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Manage Consigned Inventory Using Microsoft Dynamics 365 for Operations (AX7)

by Scott Hamilton
Consultant and Author, The Manufacturing Guild

The use of consignment inventory represents a common practice in many industries. While it may be best known in the retail industry, it also applies to manufacturing companies with consigned inventory of production components. The component inventory is owned by the supplying vendor but stored at the company's site. The company takes over the ownership when needed, and the need for payment occurs after the change in ownership. Capabilities for managing this consigned inventory have been introduced in the latest release of Dynamics 365 for Operations, whereas previous versions of Dynamics AX required a workaround.

This article describes the new capabilities for managing consigned inventory, and focuses on manufacturing scenarios with consigned inventory of production components. The capabilities apply to components of production orders and batch orders, but the explanation primarily uses the terminology for production orders. The article provides a business process model and describes the key constructs for managing this consigned inventory. The new capabilities are described in the context of basic warehousing (rather than advanced warehousing) because of the current software design, and the basic warehousing context fits many scenarios with consigned inventory. A previous article about Strategic Options for Warehouse Management summarized the basic versus advanced warehousing capabilities, and detailed explanations about the impact on production components were provided in my Warehouse Management book. This article includes screenshot examples and case studies, and provides insights about variations and limitations in the current software. These aspects of consigned inventory are reflected in the following sections of the article.

  1. Basic Process for Managing Consigned Inventory of Production Components
  2. Key Constructs and Life Cycles related to the Basic Process
  3. Reversing Transactions in ...

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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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