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Inventory Ramp-Up Plans for a new Distribution Center at Manufacturers using Microsoft Dynamics 365 for Finance and Operations

by Scott Hamilton
Consultant and Author, The Manufacturing Guild

Author’s Note: This 2-part article illustrates creative uses of safety stock requirements and the Minimum Key, in this case to support inventory ramp-up plans. This first part involves a simple case and reviews two variations of using a Minimum Key, whereas the second part involves a more complex case with an item-specific Minimum Key.

Some manufacturing companies have distribution centers with products supplied by their manufacturing plants. Demands for these products at a distribution center – such as sales orders, demand forecasts and safety stock requirements – drive the transfer requirements and the related manufacturing requirements. The opening of a new distribution center represents a special case for driving the transfer and manufacturing requirements. The distribution manager can use inventory ramp-up plans for stocking a new distribution center prior to its opening date and providing visibility of these requirements for coordinating production at the manufacturing plant.

This article illustrates two approaches to these inventory ramp-up plans, where the definition of an item’s ramp-up plan employs the combination of a Minimum Quantity and a Minimum Key to calculate safety stock requirements. In one approach, the Minimum Key defines a pattern for the ramp-up plan and the pattern can apply to multiple items. The second approach uses multiple Minimum Keys that define an item-specific ramp-up plan. The article consists of the following sections.

  1. Two Approaches to Inventory Ramp-Up Plans
  2. Approach #1: Define the item’s Target Inventory and a Pattern for the Ramp-up Plan
  3. Approach #2: Define an Item-Specific Ramp-Up Plan
  4. Comparing the Two Approaches to a Ramp-up Plan
  5. Summary

The two approaches apply to manufacturers using Microsoft Dynamics 365 for Finance and Operations (D365FO) or previous versions of Dynamics AX such as AX 2012 R3 or AX 2012. The article includes screenshots reflecting the D365FO user interface, but the screenshots could have reflected the user interface in the previous software versions.

The article builds on the Microsoft documentation about safety stock fulfillment for items, and

extends other articles about using the Minimum Key for indicating due dates for safety stock requirements and for inventory ramp-up plans to anticipate capacity constraints.

1. Two Approaches to Inventory Ramp-Up Plans

The definition of an inventory ramp-up plan employs the combination of a Minimum Quantity and a Minimum Key to define an item’s target inventory over several time periods. It is easiest to explain the approach with examples. Two approaches and their example data are illustrated in Figure 1 and described in subsequent sections.

For both approaches, the example data reflects a 4-week ramp-up plan during June for a new distribution center (identified as warehouse D2 within the site MFG) with an opening date of July 1st 2019. The weekly increments within the 4-week ramp-up plan result in weekly planned transfers, and the transfer requirements provide visibility for weekly production orders of the items (with period lot sizing of 7 days). Multiple finished goods must be stocked at the new distribution center prior to the opening date, and the example data illustrates one of these finished goods (identified as FG123). Replenishment of these finished goods at the distribution center will be driven by demand forecasts and sales orders after the opening date.

Figure 1: Two Approaches to the Inventory Ramp-up Plan for a new Distribution Center

2. Approach #1: Define the item’s Target Inventory and a Pattern for the Ramp-up Plan

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About Scott Hamilton

Scott Hamilton has consulted globally with several hundred manufacturing/distribution companies on SCM and ERP issues. His publications include multiple books about SCM using Dynamics 365FO/AX, two textbooks about SCM/ERP, and 100+ articles in Scott has been a frequent speaker at Microsoft and user group conferences around the world, and a 10-time winner of the rarely given Microsoft MVP award.

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