Dynamics 365 Business Central Training: Reordering Policies

Effective inventory management is crucial for ensuring that your business runs smoothly and efficiently. Dynamics 365 Business Central offers a variety of reordering policies to help you manage your inventory levels effectively. In this Dynamics 365 Business Central training post, we will walk you through the different reordering policies available in Dynamics 365 Business Central, explain their impact on inventory management, and provide step-by-step instructions on how to configure them. 

Understanding Reordering Policies 

Before diving into the configuration process, it's important to understand what each reordering policy does and how it affects your inventory management. Dynamics 365 Business Central offers the following reordering policies: 

• Fixed Reorder Quantity: This policy allows you to set a specific quantity that should be reordered whenever the inventory level drops below the reorder point. It ensures a consistent replenishment quantity, making it easy to predict inventory levels. For example, if your reorder point is 50 units and the fixed reorder quantity is 100 units, every time the inventory falls below 50 units, an order for 100 units is placed. 

• Maximum Quantity: With this policy, the system will reorder enough inventory to reach a predetermined maximum level whenever the inventory falls below the reorder point. This approach helps maintain an optimal stock level and minimizes overstocking. For instance, if the maximum quantity is set to 200 units and the reorder point is 50 units, and your current inventory is 30 units, the system will place an order for 170 units to reach the maximum level. 

• Order: This policy triggers a purchase order for a specific quantity whenever the inventory falls below the reorder point. It is useful for items with unpredictable demand patterns. For example, if the reorder point is 40 units and the order quantity is 80 units, an order for 80 units will be placed each time the inventory falls below 40 units. 

• Lot-for-Lot: This policy generates orders based on the actual demand during a specified period. It helps in aligning inventory levels with real-time demand, reducing excess inventory. For example, if the demand for the last week was 150 units and the current inventory is 60 units, the system will generate an order for 90 units to meet the demand. 

  
  

Step-by-Step Instructions to Configure Reordering Policies 

Now that we have a basic understanding of the reordering policies, let's move on to the step-by-step instructions for configuring them in Dynamics 365 Business Central. 

Step 1: Access the Items List 

To begin, navigate to the Items List in Dynamics 365 Business Central. You can do this by typing "Items" in the search bar and selecting the appropriate option from the search results. 

Step 2: Select the Item 

Once you are on the Items List, locate the item for which you want to configure the reordering policy. You can search for the item by entering its name or item number in the search bar. 

Step 3: Open the Item Card 

After selecting the item, open its Item Card by clicking on the item name or number. The Item Card contains detailed information about the item, including the reordering policies. 

Step 4: Navigate to the Planning Tab 

In the Item Card, navigate to the Planning tab. This tab contains various fields related to inventory planning and reordering policies. 

Step 5: Select the Reordering Policy 

In the Planning tab, locate the Reordering Policy field. Click on the drop-down menu to see the available reordering policies. Select the appropriate policy based on your inventory management strategy. 

Step 6: Set Additional Parameters 

Depending on the reordering policy you selected, you may need to set additional parameters such as Reorder Point, Reorder Quantity, and Maximum Inventory. Fill in the required fields based on your inventory requirements. 

Impact of Reordering Policies on Inventory Management 

Each reordering policy has a unique impact on inventory management. Understanding these impacts can help you choose the right policy for your business needs: 

• Fixed Reorder Quantity: Ensures consistent replenishment and simplifies inventory planning. However, it may not be suitable for items with highly variable demand. 

• Maximum Quantity: Helps maintain optimal stock levels and minimizes the risk of overstocking. It is ideal for items with steady demand patterns. 

• Order: Offers flexibility for items with unpredictable demand. It may result in higher administrative overhead due to frequent order placements. 

• Lot-for-Lot: Aligns inventory levels with actual demand, reducing excess inventory. This policy is best suited for items with fluctuating demand. 

  
  

How Lot-for-Lot Works 

The Lot-for-Lot reordering policy is designed to match the inventory replenishment with actual demand during a specified period. This policy is particularly useful for managing items with fluctuating demand and helps minimize both excess inventory and stockouts. 

Here’s an example to illustrate how Lot-for-Lot works: 

• Assume the demand for an item over the past week is 150 units. 

• Currently, you have 60 units in stock. 

• Using the Lot-for-Lot policy, the system will generate an order for the exact quantity needed to meet the demand, which in this case is 90 units (150 units demand - 60 units in stock). 

The Lot-for-Lot policy ensures that you only order what is necessary to cover the demand, avoiding unnecessary overstock. This approach can be particularly beneficial in industries where demand is highly variable, as it helps maintain a lean inventory. 

Additionally, the Lot-for-Lot policy allows you to set a specific planning period, such as a week, month, or any other timeframe that suits your business needs. The system will then calculate the total demand for that period and generate purchase orders accordingly. 

Conclusion 

Configuring reordering policies in Dynamics 365 Business Central is a powerful way to optimize your inventory management. By understanding the different reordering policies and their impacts, you can make informed decisions that align with your business objectives. Follow the step-by-step instructions provided in this blog post to configure the reordering policies effectively and ensure that your inventory levels are always in check. 

We hope this guide has been helpful in assisting you with configuring reordering policies in Dynamics 365 Business Central. If you have any questions or need further assistance, feel free to reach out to our support team. 

Happy inventory management!