Significance of Sales Lead Time for Sales Orders in Manufacturers using Microsoft Dynamics 365 for Finance and Operations

April 18 2019

Author’s Note: This represents the first of a two-part article about the use of sales lead time for sales orders. The second part covers the S&OP approaches to support order promises based on sales lead time.

Many manufacturers employ sales lead time as the basis for promised ship dates on sales orders, where it typically reflects a guaranteed lead time (in days) for shipment of stocked or make-to-order products. It represents the simplest option for promise dates in comparison to other options for delivery date control such as Available-to-Promise (ATP) or Capable-to-Promise (CTP) logic.

The use of sales lead time involves several companywide and item-specific policies and their impacts on the ship dates for sales orders and sales quotes. It also requires alignment of the S&OP (Sales and Operations Planning) approaches to meet the order promises and achieve the desired level of customer service.

This first of a two-part article reviews the significance of sales lead time for sales orders and consists of the sections listed below. The second part reviews the S&OP approaches to support order promises based on sales lead time.

  1. Key Policies related to using Sales Lead Time for Sales Order Promise Dates
  2. Impact of the Companywide Defaults on a Sales Order Header
  3. Impact of the Item-Specific Sales Lead Time on a Sales Order Line
  4. Defining the Sales Lead Time within Sales Price Trade Agreements
  5. Impact of Disabling Delivery Date Control
  6. Impact of Changing the Ship Date in a Sales Order Header
  7. Impact of Sales Lead Time on Transfer Orders
  8. Case Studies
  9. Summary

The explanations apply to firms using Microsoft Dynamics 365 for Finance and Operations (D365FO) or previous versions of Dynamics AX (such as AX 2012 R3 or AX 2012) because the different versions employ the same functionality. The article includes screenshots reflecting the D365FO user interface, but the screenshots could have reflected the user interface in the previous software versions. To simplify the screenshot examples, it is assumed the item identifier consists of just the item number and coverage planning applies to the site/warehouse.

The article builds on previous explanations about sales order delivery promises and master planning in manufacturing. The number of days for sales lead time and for the issue margin of salable items often reflect the typical time for sales order picking/shipping activities. These activities were described in previous articles about the sales order picking/shipping activities using the advanced warehouse management capabilities or using the basic warehouse management capabilities.

1. Key Policies related to using Sales Lead Time for Sales Order Promise Dates

The use of sales lead time involves several companywide and item-specific policies that impact sales orders and sales quotes. One key policy identifies the Delivery Date Control option of “Sales Lead Time”, and it works in conjunction with a second policy about the number of days for a sales lead time (which can be expressed in calendar days or working days). These two policies can be specified as companywide defaults that impact the definition of item-specific policies for sales lead time and the initial assignment of a ship date on sales order headers, as illustrated in Figure 1 and described below. Numbers displayed in the figure (of 1,2, and 3) refer to the key companywide policies and their impacts (such as 1a and 1b), and provide an organizing focus for the further explanation.


Figure 1. Key Policies for using Sales Lead Time for Sales Orders

  • Companywide Policies related to Sales Lead Time. As part of the Accounts Receivable Parameters illustrated by the screenshot at the top of Figure 1, you can indicate a companywide default for (1) the Delivery Date Control option of “Sales Lead Time” and (2) the number of days for sales lead time. You also indicate the companywide decision on (3) whether these are expressed in working days or calendar days. The example data in Figure I displays a companywide default of zero days for sales lead time, and a companywide decision to express sales lead time in working days.
    The decision concerning working days versus calendars days typically reflects several other decisions about how to treat lead times, and the definition of working days in SCM-related calendars. Examples include the companywide decision about how to treat the number of days for safety margins and the item-specific decisions about how to treat the number of days for an item’s purchasing or production lead time. A previous article covered the significance of SCM-related calendars and the use of working days for lead times.
    The decision concerning working days versus calendars days also impacts the terminology about sales lead time. For example, a sales lead time of two weeks could be termed a 10-day or 14-day sales lead time to reflect the decision about working days versus calendar days. Case 2 provides another illustration about terminology for sales lead time.  
  • Impact of the Companywide Default for Delivery Date Control. The companywide default for the Delivery Date Control option will be inherited (1a) by an item’s Default Order Settings for sales orders and (1b) by a sales order header, as illustrated in the two screenshots at the bottom of the figure. This inherited option can be overridden.
  • Impact of the Companywide Default for the number of days for Sales Lead Time. The companywide default for the number of days for sales lead time will be inherited (2a) by an item’s Default Order Settings for sales orders. This value can be overridden, as illustrated by the value of 10 days shown in the second screenshot within the figure. It will also impact (2b) the requested ship date initially assigned to a sales order header, as illustrated in the third screenshot at the bottom of the figure.

Some general guidelines can be mentioned for the companywide default about the number of days for sales lead time. It should be a value of zero days in scenarios with same-day shipments for sales orders, and an issue margin of zero days should also be assigned to the salable items. Alternatively, it could be a value of “1” or “2” days in scenarios requiring a significant time to prepare sales order shipments, and a corresponding issue margin should be assigned to salable items. A few scenarios may have a standard sales lead time with a longer period (such as two weeks) for all products, so that the companywide default should reflect the standard. This approach avoids the data maintenance of defining the same item-specific sales lead time for every product.

2. Impact of the Companywide Defaults on a Sales Order Header

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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