Dynamics 365/AX ERP and everything related

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81204-23 Inventory Closing & Understanding open quantities — April 21, 2018

81204-23 Inventory Closing & Understanding open quantities

Usually done every month to adjust all inventory transactions amount as per model group attached to each item like: FIFO, weighted average etc.

Before going to process please read for item model here. Example FIFO: An 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 when closing is run.

Note: Once closed that period and before this period the inventory transactions will be locked however it can be reversed also until year end close is done permanently.


Inventory Management->Periodic->Closing and adjustment

The generic way is re-calculation and closing. However additionally we can see open quantities, items which cannot be settled hence gets carry forwarded until receipt is matched with issue. The unmatched are hence open quantities items, read here.


Item Code C0001 is purchased with PO no PO/0006 with qty 6 -> receipt done->Invoice done->Later consumed all the 6 quantities (by Production Order, Adjustment, movement or project item journal)

Again Item Code C0001 is purchased with PO no PO/0006 with qty 3->receipt done->Invoice Not done->Later consumed all the quantities  (by Production Order, Adjustment, movement or project item journal)

This consumed -3 quantities will look for invoiced qty which is not done and pending hence system will show -3 quantities are open

Closing in detail see here.

81204-22 ABC classification & Reports —

81204-22 ABC classification & Reports

ABC Classification

All items in the inventory can be periodically or manually categorized based on: revenue, margin, value & carrying cost.

  • A Items are most expensive which requires regular cycle count and monitoring like 30% of total inventory
  • B are medium level
  • C are low level where tracking may not be required

Note: Classification is only for reporting and filtering purpose only

Inventory Reports

There are 2 main reports commonly used

  • Physical Inventory: Using inventory dimension which provides on hand stock bases on as on date provided. Reports->Physical Inventory
  • Inventory Aging: Shows how old the inventory across various days buckets: 30, 60,90 & 120.
81204-21 Transfer Orders using Transit —

81204-21 Transfer Orders using Transit

Transfer Orders

Are the transfer of items from one Warehouse to another. When the transfer Order is made stock of from warehouse is deducted and to warehouse is added even the transaction has not placed yet or it takes some time for actual transaction, isn’t it wrong?

The problem is the user is left with option either load the item and make transfer order which immediately increases stock from other side and consumption may happen due to wrong data or vice-versa. To control this warehouse of type Transit is used.

Transit Warehouse

The intermediate warehouse used during transfer order where from warehouse item is deducted and added to transit warehouse instead of to warehouse directly with control of no of day required to complete transit with various mode of transport to generate delivery date.


  • Warehouse: Create a warehouse type transit and attach to the To warehouse
  • Transport Days: Under Inventory Management setup under distribution, Transport.

Transfer dispatch

Create new transfer order select from warehouse and to warehouse of type transit linked, provide mode of transport and see auto delivery date.

Transfer received

Based on configuration we can receive directly or picking registration as discussed earlier here. If picking is used then we have to use release transfer order. Here we can receive partial qty also which is very important feature.

81204-20 Item Registration —

81204-20 Item Registration

Under Item Model group if registration is compulsory and attached to Item then before making Purchase Order based Product receipt Item registration is required for the purpose of tracking dimension and batches. Example: I personally faced one issue where the Project controller requires the item to be tracked with bar code to all the electric tools and trying push it as Asset whereas on other hand finance rejects this as asset item, the solution was to have new item model group with Tracking dimension enabled.

How it work?

The PO, return orders or transfer orders items attached with Tracking dimension is preferred way of tracking, when item is arrived we can simply register items as registered with bar code or serial no generated then only receipt is done to post inventory Journal.

Use direct lines from receipt or in bulk best way is to use Item arrival overview available in both AX & D365

Note: Item registration do not post any physical update

81204-19 Inventory Blocking — April 19, 2018

81204-19 Inventory Blocking

Inventory Blocking

To block item to get issued or receipt, this done by 2 ways: 1. Via Quality Orders and 2. Manually block.

Note: Item which is having stock as on hand can only be blocked

However the problem here is that each separate line must be created separately for each item to block, not in bulk like the Journals and unblock requires simply deleting this line. Also note this is usually items as part of Quality procedure do not use this form like blocking item as complete in general.

Path: Inventory Management -> Periodic -> Inventory Blocking

For Quality orders the link will be added once posted.

Additionally we can block inventory locations like: Aisle, racks, shelves & Bins. See here


81204-18 Cycle Counting Operations —

81204-18 Cycle Counting Operations

In the last post we have seen counting Journal and Tag counting Journal which are the journal as the name suggest and posts the on-hand qty counted with differences to profit and loss accounts where as cycle counting is the generation of counting Journals lines across various warehouses based on counting groups and Warehouse items

Warehouse Items read here

  1. Counting Groups: To generate lines in counting journal of count based period defined
  2. Inventory Dimension: To count specific inventory dimension item lines to be generated in counting journal
  3. Locations: To count only in specific locations only

Note: Item status are recorded during process

Counting Groups

The general grouping of items on how they will be counted, example very expensive items (see ABC classification) or location based. However the setup can be set in each group when cycle counting must occur such as:

  1. Manual: Direct manual no rules
  2. Period: Within specified period only
  3. Zero in Stock: Only when stock hits zero on hand
  4. Minimum: When stock reaches minimum value

These are the trigger points to generate lines in counting Journal however note that the item under Manage Inventory fast tab. Example in counting journal based counting group selected the lines are filtered and generated, like generate all the lines which reached zero on hand qty.

81204-17 Inventory Journals — April 17, 2018

81204-17 Inventory Journals

Inventory Transactions

In AX world the Inventory transactions are of 2 types:

  1. Receipts all in transactions with +ve value and increase stock per site or warehouse
  2. Issue all out transaction with -ve value and decreases stock per site or warehouse

The primary transactions of inventory which by business day to day transactions are:

  • Sales Order
  • Purchase Order
  • Production Order
  • Project Item Journal

Journal Names

Before this each Journal must be setup with proper posting profiles and Journal names for each transaction types, the important thing in setting Journal names are:

  • Selection by to generate a voucher when line is entered or posted
  • Posting Details level to post voucher summary only to have less transactions
  • Delete lines after posting: I recommend to always enable no and customize forms to disallow deleting of journals after posting unless internal policy is set to delete this journals every 3 years lets say for example.
  • Blocking for private user group: Create multiple journal names for group of users to be accessed
  • Reservation keep it manual if new setup
  • Offset account for Movement Journal only

Inventory Journals

However the Inventory itself requires transactions apart from above primary transactions types for the inventory management processes like: Opening balances, warehouse to warehouse transfers, counting, and many more we will see in details.

  1. Item Transactions
    1. Movement: Only Journal where Offset ledger account is selected here manually used in opening balances and many other purposes
    2. Inventory Adjustment: Simply issue and receipt to profit and loss accounts
    3. Transfer: Transfer materials from location (-ve) to location (+ve) for internal transfers without consumption, one variant to another and one batch to another.
    4. Bills of materials: Is short cut process of creating BOM product (or finished goods) where same time raw materials (or items under BOM) are issued and BOM product receipt is done
  2. Item Counting
    1. Counting: Count the inventory stock and post as actual the difference of more or less stock in inventory is adjusted automatically and posted against ledgers as per posting profiles set however note that do not use this frequently as auditor will question this usage. See more about cycle counting here.
    2. Tag Counting: More sophisticated process for counting, this is used usually year end counting where Warehouse is closed and AX locks any accidental item transactions unless the item is tagged to a counting group then once posted these transactions are generated again in Item counting Journal which has to be posted again.
81204-16 Picking Workbench Profiles —

81204-16 Picking Workbench Profiles


Understanding first: Picking List

The main reason for picking list usage is to simplify and automate warehouse internal process to create a pick list when sales order (also by transfer order or production order, in this example we will see only SO) is created.

Understanding via Example: Customer orders a set of items based on which Sales Order is created (we are skipping scheduled delivery dates) then on daily basis or via alert the warehouse In-charge is informed to do a task for pick and pack items to deliver. This warehouse In-Charge generates a picking list using form in Sales order or multiple sales order in which item code, name and warehouse location is specified with on-hand quantity. Warehouse In-Charge give this list to warehouse workers these workers picks all the items and marks as ticked meaning this item was picked or X mark meaning not available. These workers then registers these items in picking list registration form in sales order, the warehouse In-charge is notified who then later updates the packing slip based on picking list registered which reduces on hand stock.

So the process is from Sales Order confirmation – Picking list – picking list registration – packing slip

Note: Only on hand quantity can be picked in picking process

Picking List: 

  • Picking Order generates items grouped under Various picking list
  • No of orders a person can pick at a time

Activate Picking List:

Accounts receivable > parameters > Updates > Picking route status change to activates.

You have 2 options to set here Completed this will close the process and activated in this one step extra has to perform to update status to Completed.

Picking Order

Picking list can also be separately generated from other source.

Inventory management > Common > Picking workbench.

  • Picking Order: Picking order,  with instruction which item from which warehouse and location at what time to be picked, generated via
    • Sales Order or (Release Sale Order picking form)
    • Transfer Order (Release Transfer Order picking Form

Picking workbench profile

Process efficient Picking list (explained above) from multiple source of orders (sales or transfer) based on warehouse working times, warehouse workers, max lines per worker, max pick list in one batch, lead time and lot more this arrangement of profiles is known as picking workbench profile.

Various parameters/rules to setup different profiles

Item Lines (grouped under)> Pick list (grouped under)> Batch (grouped under) > Orders

Picking Workbench: Location where items are prepared for Packaging items by picking process, this process is further defined like:

  • Picking Wave:  Inventory breakdown > Warehouses > Picking Work bench (fast tab)
    • All Picking List are grouped under Batches
    • Picking wave is limited to one warehouse
    • customizing no of pick list per batch (Picking Wave)
  • Orders (Sales/Transfer):  Inventory breakdown > Warehouses > Picking Work bench (fast tab)
    • Define Max No of batches in one order
  • Split by ship alone: Warehouses > Picking Work bench (fast tab)
    • To pick/pack items separately tagged with this option
  • Split by delivery mode: Warehouses > Picking Work bench (fast tab)
    • To pick/pack item based on different delivery modes

Setting up Picking Workbench profile

Inventory management > Setup > Picking workbench > Workbench profiles.

  • Customer group with Priority to pick (another customer group with different priority)
  • Maximum no of Sales orders each location can handle with even no of sales order lines control
  • Lead days: the days required to do the job
  • Mode of delivery

Once all these are defined once then no need to thing again and again daily tasks.

81204-15 Boxing Logic (New: with images) —

81204-15 Boxing Logic (New: with images)

Boxing logic is the part of big process picking workbench read here.

Once the sales order/transfer order (during the releasing of item) is requested then the on hand stock is organized and split and packed into different packages (grouping of items on picking route) based on various options

  • split by ship alone (example TV)
  • split by delivery mode (requesting by Air for urgent delivery)
  • boxing logic.

Boxing Logic

The efficient way of auto packaging of products in smallest box during picking workbench (sales order process/transfer order) based on factors weight, volume and dimensions. This logic determines product factors and picks best smallest box to pack on picking route. The picking and shipping function works together to further decide if multiple boxes and can be further packed under one box unless split ship by alone option is selected.


The best example is when ordering multiple products via online shopping portal they use this logic to pack products and boxes based on customer address and special requirement.

Customer Abdullah from Dubai ordered 1. Headphone, 2. Phone and 3. TV and another customer Bilal from Oman ordered 1. Headphone and 2. Phone from US Amazon. Note that Dubai and Oman are part of Gulf region and the main hub is Dubai which receives shipment first. Then the system is configured in so details that the US based warehouse packs individually all the products in big box to be dispatched for Dubai then inside separate box for Dubai and separate box for Oman. In Dubai box again headphone and phone are packed in one box of specified size (because of same address and product size) and TV packed in separated box due to special packing requirements then loaded in transport for courier. Like these many minute details can be added for complete automation where employee working as part of packaging is not required to think at all to segregate the boxes again and again.

The warehouse receives multiple requests for picking/packing like which items to be picked from which location and packaging of items based on various parameters then loading in the transport (ex: truck). There could be various items requested by same customer so based on boxing logic all these items are grouped in one box, the process also checks maximum box size and maximum no of small boxes can be accommodated. Like this so many rules can be applied. This is based on customer business requirements. Let me know in the comments what is your requirement.

To implement boxing logic each item specification (length, height, etc.) must be defined in order to work automation.

Additional: This is not limited to just box packaging as not each organization does the packaging in box as some have big concrete based products in mass volumes where the size of trailer itself can be used as box.

Setup (AX 2012 and 365 similar)

  1. First enable the Boxing logic picking workbench in Inventory Management->Inventory warehouse management parameters01box
  2. Second is to enable boxing logic for picking work bench for released items Deliver fast tab02box
  3. Set physical dimensions for released items under  under manage inventory fast tab, here mostly no body discusses or explain that what is the unit of weight, depth, width and height. The trick is simple note that in unit of measurement topic (read here) each unit belongs to unit class like kg or grams to mass and meters/cm to length and each unit class must have one default system unit (default unit used for item physical dimensions, boxes, production and so on) which will work across as default unit, example: kg or grams even though both belongs to one unit class mass, only one unit is selected as system unit. Read here the discussion someone posted the question.05box
  4. Defining physical Boxes under setup of Inventory warehouse management. Note default is from system unit explained above in point 3.04box


Example: Live demo of boxing logic using Sales Order with picking workbench profile (however see in detail picking workbench in detail here)

Customer requirement is to apply boxing logic as all the products are having max and min volumes defined so that warehouse personnel should find easy to apply pick and pack with following requirements:


  1. Box sizes available: length: inches and mass in Kgs
    1. Small (depth: 3, width: 5, height: 8, weight: 200, volume: 120)
    2. Medium (depth: 5, width: 10, height: 15, weight: 500, volume: 750)
  2. Product sizes available:
    1. Iphone 5s: (depth: 0.3, width: 2.31, height: 4.87, weight: 112, volume: 3.37)
  3. Shipping address and qty:
    1. Client 1: 3 Qty in best boxes, same address

Before creating sales order make sure the following setups are done.

Picking Workbench setup

Inventory management > Setup > Picking Workbench > Workbench Profiles

Create new profile with criteria Sales Id (Sales order no)

Warehouse workbench setup

Inventory management > Setup > Inventory Break down > Warehouse

Picking workbench fast tab: Pick list per batch 5 and Maximum lines per picking list 5

Sale Order Creation

Create sales order with item Iphone 5s then no need to confirm directly picking workbench can processed.

Picking Work bench process form

  • You can use directly sales order to generate pick list/picking list generation or navigate to Inventory management > Common > Picking workbench
  • Use criteria sales id and select sales order no specifically generated in above step
  • Print the batch then report will show automatically box selected if not appearing then it means setup is missing or physical dimensions are wrong with default system unit






81204-14 Inventory Aisles and Locations —

81204-14 Inventory Aisles and Locations

Inventory Aisles

A passage way between the rows generally seen in supermarkets or grocery stores. In AX inventory aisles is the identification of aisles within a location of warehouse.

Note: Aisles and locations can be used only if storage dimension is enabled with Location. Items not enabled with location parameter cannot be used instead new item creation is required. That is why it is important to have location option enabled in Storage dimension with default value even if there is no need for future purpose. Read here

Aisles Setup provides option to have multiple ids under a specific aisle which can be sorted in ascending and descending order and finally linked to warehouse.


The location is the place where Items are stored and drawn later.

Note: Item inserted at one place is not necessarily to be drawn from same place

Co-ordinates of Locations:



They are called co-ordinates because each set is encoded with no and these numbers together generates unique id which represents the co-ordinates.

To see this co-ordinates go to Warehouse->Inventory locations

If no data there then requires setup, go to warehouse->Locations Names->Include as per requirement example: Aisle and rack with no format. Then use Location wizard to generate automatically all the aisles-rack data.

Define capacity of each location

  1. Physical dimensions (height, weight, depth, etc.)
  2. Load of pallets
  3. Capacity (max, min and current)
  4. Finally how many and which aisles are associated

Various location types:

  1. Bulk Location (generic)
  2. Picking Location (during Sales order)
  3. Inbound Dock (during product receipts)
  4. Outbound Dock (during transfers)
  5. Production Input Location (from production orders)
  6. Inspection Location (Quarantine process)
  7. Kanban Supermarket (Production process)

Blocking Inventory Locations:

Locations can be blocked for various reasons like maintenance or accident. To do this navigate to Inventory management->setup->warehouse breakdown->Inventory locations form->Other tab->Blocking

Either block input, output or both.

Sort codes:

These codes are used to sort inventory locations as per aisle, racks, shelves or bin assigned sort codes. During Picking process the items listed are sorted by these codes. Useful to define if your organization is using specific route useful for efficient picking process.

To apply:

Inventory management->setup->warehouse breakdown->Inventory locations form->Other tab->Sorting->Manual update::Yes->Sort Code

The main difference between Inventory Location vs Warehouse Location:

Inventory Locations are the locations inside warehouse which has all the setups of creating co-ordinates of warehouse, aisle, rack, shelves & bin.

Whereas warehouse location defines the property of warehouse itself which contains inventory locations hence warehouse location does not have aisles related setups. Warehouse is like a capsule for inventory locations.

For more info for warehouse locations you have see regarding advance warehouse WMS2 topics.