Dynamics 365 Business Central: Supply & Demand, Min/Max
Oh, no cups! we ran completely out of cups, so we put in a full order of cups when we ran out. That's not really a good idea, we don’t want to run out of coffee cups, right? Wouldn’t it be better if you put the order when we got about 10 cups left? I would never come up here and there wouldn't be coffee cups, there will always be coffee cups, and we would always get coffee. And when people don’t get coffee, serious things can happen, right? We are going to talk about Min/Max and how business central can help us solve this problem.
Let's check out a graph, here we have on the y-axis inventory and on the x-axis we have time. We start with the inventory at 300, we have a dotted line at 100, which is indicating out minimum inventory for this item. In this case is the coffee cups, if we go below 100 coffee cups, we want to buy more. In this case, we get a sales order for 250 which brings us below 100, so we are now at 50, and now the system should trigger an alert, and it does, a minimum quantity alert comes up, and it issues a purchase order for 500. And the lead time is 3 days.
Three days pass and we have no sales order here and the PO is received for 550 and the inventory goes up. So, when we are looking at this, we want to have the minimum inventory high enough, so it covers us or whatever we dip underneath, plus those days that it takes to bring the purchase order in. In this case, we didn’t have any others between the 15th and the 18th so its ok, but if we are always getting 250, this 100 might be too low, we might want to be close to 300 for a reorder point. These considerations must be brought in when we are putting a reorder. But for a technical perspective, the system issues a minimum of quantity alert to issue a PO. Whenever we go below the minimum quantity.
Let’s look at the system, I’ve created an item called a paper coffee cup. And I created 250 inventory in the blank location, so if I click on the paper coffee cup, I want to set that up so we order automatically 500 if we go below 50 on inventory. In order to do that, I go into planning, reordering policy, and I set this up to be fixed reorder quantity, which means that when we go below the reorder point, it will order a fixed quantity, my reorder point is going to be 100, and my reorder quantity is going to be 500. So, if we go below 100, we are going to order 500.
Now, if I go up here to navigate, availability by event, I can see for this item. Yes, we do have 250 on hand but there’s a sales order out here for 300 which will bring the projected available balance down to 50. So, this will actually take down the inventory to blow the reorder point. Let me go ahead and close this out and see what happens if I go into the requisition worksheet. I go into action, requisition worksheet. Here basically I’m saying, look at the system and tell me if there is anything I need to do.
Do I need to order anything according to the reorder policies that I’ve set up? So, I go in here, calculate plan. I do have it filtered only on the coffee cup, paper coffee cup. I’m only interested in that item at the moment. Then I just hit ok. And the system calls and says, you need to buy 500 because you are below the order point. Please go ahead and pick the vendor and carry out the action measures to create that purchase order. That is how the reorder point works, I’ve fixed the order quantity, now you can set it up, so you won't run out of paper coffee cups.