Core setup of every ERP with inventory module, in Item groups we can define the way item behaves whether to stock or not, apply inventory evaluation method: FIFO, LIFO or weighted average and lot more. This setup is self explanatory which we will go in detail.
Path: Inventory Management->Setup->Inventory->Item Model Groups:
Costing Method & Cost Recognition:
Stocked Product (check): Decides to stock product as inventory and show as on hand stock. Also important for inventory transactions. If item is service item then this must be unchecked.
Inventory Model (drop down): All the inventory transaction may go with any price however when inventory closing is done then all posted transactions are adjusted with the model applied like: FIFO, LIFO, Weighted average.
Example FIFO: This is widely used so take example that and Iphone X is purchased $1,000 as original price in the month of JAN 2018 with 1 QTY. Again purchased in the month of JUNE 2018 with price $999 then in DEC $800. Assume no transactions of any issue in year 2018, Year 2019 first issuance is done then as per FIFO the transaction is adjusted as $1,000 first in first out.
What is Physical value: In short all the issue (sales order, Project Items) and receipt (Purchase Order receipts)
What is financial value: The stock effected by invoices for issue (Sales order invoices) and receipts (Purchase Order invoices)
Include Physical Value (check): To adjust inventory value as per Inventory model like FIFO for all physical inventory and financial values. Example: PO Product receipt value is $20 and another transaction is directly by Purchase Order Invoice with $10 then if average formula is attached then $15 is new adjusted value.
Fixed receipt price (check): If you want to fix a price of item no matter what is purchase price (receipts) or sales orders (issue) however the difference is posted to P & L account specified for receipts and to estimated cost price for sales.
Post Physical Inventory (check): All physical values to be posted in Journal. Sometimes you don’t want Purchase Receipts to be posted to Journals.
Post Financial Inventory (check): To be posted to Journals or not, depends if required.
Post to deferred revenue account on Sales Delivery (check): If items are delivered then post to estimated revenue accrue account which will be reversed when Sales invoice is done this is useful to know pending Sales invoices to book.
Accrue Liability on Product receipt (check): If items are delivered via Purchase Order using receipt which will be reversed when Purchase invoice is done this is useful to know pending Purchase Invoices to book. If not required we can disable this option.
Inventory Policies:
Physical/Financial negative Inventory (check): to allow negative postings or not. Example if there is no stock on hand and still you want to issue then check this option.
Quarantine Management (check): To enable this extra features for Quality Check process.
Registration requirements: Prior Product receipts to register each item specially when serial no/bar code are required to assign. Register the codes then receive. On PO lines register item code example: C001 with 3 barcodes: C001-1, Coo1-2 & C001-3 then proceed with receipts.
Receiving requirements: Prior Purchase Invoices to make compulsory Product receipts.
Picking requirements: In Sales Order various stages are there when item is completely delivered this option is picking is compulsory before delivery as this step can be skipped by directly delivering. Mostly used in advance warehouse management.
Deduction requirements: In Sales Order to update first physical value compulsory prior financial value.
Reservation: FIFO Controlled and Backward from Ship date (Checks): Usually in trading company where Sales Order Product reservation is controlled with Purchase Order receipts date. Also inventory Storage dimension must support Batch no. If both are cleared then lowest Batch no is reserved, if FIFO date-controlled is checked then batch with earliest date is reserved and if last option is checked then batch no of Product receipt date with closest to Sales Order date is reserved.
Item Sales reservation: Manual: Manually reserve items, Automatic: reserve when SO is created however BOM item is only reserved not it attributes and Explosion: same as automatic however BOM attributes are reserved and not BOM item itself.
Same Batch Selection/Consolidate Requirement: When manufactured product which is having batch no is required sometimes to deliver all the products from same batch only i.e. reserving same batch and picking from same batch, which can be consolidated too.
FEFO (First Expired First Out) Date Controlled and Criteria: In Sales Order Product to picked Products either by expiring soon or best before date.
Batch Disposition Code: To manually make batch reserved or available. As normal process of reservation is automatic and Sales/Purchase users cannot manually make these changes.
Vendor Batch Purchase Registration: Prior receipt updating Vendor’s batch no too for tracking which can be editable. Main functionality is when Mobile application is used for registering products and this data can be edited in main AX application.
Approve Vendor List: To control creations of PO or invoice transactions with approved vendors or no check or warning only option.
Dynamics 365 Finance and Operations 