There was limited visibility into the order and approval status. 
• Project timelines were getting impacted by delays in the approval process in place, which again led to increased project costs as well as client dissatisfaction. 

How did transitioning to Dynamics BC help our clients? 

• The vendor orders and goods receipt process of approval got automated. 
• A multi-level approval hierarchy ensures rigorous quality checks. 
• With BC in place, the enterprise could integrate the testing results into the approval workflow to automate the approval and the rejection process. 
• Visibility improved with dashboards and notifications in place, and the status of goods receipts, order status, and approvals became easier.

Read more about our client here in this link

We have used this approach with many clients. But some enterprises do express this doubt as well – why do they need a partner? 

Why Do Most Enterprises Benefit from Having a Partner to Guide Them? 

Dynamics BC integration as the SMB ERP for Inventory Management is an obvious choice today. However, without a partner, many challenges will arise and that will need mitigation, and no one can seem to address these challenges alone. 

Vastasys could expand your reach and help you get in the right direction using BC, particularly by providing expertise in overcoming the challenges associated with implementing Dynamics BC for inventory management in complex manufacturing settings. 

Contact us and visit our website to understand more about how we can assist you.