Microsoft Dynamics 365 for Finance and Operations: Inventory consignment process

In this blog post we are going to review consignment scenario where vendor sends the inventory to the company but vendor retains ownership until the consumption. It could be production consumption or sale.  Once the company received the goods, it will be stored in companies’ site or warehouse. Later on, the company can take the ownership of the item once the item is ready to be consumed on a production order/sale. Until changing the ownership, item is still owned by vendor.

The process flow might be as presented below:

The general idea is in using of the tracking dimension “Owner”. This tracking option gives the visibility who owns what. Using this tracking dimension, you can easily identify where is vendor-owned inventory and where is company-owned inventory. In this process a new type of orders is represented. It’s called Consignment replenishment order which track incoming vendor-owned inventory. In addition to that inventory ownership change journal enables automatic generation of the purchase order product receipt which will constitute grounds for invoice and payments.

There is basic setup that needs to be completed for using inventory consignment capability.

Inventory owners.

Navigate to Inventory management > Setup > Dimensions > Inventory owners.

Add the vendor who becomes consignment vendor.

Click New button and select Vendor in the Vendor account.

Tracking dimension group.

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

Create new Owner tracking dimension group by clicking New button.

Set Owner dimension active.

Inventory journal name.

Navigate to Inventory management > Setup > Journal names > Inventory.

Create new journal name by clicking New button.

Select Ownership change journal type.

Inventory management parameters.

Navigate to Inventory management > Setup > Inventory management parameters.

Switch to the Journals tab.

Set the default journal name for the Ownership change field.

This journal name will be defaulted upon Inventory ownership change journal creation.

Process overview.

In this example we will follow the process as presented below:

1. Product creation

Navigate to Product and information management > Products > Released products

Click New button.

Select Owner tracking dimension group.

Populate the rest of the fields.

Keep in mind that Owner tracking dimension could be assigned to the products which have Standard cost or Moving average products.

2. Create and activate item price

Navigate to the Manage costs tab > Setup group of fields > Item price button.

Create new record by clicking New button.

After saving it, click Activate pending prices button.

3. Create Consignment replenishment order

Navigate to Procurement and sourcing > Consignment > Consignment replenishment orders.

Create the lines of the consignment order.

Check the inventory transaction. You will notice that Owner inventory dimension is automatically set.

4. Record the product receipt

Navigate to Procurement and sourcing > Consignment > Consignment replenishment orders > Receive > Product receipt.

Set the Product receipt number.

Adjust the Qty if needed.

Check the transactions. You will notice that status has been changed to Purchased.

5. Change the ownership

Navigate to Inventory management > Journal entries > Items > Inventory ownership change or Procurement and sourcing > Consignment > Inventory ownership change.

Create new journal.

Journal name will be defaulter from Inventory management parameters.

Create journal lines.

Post the journal by click Post button.

Infolog message will appear with the Purchase order number created.

Check inventory transaction. You will notice that purchase order transaction in the Received status.

That’s it!