A quick chat about Fail Mountain, and then diving into a long tour of Inventory Basics with #msdyn365bc. We talk about Availability, Ledger Entries, Location Setup, and Warehousing. So much!
- 0:00:00-0:00:55 Pre-Intro Talk
- 0:00:55-0:01:28 Intro Music
- 0:01:28-0:05:27 Fail Mountain
- 0:05:27-1:05:31 Inventory in Business Central
- 1:05:31-1:07:15 Outro
Good morning, everybody, and good day to everyone else who is listening to this in different time zones. We are going to have a little bit of a different format this episode, I got a lot of questions from people, which you can hit me up on Twitter, LinkedIn, and any number of places to ask, “Can you cover this topic for me, please?” I have gotten lots and lots of questions about items and inventory stuff. And honestly, we need the full hour to go over a lot of those different areas. So that is what we are going to be doing today. I have a little bit of a quick thing I want to talk about and then we are just going to dive into a lot of stuff that as consultants, implementers, project managers, and developers, you should all know this if you are doing inventory stuff. So let us get started.
I forgot it did that little overly fancy swooshing noise there. now, one quick thing, because I like to talk about a topic that is important to me in the beginning parts of things, before we get into Business Central-ly sort of things. It was a thread that I posted last year that some people have already seen, I am sure. But we have new audience. Someone was struggling with the fact that they were having a really hard time working with the system, and that in learning the system, every step forward was two steps back, and that it was very difficult for them to feel that they were making any progress.
That happens a lot to people in the startup community. For instance, if you are running your own shop, it feels like there are always more things to do that are setting you further back from your objectives. Trust me, I understand you. And the best way that I ended up thinking about it was when I had to help my son learn something when he was much younger, and he would get very frustrated, because he was a bright little kid. And
when you are a small little kid, you want to try a lot of new things. You might stumble once or twice, but then you get it, and you are done. Thus, learning is easy. Learning new stuff is easy until it isn’t.
Not everyone can do everything on the second or third try. Life is not like that. Some things take some serious effort. And the way that I explained it to him – because as you have probably noticed, I am a pretty big metaphor and simile sort of person – is that anytime you are trying to do something new, and you make an attempt, it feels like a failure. And it remains there in your brain. Particularly if you are a spectrum person.
IT failures sit in the forefront of the brain, and they remain there. And you might try again, and another failure sits there and they start to accumulate. But eventually, this means that you can climb those little failures to be able to reach higher and higher because you are stepping on all the things that you know do not work. So, we ended up calling this idea, since my kid was very little at the time, the “fail mountain”, you know that you have to climb fail mountain. And sometimes it is about having enough things that you have tried, but did not work, to pile them up and reach to a higher level.
Sometimes the mountains are a really big challenge to hike up and it is already there. You just do not know what skills you need to climb up the next part. You have to carve the path to get further along, and each time you feel that you need to give up, go home, and go back down to the bottom of mountain, take a moment to reevaluate and think, that might happen a lot. It sometimes feels pretty awful. But learning what does not work is a very important skill. It is the foundation stone of progress.
Anyway, I am hopeful that while a very short little topic, it was one that I have talked about in the past, and I thought it would be fun to go through again
Inventory in Business Central
I really did want to save a huge chunk of time to talk about inventory topics in Business Central, because it is not a simple topic. However, there are going to be things that we are probably not going to cover today. This is an area of which there is a lot of configurations that change the whole process. There is a lot of customization that needs to happen. And there is a lot of underlying assumptions in Business Central on how you should work with inventory, that if you are not familiar with those assumptions, the whole system seems really strange and foreign. As such, let us spend some time talking about that.
I am absolutely going to talk through things. So, for people who are listening through in podcast form, rather than on YouTube and streaming and whatnot, hopefully, I will be doing a good job of describing everything we are going through. Hence, let us pop open a Business Central system to have a starting point.
One of the first things that people stumble on very quickly is understanding the big scary question of what, in my system, for an item is available? Can I pull to Power BI? Can I pull to Power apps? I am particularly mentioning those because this is what a lot of people who work outside of Business Central struggle with. The question of “How many are available?” Every BC developer in the room has already though “There is no single field in your system that will say this is how many are available.” Because this is a fairly powerful system, it means that there are so many configuration options, and business considerations that drive what available means.
Consequently, with that in mind, you have to figure out, first to your customer, what available means. And that can get really complicated very quickly. And we will explore the why of it. When you are looking at Kronos for the first time, where you get started on what is available are a set of flow fields in the item card on the Inventory section, the fast time column inventory, you will see right out of the gate, that there are three fields that give you a hint to your availability. One is the inventory field. And you will see that these are drilled down capable; they are flow fields. This means that they are dynamically updated based on information underneath the item card from some other table.
For those of you not familiar with flow fields, the inventory field in our Kronos environment here for one of the guest chairs says that there are 95 available. But the question is “In which location?” Business Central supports lots of different locations. And those locations could be on other sides of the planet. Some of those locations could be vendor managed inventory, how can you say how many exactly are available? Well, you might have five available, but it might be that of these 95 on the item card, 90 are currently in a country that has a quarantine going on and you cannot ship them out of that country. In this case, you do not really have 95 available, you have only five. But how can you know that if not from the item card?
Additionally, there are some other fields that are shown right out of the gate as well. They are called “quantity on purchase order” and “quantity on sales order”. Those reflect what your incoming and outgoing inventory are. And that is a good thing to have visibility into. But if you had 1000 on your quantity on purchase orders, when are they due to arrive? Do you consider them to be available in your business process because they are due to over at some point? Maybe they are not. Maybe it is a promised order that someone is manufacturing that will be delivered in two months, but it could bleed over into four. So how do you consider those available when you talk to a customer? Some customers are perfectly fine with being backordered. And they will get it when they get it. It is important to them. They just need to know when. Other customers want their order shipped tomorrow. You have to think about what that means.
And then it gets even crazier. In the inventory fast tab, you can click show more. And suddenly, you do not just have “quantity on purchase order” and “quantity and sales order” quantity on job orders, but rather have “quantity on assembly order” and “quantity on assembly component”. And you then wonder what that means. “Quantity on assembly order” means that it is something that is going to result as an output from some sort of assembly or manufacturing process. So, you as an end, and as a business organization, are planning to make these. Thus, this is going to be a net positive to your inventory. However, “quantity and assembly component” means that it is going to be consumed by some sort of assembly or manufacturing process. And that is a net negative. But again, you know what location.
There is no single component level where you can say “I know precisely what is available”. And you get a hint of some of the complexity behind this when you dig into it. This are too many menu steps in the action bar in “related”. There is an availability section. And then under availability, you can see item availability by and check out all the different breakdown levels that they give us here, you have item availability by event, which means that it is going to show you sequentially all of the different events that are known in the system, potential chips, potential receives, potential assemblies, all those sorts of things. It is going to show that list of those events and give you a sense of how your item forecast is going to go. There is item availability by period. For example, it can show you week by week what you are going to have.
There is item availability by variant, which we will talk about in a couple of minutes, because that is a whole other level. The same applies to item availability by unit of measure, because sometimes Unit of Measures are really important. And you can see that there is also item availability by location, lot, and Bill of Material level. That gives a sense of how complicated the availability is.
The base product has over seven different ways, right from the start to potentially look at the question of what is available. And if we go into each one of these screens, we get some interesting insights into the level of detail that comes behind it. Looking at item availability by periods, we can see we can view it by different periods, we can view it by day, week, month, year accounting period. But on the lines for this, we see all those different periods. And we see that there are requirements for scenes, planned order receipts, projected available balance, and these are all drill downs. Thus, there is more and more information behind all the scenes.
As such, availability is a complicated question. And that is something that I think trips up people who are new to Business Central in a big way. That leads us to some other fun questions. First, let us zoom out for one second, and come back to items as a concept. In Business Central, items have a type, which I think is a really interesting idea. These used to be broken out in two different parts of the system and have been consolidated to the item card under the type hierarchy. Item used to be just inventory. Once upon a time, you could only have an inventory item. That made sense. It was an item that you kept it in stock. Over time, they have added support for what is referred to as a service type item, which is sort of fascinating. The idea behind this being that you could functionally train your users to work with it just like an item, but there are some differences and variations on how much you would potentially track inventory around it. And how that is going to be available to use on other parts of the system, but we are not going to chase down that rabbit hole.
However, service and non-inventory items functionally work fairly differently. But they allow users of the system to work with the same pricing, the same discount groups, all those sorts of functional pieces can be tied to the service and non-inventory items – non-inventory being things like an item carried as something someone can order, but it will never be stocked, it will only be use for drop shipments and things like that. That rule used to be filled by a separate system, and may still be in there, I have not looked before the stream. They are called non-stock items, which was once upon a time a nice little way of doing things.
Without delving into the rabbit hole of Type, there is also a core concept that is a little bit new for some non-BC people, that items always have a unit of measure code. In this case, for example, they use PCSs, as pieces, aka each, you can potentially have different things in different units of measure, but for the perspective of your inventory, and how you would count these things and how you might value these things. What do you consider the baseline? For example, if you are a company that has spools of wire that have 5000 meters of wire on the spool? Do you potentially just buy and ship the whole spool? Do you ever unwind them? Then you might track those in pieces. But if you are the kind of company that buys big spools and then consumes or sells those in individual meters, then the base unit of measure you might want to use is meter. But not only can you have a base unit of measure, you can have separately on the prices. And I believe it is replenishment fast hubs, you can have a sales unit of measure. And you can have a purchase unit of measure. What do all those different things mean? How do they relate to each other?
If we look at the item Unit of Measures, which I always get myself a little lost as to which menus, the action bar with the item card, I hope they clean it up, because I find it is extremely challenging. For those of you not following on visually, we have in the action bar process item, prices, and discounts request approval. And then we have the deeper menus of action and related. And under this item menu, we have comments, attachments, attributes, and adjust inventory, perfectly reasonable things that we might want to get to frequently. But under the Actions menu, we also have a folder called item. And under that it has variants and identifiers. I don’t know why those are actions.
If we go under the related menu, we have another folder called Item. So, when you try to teach users where to find this stuff, or you are just not in here every day, you might feel that it is a mess to navigate these menus. I really hope they clean it up, because I do not understand why variance and identifiers is under Actions; you are not taking an action, those are related setup items. Anyway, under the related item folder, you will see there is a unit of measure table. What this does is allow you to see several things. First, your current basing measure for an item, and that will always be quantity per unit of measure 1. Thus, anytime you are dealing with this unit of measure, that is the measure that you are working with.
Thus, in our wire example, meters would be quantity per unit measure 1 in our spool of wire example. We could then set up another item unit of measure for this called spool, or unit, or whatever makes sense for your organization. And the quantity per unit of measure on that would be 5000. Then when your users are going into a purchase order and you have got it set up to buy in those spools, if they buy three spools, when you receive that in, it’s going to do the math for you automatically. And you will know you got 15,000 meters. And that is it. You do not have to do any of that conversion work. Your users do not have to do that conversion work. That is super helpful.
You will notice here on the screen that we have got the items unit of measure, we can specify the code, the quantity per unit measure. And this is where you put in some of the different specification values that you might need elsewhere for shipping documents with height, width, length cubed, and weight. This is where that information lives. A lot of people ask me about how to enter in the weight of items to put them on a picking document or a shipping document. This is where that comes from. Because after all, if you sell a meter of wire, that is going to have a very different weight than if you sell a spool of wire.
So, that is one of the other fun challenges. And I think that covers one of the core concepts. In this hour, I am not going to try to cover the different costing methods, because that probably could be an hour in its own right. So, after explaining items and unit of measure, I have a quick side note before we go to the next part. Sometimes you have versions of items that come in different varieties. For example, colors or sizes, it is fairly common to set up what is called variant codes on that.
As such, for example, the KRONOS chair that we are looking at is noted as 1936-s Berlin Guest Chair, yellow. We might have six different colors of this guest chair, but they are otherwise functionally identical. Some companies will want to know how many guest chairs they have, regardless of color. They would like to be able to drill in and see the differences of which items they have. And that is managed via a system called variance under Action, item, variants. You will note that we just get a list here, that is Code and Description, you can set up different variant codes. And for the most part, there is not a lot of differentiation. But it gives us the ability to tag. When we are looking at inventory transactions involving this item, to define which variant I am dealing with. So that was why we had the ability to look at the availability by variant.
Consequently, if we had six different colors of this guest chair, we have got 100 in stock, we might drill into the variants to go out, and we have, for instance, 13 red, we have 16 blue, etc., whatever makes sense. Accordingly, that can affect some of those availability calculations as well. If you have got variants involved, you have 95 in stock, but of which color. So, it can get complicated very quickly.
So, let us talk a little bit about some of the underlying tables behind the item card and what is going on with it transactionally in system. In the Related menu. Under the History, we have entries, just like customer has Customer Ledger Entries, and vendor has Vendor Ledger Entries, Item has Ledger Entries. But when you open that list for the first time, you may have a bit of a panic moment as you go. Here, under history entries, we have Ledger Entries, Physical Inventory Ledger Entries, Reservation Entries, Value Entries, Item Tracking Entries, Warehouse Entries, and we got a couple of odd balls in here of Application Worksheet, and for some ungodly reason, Export Item Data, which to me is an Action not Related.
I hope at some point that we can do Pull Requests against the base app because I would like to clean up these menus, just like a half a day of moving these to be logical. Anyway, I assure you that it is still better than it once was. I had an interesting experiment back in 2009, when we were attempting to start the process of writing, the first 20 hours of Business Central. The first version of that I was actually going to write back in the nav. 2009 era. We were going through all of the roll centers looking at all the different Action bar items, and there were duplicates, there were misspellings, and places where if you clicked on something in that menu, it would not even go to the right object. It was a mess. So, I promise that it is infinitely better than it was. 2009 was not a gold standard version for usability. So, if you are out there today, using nav. 2009, or a customer has come to us saying they want help with their nav. 2009 system, I am very sorry to hear that. Please move to Business Central.
Back to our focus point, the Ledger Entries is as useful as it sounds, it is straightforward, and gives you what has changed of stock in your system, when stuff comes into, or leaves the inventory for this item, what is the impact of that, what kind of transaction it is, etc. The physical inventory ledger entries, if you use the physical inventory system, whether you do full physical inventory or a cycle-counts, they segregate these physical inventory ledger entries just so that you have a better visibility into it.
Reservation Entries, this would take an approximately half-a-day session, not even a full hour is enough. There are mechanisms in the system by which you can, for this given customer’s order or for this given vendor’s order, have this inventory promised to this transaction. It comes up with lots and serial numbers. In a way, I feel like I could teach a week-long class on some of these topics. So, we’re not going to dive into that.
Value Entries is an interesting table, it is worth talking about for a moment. It has to do with the financial transactions related to the value of the inventory that is in your system. We are going to talk about that in a second, related to Ledger Entries.
Item Tracking Entries is part of the lot tracking or serial tracking mechanisms. Because there are some implications, we might be able to squeak in 10 minutes to chat about that and an overview. And then Warehouse Entries talks about the fact that there is a warehousing system in this product. For example, in a warehouse-based location, when you move stuff between different bins, because it is still within the same location, there is no effect on the overall availability or the financial value of that stock. So, those entries need to be kept. But they do not necessarily need to clutter up your availability information table; the Item Ledger Entries. So, Warehouse Entries is a whole separate table. And that can throw people off a little bit here. Application Worksheet is related to costings, we are not going to dive into that.
Thus, let us look at the Item Ledger Entries table. The Item Ledger Entries table looks lot like many other ledger entries. If you have ever looked into Customer Balances or Vendor Balances, it will look pretty familiar because it has got a posting date, it has an entry type which lets you know what kind of transaction, it has a document type to let you know which kind of document did this transaction. For example, in our list of things, we have a few different sales shipments that are entry type of sales. We have some purchase receipts that are type of purchase. And as you can imagine, as we scroll off to the side, we see that the sales transactions show negative quantity impact and the purchase receipts, when we received those items in, have a positive quantity impact. And that drives what is behind the item.
Card Inventory field is a sum of not the quantity, but this remaining Quantity column. For those who are following an audio we have quantity, invoiced quantity, and remaining quantity. And we have got some sales amount and cost amount and an open Boolean flag off to the right and all of those are pretty relevant. So, what is the situation on quantity, invoice quantity and remaining quantity? Every one of these transactions was originally related to a sales or purchase document. You can do item journal entries that are not related to a document type. But the ones we are currently looking at for this item on screen, they were all related to sales or purchase, not adjustments. So, for the sales ones, for example, we have quantity, say minus two. And we will notice that we have an inventory invoiced quantity minus two. That means that not only was the shipment posted, but also the invoice. So, looking at the Item Ledger Entry, we know that this was a fully invoiced sales shipment. And the remaining quantity on most sales’ ledger entries will typically be zero because there was not any positive impact to your inventory.
For the purchase side of things, there will be remaining quantities based on what is in your system. If we scroll down far enough, we will get to a list of purchase receipts for this, where we start seeing that, for example, in the demo data here, we had a quantity of 10 that has a remaining quantity of zero. That means that, somewhere in the demo data here, March 2021, we bought 10 of these, and those particular items have since left the building. They are no longer considered open; that open flag that we mentioned, a little checkbox. The reason that matters – which items are sold – is because it connects your sales costs to your purchase costs. This gets deep into the weeds of the costing, but much like when a customer makes a payment and you can apply the customer payment to different invoices. Inventory works in the same way of a shipment, under the hood is typically automatically applying and selecting which inventory went out the door.
As such, when I ask the question for this quantity of two that we shipped out, I want to know how much profit we made on that item. And it depends on which inventory you bought, if the costs are going up and down per unit. For example, your company sells graphics cards. The costs on those definitely have gone a little haywire. As such, the value of a graphics card that has been sitting on your shelf for a year might be a lot lower than if it is a graphics card that you bought just last month. They might be identical for the purposes of shipping out the door, but the profitability will be very different. So those are connected things. And that is why there are the sales amount and cost amount fields. They flow into other records.
There also is an option. We will notice too that it says “Sales Amount Actual” and “Cost Amount Actual”. The reason those are in there is because there is functionality in the system that allows you to record the expected costs. And in your personalization of item ledger entries, you will see there are “Cost Amount Expected” and “Sales Amount Expected”. If you have turned on expected costs, or you are working with a customer with expected costs, what that means is that typically in your business process flow, the actual process of receiving the goods and getting the invoice, or shipping the goods and sending the invoice, are far enough apart in time that it makes sense to also have some estimated value of the purchase or sales, and you want to just get something recorded in your books because of inventory has moved. So, there is a whole expected functionality around that.
Thus, if we look at the “Sales Amount actual” and “Cost Amount Actual”, let us come into one of our last purchases that we have received. If we click on the cost amount actual drill down, you will note it will drop you to the value entries table. In our case, in the Kronos Data, that just brings us to a single value entry showing a purchase that happened on that date. And the entry type is a direct cost. And if we scroll off to the right, it will show our “Sales Amount actual”, our “Cost Amount Expected”, our “Cost Amount Actual”. And I also show some info about the cost posted to the GL. It will tell you a lot more about things such as the item ledger entry quantity, what was the cost per unit? It will tell you a little bit more about what posting groups it used to go to the GL, all that stuff.
The reason for this is in case the market went crazy, and this chair was suddenly now worth, instead of 97 per unit, this chair in the market space was worth 500. The people discovered and now it is a trend. And we need to figure out how to make sure our inventory value reflects that. We do not have to adjust the stock out. And we do not just post a single adjustment to the inventory account of the GL. No, what we do is a revaluation where we can say these 13 items posted in March, we can adjust that to say instead of 1200, it is actually 12,000, or whatever have you. And that revaluation process will create new entries in this table. And all of these costs are then summed up into the item ledger entry, in effect how that works. If you are using average costing not FIFO, which again, I am not going to dive too deep into the average costing, creates a ton of entries in that info as you buy and sell against items. So, a lot of agitation if you do it that way.
One of the other areas that throws people off a whole of a lot in a big way, zooming all the way back out, is that inventory in Business Central can work in a variety of different modes. And it is tied to what you have configured for a location. For example, you might have a main warehouse that has hundreds of people working in it, you have got robots doing the packing of boxes, really elaborate stuff, but you might have a remote warehouse that is near to one of your customers that has got a guy. And it is one big room. And all you do is fulfill the orders of that one special costumer from that location, you just keep it stocked to a certain level. And you know, the operational requirements of what you do in the big giant warehouse versus that guy’s warehouse. Those are very different business processes. And so, whenever a customer asked me to help them with their inventory, the very first thing I do is I try to figure out what their location configurations are, and what the different methodologies are.
An interesting side note before we dive into how different locations works, is locations are not technically required in Business Central. For customers who have self-setup, this scares them as one of the possibilities. If you do not set up using Location Codes to begin with, it becomes much harder to add locations later. I usually encourage all of my customers to just set up a main location and default it everywhere. Even if they have one location, they have been in business for 30 years, they do not currently have plans to expand, and all that sort of stuff. So, you just set up one location and get started. The reason for this, it is much harder to add locations to an inventory system that does not have locations configured from the start. So be aware, strong recommendation from me.
So, what we mean by some of the different modes that we can run Business Central inventory on? There is a great blog post from Olaf Simren.com. he has got this post from 2015. So, the screenshots are about that time. But this is one of the better write ups of the possible different methodologies you can use for doing shipments. And it gives you a sense of the complexities to what the different options and the different methods are used to ship goods out of the system. He wrote it up as four main processes.
Option 1 is you write up a sales order, and on the sales order, you hit post, and you pick one of the options that includes ship. Very straightforward. There are no extra processes, there are no extra steps. You train your warehouse people, or logistics people or your team, whoever, you train them to go to a given customer’s sales order, and hit the post button after they have set the quantity to ship column on each of the lines. And that is it. No extra complexity. That is the most straightforward and simple method to works with. If you have locations, you can specify location on the customer card, which defaults to the sales header, which defaults to the sales line. And if you have multiple locations, you can fill those in separately on the sales lines. And now all will work with this option 1. We will talk in a moment about bins for sure. But if you use different bins, you have to do different sales lines. If you want to use different bins.
In option 2, however, which is a little less commonly used for Business Central, but has some value, is if you have a different team doing logistics where they potentially need to post the shipments for sales orders. But you do not want your logistics people to go to the sales order screen. There is a mechanism by which you can create what is referred to as an inventory pic. And that inventory pic is a one-to-one document, a picking card, that matches to a single sales order. It is designed around the idea that you want to not have your logistics team have permissions to look at or work with the sales order screen. It is a very simplified version of the order that allows them to work with the picking process. The advantage to the process that you have to create a pic document. The advantage to this is that when you go to create a pic document, if the item is unavailable for some reason, then the pic will not get created. And typically, organizations that would use this business process to create these inventory picks would run it as a big batch job to determine everything that they are supposed to be shipping today based on the shipment dates of the sales orders, and they can create, for instance, 30 picks for the inventory logistics crew to fill in. They just get a simplified UI that says from this sales order, what quantity I want to ship for each of the different lines.
That is pretty good. It is not commonly used, but I still think it has value to mention. Because a lot of people who are using simpler inventory methods find it frustrating or challenging, that they have to teach the logistics team to know which orders are available and to train them to ignore all of the rest of the sales order screen that they should not be changing. They cannot change the quantity field to ship while in the inventory pick scenario. They cannot change the quantity field they have to change the quantity ship.
Then you get into Options 3 and 4. And this is the beginning of where you use the warehousing system. Now, for those of you who do not know your Business Central / NAB history, once upon a time, the product had a separate variant of essentially the system called division warehousing, it was actually a whole separate product. If you wanted to use the warehousing product, you ran a slightly different version of the software that was merged together into the base product. And feel free to correct me if I am wrong, but I am still pretty sure this is correct information, that once upon a time the warehousing engine, not only was it a separate little product, but it was a separate product because it was originally an ISV solution that got integrated into the base product. This helps understand a little bit why it sometimes feels like the warehousing system feels almost like a separate piece.
Moving on to option 3, as Olof describes it. What happens with orders is when the sales orders are released, you would create a warehouse shipment based on running a batch job and it consolidates multiple orders that have the same destination. So, if you have five orders for a customer, you have those five orders get consolidated onto a single warehousing document. Because the logistics team knows that the container that is on the truck is all going to the same customer. As such, pack five orders into that same container. Straightforward enough. When the warehousing team posts this multi sales order warehouse shipment document under the hood on their behalf, it is effectively going through each of those five orders and doing the post ship command to also create the five posted sales shipments. So, that is an important thing to understand, that even when you do the warehouse documents, the non-warehousing documents, the sales shipment, documents posted sales shipments, those are created by the warehousing system.
And finally, in option 4, the highest kind of complexity side of things that we will dive into today is not only does a warehouse shipment get prepared, but it can be multiple picking documents are then prepared. So, in our scenario where we had a big giant warehouse where maybe there at this given location, you have actually gotten six different buildings. But it is all effectively the same location, you might have different stock in different buildings, maybe one of them is refrigerated, maybe one of them is freezer base. And you may have different teams of people who are going to pick in those different buildings. While even though it is all going into the same refrigerator or freezer truck or whatever you are doing, each of the five different picking teams gets their documents for the day. Well, the warehouse picks are what lets you break up the warehouse shipment based on different criteria such as you know, different zones, different bins, different teams, whatever, it supports some pretty complex logistics. So, you now have maybe five different orders with a bunch of different lines all get consolidated together onto a warehouse shipment based on the destination. And then based on your business requirements of what is going to need to come together from separate parts of your inventory, or by different people for different reasons. You have multiple pic documents, so the pics get all registered, the equivalent of posted but there is no financial location. So, the pics get registered, which moves all of the inventory typically to a shipping bin within the location, and then the shipment gets posted which effectively considers it going out the door.
Thus, it can be really important to understand the pros and cons of all of these different models. They all have different benefits and different value. So OlofSimren.com. He has a great series on this. And it goes into great detail of what happens behind each of these options. And he did the same process for both shipments and receiving.
So, how can you tell when someone calls you up for the first time and they ask you why this is not shipping on the Business Central system. Well, the very first place I start in any new environment for me is to look at the location card, because all of those options and configuration settings about what kind of inventory management we are doing is driven by settings on the location card, and challengingly enough in the Kronos data as it stands right now, there are no locations that are configured to use the full warehousing module. It is a complex area of the system. So just be aware that even though descriptively they call it east warehouse, main warehouse, West warehouse and a couple of logistics locations in the Kronos locations list. None of these “warehouses” are using the warehousing functionality. So be aware that that is something you cannot just dive into Kronos and learn. It is a challenge. How do you know on the location card because it does not immediately jump out the location card, if you go to the warehousing directly, which is also collapsed by default? This drives whether or not you utilize the warehousing module.
And interestingly, you can have the process be different whether you are doing receiving or shipping. For example, you may just want to do order by order receiving because we do not receive very often. The complexity level is much lower on receiving. But when we do the shipments, we want to do the full shipping and picking, you could do that and you can turn on ship and require ship and require pick. Or you can potentially turn on require receive and require put away. Put away is the equivalent of the pick where basically you can break up, we received two containers full of stuff. And now we need to put it all the way to the correct locations.
There is a full-scale version of this where it traces everything through the whole process. And you can have a really elaborate model around. And there is this directed put away and pick down at the bottom. And that Boolean is complicated. And most of the time it is going to be grayed out if there is existing inventory, you are not really allowed to change this. If you need to turn this on, you effectively need to make a new location and transfer your goods to a directive port away and pick location using a transfer order or inventory adjustments. As an aside. There is also a separate little thing which is not directly related to warehouse where you can turn on being mandatory. And that also affects options one and two, even though we are not using warehousing.
So just for your information, if you are wondering what is a bin at the location level, in the simple models of things, bins are subsets of a location. A bin could be in a large warehouse where you have buildings A, B and C. You could just go ahead and located them in building C, maybe that is enough granular detail for your warehouse logistics team to know exactly what that means. I have also seen far more often that in a location where the customers will label each and every rack in a warehouse, and maybe even each and every single shelf in a warehouse with a bin code. And that lets the logistics person know in which aisle, rack and shelf each item is located. That makes sense to my logistics guy. He will know exactly what to find when he gets the forklift in there and that is the granular level of detail that helps.
Bin is the bottom level of that. So, you want to make sure that that makes sense to people. In advanced scenarios where you need to have more fine-tuned control over how people use different bins, there is a middle layer between locations and bins called zones. So, because we cannot turn on the warehousing modules for any of the existing Kronos locations, I cannot show you as part of this stream, what it would look like to have different transactions. In the warehousing side of things, I would need to set up a new location and do some adjustments. And so, we’re not going to dive into that today. Because it gets complex.
But some of the other things to be aware of that are hopefully starting to make everything make sense, if you need to move things between different locations in the system, the appropriate keyword for that is the transfer order that allows you to do inventory moving between different locations. If you are moving things around between bins in your existing single location, the key word on that is movements. There are different types of movements, depending on what you are doing for your inventory setup. You can see here that we have got inventory movements, we have got warehouse movements, there is also movement worksheets. So, it gets a little elaborate. But the idea behind this is that you are recording the things that are changing around, if you need to move things in and out of inventory. This also depends on what your location setup is.
For example, if your logistics manager calls you up and says, that you have had an issue where one of the boxes is broken, and you need to zero this out and deal with it later. “I think it was something that our operations did, we are not going to try to do a return to the vendor” the manager says, for instance. Well, then that would be a in a full logistics environment, you would first need to do a warehouse journal, to bring the inventory out of the warehousing system. The second step would be to go to your item journal. And on the item journal, you will see under brewery (in the item journal, under the Actions menu, you will see there is something called a calculate warehouse adjustment).
After you post a warehouse journal, you then have to do the related item journal, because something coming out of the warehousing ledger entries or warehouse entries, that is a quantity-based change only. And the item journal does not only do the quantity-based change, but it also allows you to select which cost related components that is.
For example, if our crazy graphics cards were cheaper a year ago versus a month ago. If one of those got smashed by careless handling and you have to zero that off your books. Well, which one are you zeroing off your books, the one from a year ago or the one from a month ago? The item journal lets you connect those things. So, depending on the complexity of your location setup, drives a variety of the different processes that you have to handle, and that is without even getting into some of the complexities of using the variants and all that sort of thing.
Let us see, I am just trying to see what else we can fit in here because there is a day’s worth of content, just using this as a syllabus. There are also abilities in the warehousing module to be able to look at the quantities that are in each and every single bin. So, in your item card under related and warehouse you can see bin contents to look into across all your different locations, and what we have in each bin. This allows to apply some different rules to your bins as well, if you need to track. I am just getting a field, getting something open in front of me. One of the options that we are not going to go into because I do not have this set up correctly for that. One of the other options you have open to you is you can also have what are referred to as stock keeping units off of the item card for the warehousing module, so that you can potentially have different skews to be able to see what your availability is based on different locations, be able to do different traceability per locations, all that fun stuff.
Another key thing to be thinking about in inventory, is that you can also have customers show up in your world that I believe is in inventory set up. In the inventory setup, which is your general overall inventory setup. This is a place where I come also, in any new environment quickly. You will see a few different things that are critical to know. From the very beginning, you will see in your general fast tab is automatic cost posting. That is important, we can spend a long while on inventory cost, I am not going to go into it. But it is something to be aware of. If you do not know what this setting is, and how that affects the financials of your client, you need to you need to read up. Because this is critical for any customer using Business Central, you need to understand this.
There are definitely people who do not have this turned on and have never run the Adjust cost routines and wonder what is going on in their books. But this is one of the places I come to quickly because here is that location mandatory flag. I will typically turn this on right out of the gate before anyone sets up anything. Because if you have inventory in your system, and you decide to implement locations later, you did not use locations to begin with turning this on means that you will never be able to do transactions for those items that are against the blank location code. And that is a real problem.
As such, customers that I have seen that did not have a default location right out of the gate ended up having to have a big giant journal where they adjusted out all of their inventory to zero out their entire inventory, then they could turn this on. And then they brought all their inventory information back into the newly created main location. So, it is a real nightmare for everyone involved from a costing and accounting perspective. So, I turn this on for every single one of my customers right out the start.
Another thing to be aware of, too, is there the setting here on the general fast tab of the inventory setup called prevent negative inventory. I am always surprised by organizations that are ok with having this set. It means that their business process is not disciplined enough. And sometimes it cannot be. So, there are plenty of good reasons. But this being off means that if I only have five in inventory and a location and a customer orders 10. And the logistics team for whatever reason gives approval to that I 10 down here, they have not maybe hit post on their receipts yet, whatever have you. The system will just let them do that. And it will kind of get itself sorted out later when you post the purchase receipt to receive that inventory in but only partially. So be aware. That’s an issue, I think.
I think we are mostly out of time with this. There are a million other settings in here that are all sorts of good things to know. There are ways to be looking at, how do we do replenishment? We could do an entire section on the way that the item tracking works, because I know people get stumbled on that in a big way because it is complicated. We can do all sorts of talks about the replenishment systems or we can do a whole episode on assemblies for sure. And there is a lot of information in here about extended texts and how to make Manage translations and cross references.
So, we could do a lot, but I am hopeful that this gives us enough information for people when they go into Business Central. They are trying to understand what is in the system, what is the inventory? How do we do the different transactional stuff?
I hope that gives us enough information for people to start to learn their way around things. So, with all that in mind, I think that wraps us up for today, I went a little over even trying to hurry this down into an hour, we still went a little over that. There is so much in here that you can do, there are so many great ways that you can be using this part of the system. It is designed to be incredibly flexible and incredibly powerful. which means, of course, it is a little bit like when you look in the front of the airplane, you look at all of the switches and toggles and buttons, or in the inventory system of Business Central, which is definitely one of the areas of the system where there are layers and layers.
There is a whole bunch of functionalities in here around being able to promise dates and build demand forecasts. And it is great stuff you can make your career just on understanding this area, this system. I hope it helped developers and implementation people. This is all stuff you should know if you are working with Business Central. So, I hope it helped. Let me know if there are any other areas of which you want me to dive into inside of inventory. But I think that is going to cover us for today. And there are many more to go over. Shoot me questions. And I hope that as you go through this week, that this has provided some value. Take care of everybody, and see you next week.