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

April 4 2019

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 CenterFigure 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

As shown in the top left side of Figure 1, the Item Coverage information specifies the item’s target inventory of 2,000 (for warehouse D2) in the Minimum Quantity field, and you assign a Minimum Key that reflects a pattern for the ramp-up plan. Use of a Minimum Key also requires the Minimum Periods checkbox.

The bottom left side of Figure 1 illustrates the Minimum Key. The example data for the Minimum Key of Ramp-D2 illustrates four periods that define weekly increments within the ramp-up plan starting 6/3/2019, and the factors (of .25, .50, .75 and 1.00) achieve the target inventory of 2,000 by the end of June. A fifth period (with a factor of 0) indicates the end of the ramp-up plan on July 1st. In this way, master scheduling logic will no longer recognize the safety stock requirement but still recognize the resulting inventory as available.

3. Approach #2: Define an Item-Specific Ramp-Up Plan

As shown in the top right side of Figure 1, the Item Coverage information specifies a Minimum Quantity of “1” (for warehouse D2), and you assign a Minimum Key that reflects the desired target inventory quantities within an item-specific ramp-up plan. Use of a Minimum Key also requires the Minimum Periods checkbox. A different Minimum Key is needed for each item.

The bottom right side of Figure 1 illustrates the Minimum Key. The example data for the Minimum Key R-D2-FG123 only applies to the ramp-up plan for item FG123 at warehouse D2. It illustrates four periods that define the item’s weekly increments within the ramp-up plan starting 6/3/2019, and the factors (of 500, 1000, 1500 and 2000) achieve the target inventory of 2,000 by the end of June. A fifth period (with a factor of 0) indicates the end of the ramp-up plan on July 1st. In this way, master scheduling logic will no longer recognize the safety stock requirement but still recognize the resulting inventory as available.

4. Comparing the Two Approaches to a Ramp-up Plan

Data maintenance will be simpler when using Approach #1. You only need to define a single Minimum Key, and you enter a single Minimum Quantity for each item – that represents the target inventory at the new distribution center. However, the other approach for an item-specific ramp-up plan works better in some scenarios, as illustrated in a separate article about using inventory ramp-up plans to anticipate capacity constraints.  

Both approaches result in the same safety stock requirements in the Net Requirements information, as illustrated in Figure 2 for Approach #1. This information reflects the 4-week ramp-up plan during June for the FG123 item -- so that item’s inventory will be 2,000 units by the end of June. The end of the ramp-up plan is July 1st, and a positive value is shown for the safety stock requirements on this date.

Figure 2: Example of Net Requirements information for the Ramp-Up Plan
Figure 2: Example of Net Requirements information for the Ramp-Up Plan

Each safety stock entry in the Net Requirements information shown in Figure 2 reflects an incremental change in the calculated safety stock quantity (based on the Minimum Quantity multiplied by a factor within the Minimum Key), and its due date reflects the different time periods within the Minimum Key.

5. Summary

Inventory ramp-up plans can be used for several purposes. This article focused on using a ramp-up plan for stocking a new distribution center prior to its opening date, thereby providing visibility of these requirements for coordinating production at the manufacturing plant. 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. The article explained two approaches using screenshots with example data and provided a comparison of the approaches.

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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 AX as well as two textbooks about SCM/ERP, and his books have been translated into Portuguese, Russian, Chinese and Japanese. For more than 10 years, Scott has been a frequent speaker at Microsoft and AXUG conferences around the world, and a multi-year winner of the rarely given Microsoft MVP award for Dynamics AX. His regular column “The AX Solution Architect” is published in MSDynamicsWorld.com.

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