Supply chain: What’s new in Microsoft Dynamics 365 for Operations (AX7), Part 1

posted in: Cloud/SAAS, Microsoft Dynamics | 0

By:  Rahul Mohta

Microsoft Dynamics 365 is a new approach to business applications which brings together Dynamics CRM, AX, NAV and Office 365 strengths with a unified application platform and a common data service (known until very recently as a “common data model”).

Common data service is going to be the backbone and foundation of entire Dynamics 365 offering as an out-of-box business database for storing and managing business entities. With additional capabilities coming from Azure, Power BI, Cortana Intelligence, Azure Machine Learning, Microsoft Flow and Microsoft PowerApps, this new form of business-critical application is expected to scale new heights and empower businesses to focus and grow like never before.

In this and a second article, I intend to share some new features related to supply chain; common data service; Microsoft Flow; AppSource; new warehousing and transportation; hybrid/on premise deployments and a few select platform/architecture capabilities.

First, let us explore supply chain enhancements expected in Dynamics 365 for Operations (formerly Dynamics AX7).

Vendor consignment inventory

Consignment inventory is owned by a vendor, but stored at your site. When you are ready to consume or use the inventory, you take over its ownership. Until now, Dynamics AX customers with consignment inventory from vendors or with their customers had to come up with workarounds like zero-dollar inventory and moving it from one warehouse to another in the system, and many other manual steps on PO Invoicing.

None of these workarounds is required now.

The following capabilities are expected in inbound consignment inventory processes:

  • Physically receive vendor-owned inventory on-hand without creating general ledger transactions.
  • Start a production process where the vendor-owned inventory can be physically reserved.
  • Change ownership of the raw material in orderto be able to process the consumption as part of the production order processing.
  • Vendors can monitor consumption of their inventory using the vendor collaboration interface, including when a customer takes ownership of consignment inventory.
  • Support for standard cost and moving average costing methods in the vendor consignment inventory process.
  • The On-hand Consignment Inventory page shows the vendor the actual stock level of the inventory that the customer has not yet taken ownership of.
  • The Purchase Orders Consuming Consignment Inventory page shows a list of the purchase orders that were generated when a transfer of ownership took place.

Intercompany order processing: ATP and direct shipment

Order processors can not only calculate the optimal delivery dates within the same selling company; moving forward they will be able to evaluate product availability throughout the intercompany supply chain, as well as choose delivery options directly from the vendor to the customer.

The decisions about where demand is sourced from, and whether direct delivery is used, can now be recorded directly at the sales order line level. When a sales order is created, the availability check runs in the sourced company from the intercompany chain. Possible delivery dates are calculated using the delivery date control that can be configured for each sourcing company, like ATP or capable to promise (CTP).

Delivery alternatives has a new functionality to help determine the best sourcing strategy and to help select the best options or trade-offs for meeting customer expectations for delivery dates. The options that are considered include:

  • Sourcing options
  • Different warehouses
  • Possible procurement
  • Different delivery methods
  • And the option to allow partial delivery

The ATP calculations are accessible directly from the sales order lines, which improves the usability for working with sales orders that source products through other orders.

Product variant enhancements

Microsoft is taking product variants to the next level by adding a product variant number nomenclature and by extending default order settings for product variants. What these enhancements mean to users:

  • By assigning a product variant nomenclature template to product masters, the product IDs and names generated for product variants follow a specific structure. This makes it easier for you to identify and search for a product variant during order entry.
  • The default order settings have been extended to allow configuration of specific default order settings per variant or per specific product dimension.
  • The extension is leveraged in all processes in:
    • Sales
    • Procurement
    • Production
    • Lean production and replenishment
    • Project management

Vendor collaboration

Inviting vendors to collaborate directly in Microsoft Dynamics 365 for Operations improves the vendor’s visibility of purchase orders and ensures a shared view of responses to POs, thereby greatly improving the communication between the organization and vendor. 

Among the enhancements:

  • This collaboration functionality has been expanded so that external vendors can now respond to individual purchase order lines and suggest changes, such as new dates, quantities, split a line in new delivery dates, or substitute an item with a new item.
  • The Purchase Order Confirmation workspace allows vendors to see which POs they need to respond to, which POs are awaiting confirmation by the customer, and which POs have been confirmed but not yet processed with product receipt.
  • Customers can share notes and documents  related to POs with vendors, for example, to describe requirements. The vendor can also share notes and attachments with the customer when they respond to the PO. When a vendor responds to a PO, different messages allow them to Accept, Reject, or Accept with changes. These messages can be customized to better support the business processes of the buying company.
  • A new external vendor administrator security role enables vendors to add new contacts and update information about contacts and to request new vendor collaboration users. Users with that role can also request that specific vendor user accounts are inactivated, or that security roles are modified. The same functionality is available for users at the customer company.

Enhancements to the bill of materials functionality

The enhancements in bill of materials (BoM) functionality, includes:

  • Support for BoMs that include items with different product dimensions on the same item
  • Production orders with circular structures at the first level of their BoMs are excluded from BOM-level calculation for material resource planning
  • The ability to calculate separate BOM levels for material resource planning (MRP) and cost calculation

Next time: Warehousing capabilities in Microsoft Dynamics 365 for Operations (AX).

About Rahul Mohta

Rahul Mohta is one of the advisory members of Real Dynamics.  He has cultivated diverse and rich experiences working with global Dynamics AX customers and partners, enabling them to realize the full value of their ERP platforms. Rahul’s 15 years of experience spans across multiple geographies (Americas, Europe, Asia, India) and multiple domains – Financials, Supply Chain, Distribution, Manufacturing, Warehousing, Retail and Professional Services. Prior to joining Real Dynamics, he played consulting roles for Microsoft and Infosys. For more information on Real Dynamics services, please contact us at

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