Consignment inventory functionality in dynamics 365

Consignment stock is often used in Lean manufacturing implementations, With the addition of the “owner” inventory tracking dimension, Consignment inventory can now be set up and tracked from requirement to receipt, then on to use and finally payment.  Only inventory quantities and transactions are tracked in Dynamics 365; no financial impact is recorded to general ledger until ownership is transferred.  Consignment is now an activity on the Procurement and Sourcing Area Page where Replenishment Orders and Inventory Ownership can be managed.

So, let’s walk through this new functionality, and note that this is only available for Dynamics 365 for Operations – it’s not available for Dynamics AX 2012.

  

Inventory owners. Inventory management > Setup > Inventory owners:

Here, we are setting up a link between our vendor and the Owner inventory dimension, and defining the default dimension which represents our own inventory.

Tracking dimension group. Product and information management > Setup > Dimension and variant groups > Tracking dimension group:

We’ve created a new Dimension group with the ‘Owner’ dimension active – in the current version you can’t enable batch or serial tracking (well you can on this form, but you get an error when you try to create an item with this Tracking dimension group).

Inventory ownership change journal. Inventory management > Setup > Journal names > Inventory:

Apart from the new Journal type, and of course we can define a default Ownership change journal name:

Next I’m creating a new Consignment stock warehouse. This isn’t strictly part of the process, but it’s the way I’ve seen this process being managed in practice. Inventory management > Setup > Inventory breakdown > Warehouses:

Note. Don’t be tempted to use the warehouse Vendor account on your Consignment warehouse. That field is related to the sub-contract production process (where you want to deliver to your sub-contract vendor), so it defaults the warehouse delivery address. In this context, you’d have products going around in circles.

Now we can setup a new item, and assign that Tracking dimension group. Note that only standard cost, and moving average inventory cost models are supported:

I’ve chosen Standard cost, so I’ll activate the standard cost for my released product.

Now we’re ready to create a Consignment replenishment order. Procurement and sourcing > Consignment > Consignment replenishment orders:

Create a new Consignment order, Click new, give proper vendor, site & warehouse details

Add line items for consignment orders

the inventory transaction status of this consignment order reference as a Consignment replenishment order and receipt status is order

now let’s receive our consignment inventory. Procurement and sourcing > Consignment > Consignment replenishment orders > Receive > Product receipt:

After posting the Product receipt the inventory transaction and on hand inventory will be updated.

Note that there are no ledger postings related to the Consignment replenishment order product receipt:

Before we consume this inventory, we need to create an Inventory ownership change journal. Inventory management > Journal entries > Items > Inventory ownership change or Procurement and sourcing > Consignment > Inventory ownership change:

Click New and open the new window form

Create a line, and fill the ‘From’ Site, Warehouse, Location and Owner

Post the journal, system generates the automatic purchase order will be created

 Click OK

The purchase order status is received and the Purchase order header shows an Origin of ‘Consignment’ (and the purchase order line quantity can’t be changed on the Purchase order):

Will look into Inventory transactions status 

The Inventory ownership change journal has consumed some of our consignment inventory and we have a purchase order product receipt (with the normal ledger postings).

So now we can transfer this inventory and consume it on a production order, and we can post a purchase order invoice on the purchase order.

There are some  restrictions on the consignment inventory. You can’t issue the consignment inventory to a transfer order, and you can’t issue the consignment inventory to a production order – you have to posted the ownership change first. But you can count the inventory (up and down), and transfer the consignment inventory using a transfer journal. There’s also a rather neat function to automatically populate the Inventory ownership change journal from production order components.