Are you struggling with inventory control in Business Central?
You’re not alone. Manufacturing companies often struggle with inventory control in Business Central being organized and correct. There are many ways that inventory management can get out of control, but the results are almost always the same.
Stockouts on critical parts. Customer deliveries delayed. Frustration and finger pointing between staff. Rescheduled production and constant expediting - these are just some of the problems that can occur when inventory control in Business Central is not managed properly!
If your manufacturing company is facing any of these issues, they are signs you have an inventory management problem within your Business Central database.
If you enjoy this article and would like to talk to Sabre Limited’s president Robert Jolliffe to chat about these concepts, you can book a one-on-one 30-minute call with him at https://calendly.com/robert-jolliffe
Inventory Control in Business Central and the Global Supply Chain Crisis
Now, in 2022, at a time when the “supply chain crisis” has been making headlines for over a year, the stark importance of proper and exact data in inventory management is clear.
As the world emerged from the COVID-19 pandemic, many industries were caught off guard by the sudden increase in demand. In 2021, as consumers began to buy again after a year of lockdowns, factories were unable to keep up with demand, leading to massive backlogs. Manufacturers assumed the pandemic would suppress consumer demand, so they deeply cut their forecasts. When the opposite became true, they were caught flat-footed.
Moreover, an influx of demand disrupted the global shipping industry and ports became inundated with inbound cargo. The resulting chaos had cascading effects throughout global supply chains, leading to delays and shortages of goods around the world.
In 2022 and onward, those businesses that can effectively control inventory management will best be positioned to weather any disruptions in global supply chains.
Inventory Control in Business Central Helps with Supply Chain Problems
One primary way that businesses using Microsoft Dynamics 365 and inventory control in Business Central can adapt and respond to these challenges is to enforce best practices for maintaining data in inventory management for Business Central.
This will help keep track of stock levels, identify areas of high demand, and forecast future needs. By maintaining these best practices, businesses will avoid disruptions to their operations.
In this updated blog post, we will outline five critical best practices when implementing inventory control in Business Central systems. Problems in these areas indicate the cause of any problems you are having is in your inventory management data. We will also suggest which solutions might work best for you depending on where you currently stand.
Keep these tips in mind to help you keep your inventory up-to-date and under control when using inventory control in Business Central!
#1 Make sure your Bills of Material are always accurate!
Manufacturing companies need bills of material (BOM) and they must be accurate if the company wishes to avoid costly production problems. A bill of materials (BOM) lists all the raw materials, components, parts, and sub-assemblies required to build a product. It includes the quantities of each needed and identifies the suppliers. They are integral to production planning and inventory management systems. They are often referred to as the “recipes” or “shopping lists” for making a certain product.
It is critical that companies which produce high volume items have accurate data in their BOMs because small errors can lead to create errors in their inventory management data and lead to inventory shortages or surpluses.
Inaccurate BOMs can also result in production delays caused by products being made Out-of-Spec, incorrect costing of product and accounting variances resulting in negatively impacted return-on-investment, and opening oneself up to potential product liability claims, customer returns and loss of future business.
An accurate BOM is a key element of successful product manufacturing. Maintaining them within an inventory system is a critical task that requires attention to detail and expert knowledge of the manufacturing process. For this reason, it is also crucial that your BOMs are only managed by your engineering team.
#2 Are your Units of Measure Conversion Rules Correct?
Being able to convert across units of measure is an essential part of supply chain management. When using inventory control in Business Central there are Unit of Measure (UM) conversion rules that must be set correctly.
In an inventory management database, an individual item can often be represented using different units of measure based on the context. For example, items can be procured in bulk by the case, stocked by the box, and used by the pair.
This flexibility is helpful because it allows businesses to track inventory levels more accurately. However, businesses must use the appropriate unit of measure for each stage of the product life cycle. This is where unit of measure conversion rules come in.
If the UM conversion rule for a Pound (lb) to a Kilogram is 2.0 instead of 2.2 or 2.2046, that can have a significant impact on inventory levels depending on your business.
Inaccurate unit of conversion rules can also create supply chain issues. For example, if a warehouse is storing goods in boxes, but the unit of measure in the inventory management data is cases, this can lead to confusion and errors when orders are placed. If a purchase order for one case is placed, but the actual unit of measure is boxes, then the customer will only receive a fraction of the goods they were expecting.
Or, if you are receiving goods from a supplier, initially a certain item comes in cases with 50 boxes each. You input the item in your inventory management system as “cases” without specifying how many boxes in each case. Then at some point in the future you change suppliers who supply the item in cases with 100 boxes in each case. If that level of detail is not in the system, then procurement staff will continue to purchase order cases thinking there are 50 boxes in each, resulting in too many purchase order transactions generated.
Make sure all your Units of Measure are right! Don’t forget to adjust prices based on Units of Measure too!
#3 Lengths to Weight
At Sabre, we work with a lot of manufacturing companies. A common challenge many of our clients face is the fact their manufacturing process requires a product that must be converted between pieces and weight. For example, this could be the M-Weight of paper delivered in sheets, or it can be the weight of a length of steel bar stock intended to be run on a lathe.
For these customers, getting length to weight data correct in the inventory system is EVEN MORE important than getting the other Unit of Measure conversion rules correct.
For example, if 12 inches of a 1-inch diameter Cold Rolled Steel bar is 2.670 Pounds (lb) per foot, a manufacturing company needs to make 100% sure that it is recorded correctly in their inventory control in Business Central. Otherwise, they are guaranteed to have problems.
Without having accurate data for weights and measures (cubic dimensions) for each item in your inventory control module, it will be impossible to determine how many of those items can be loaded on to trucks with certain weight capacity limits. It also makes slotting and warehouse storage more difficult, makes cartonization easier, and improves accuracy of shipping costs.
#4 Avoid Adjusting Entries
It is a bad idea to let your staff make unaudited changes to information entries in inventory management modules. All errors in inventory control in Business Central are caused by a mistake in base data (like the Bill of Material and Unit of Measurement conversion rules we mentioned above) or human error when staff are doing manufacturing data entry.
Users will tend to adjust the data to make it fit before they spend the time to find the mistake.
Find the missing transaction or the incorrect serial numbers, or adjust the BOM or U of M - do not make a habit of adjusting entries. Allowing too much human adjustment will multiply the opportunities for human error to be introduced. As such, it's a good idea to limit entry adjustment to a small group of who must justify the reason for their adjustment. This will help to ensure that your inventory control system is as accurate and effective as possible. If you make it hard to adjust - then people will do the right thing.
Do NOT make a habit of adjusting entries in inventory control, just in case you didn't hear me the first time!
#5 Culture of Discipline
Make sure your manufacturing staff has a culture of discipline. This discipline should come from the top down, starting with the owner and CEO. Staff who make errors should be given some remedial help (after all, mistakes do happen sometimes no matter how careful people are trying to be), reprimanded if they continue to be careless, and pruned from your payroll entirely if they just can't or won’t get on board.
Human error is one of the most common causes of preventable inventory issues in your warehouse. If you rely on manual data entry, a staff member can press the wrong button or misread information, resulting in incorrect data. Because entering and manipulating data in inventory management modules is a manual process, spreadsheets are at high risk of human error, when entering serial numbers for example.
If left unchecked, a lack of discipline among a company's manufacturing staff can lead to chaos for inventory control in Business Central. By communicating expectations and enforcing inventory management discipline, manufacturers can ensure that their workers and manufacturing processes are held to the highest standard.
Once you start to have that culture of discipline on a consistent basis, and the data in inventory control in Business Central are under control, then it might make sense to start looking at Barcode Warehouse Management. This technology can help streamline your operations, but it's important to keep in mind that it can also come with its fair share of problems.
Barcode Warehouse Management can streamline warehouse inventory management and tracking processes, making it easier to track products and equipment. Additionally, barcodes can help improve accuracy in selecting the correct items for orders and can help reduce order picking errors.
However, Barcode Warehouse Management can also simply speed up mistakes and make them worse. Be sure you’re ready for this technology before you try and turn it on.
Inventory Control in Business Central Conclusions
The COVID-19 pandemic was a wakeup call for many businesses. It showed how quickly disruptions to the supply chain can cause chaos and disrupt the flow of purchase invoice. To avoid being caught off guard, businesses need to take inventory control more seriously.
There are several best practices that are necessary for managing inventory and ensuring it is accurate. We see issues with these best practice areas on a regular basis with our clients, so we thought they would be worth discussing today.
Your inventory is your lifeblood. All your staff and management need to take it incredibly seriously. If you don't have accurate inventory data, you'll quickly find your business struggling.
If you follow these suggested best practices for maintaining data in inventory management modules in Business Central, you’ll be able to keep track of inventory control in Business Central like a pro. You’ll never have to worry about running out of stock again – or worse, overstocking and losing money. You'll never had a shock when you look at a purchase invoice again.
Have you tried using these techniques in your own business? What was the outcome? Have you used other Microsoft products?
You can also read our post on the 6 signs you need inventory control in Microsoft Dynamics 365 Business Central and 5 Tips for Inventory Control in Microsoft Dynamics NAV. Or read any of our blogs on the main blog page. Read all blog posts by Sabre Limited President Rob Joliffe.
Need More Help?
It's important to work with an experienced Enterprise Resource Planning vendor who can ensure that your software is properly configured.
If you need help with a Microsoft Dynamics 365 Manufacturing systems choice Inventory Management in Business Central or any other questions, visit out website, give us a call at: (519) 585-7524 x.45 or contact our team, we're excited to talk with you soon!
You can also check Rob Jolliffe's LinkedIn articles here.