Vendor Consignment in Dynamics 365 for Finance and Operations
Posted on: January 17, 2019 | By: Jarrod Kraemer | Microsoft Dynamics AX/365
Authored by: Rosey McAdams
A great new feature rolled out with Dynamics 365 for Finance and Operations is the vendor consignment functionality. In prior versions of Dynamics AX handling vendor consignment was not supported without some clunky work arounds or customization. With that said, if your company does have vendor consigned inventory it wouldn’t be a bad idea to upgrade to Dynamics 365 soon. For those of you who are already on Dynamics 365 and currently do or are considering supporting vendor consignment, we are going to demonstrate the simple steps to setup and utilize vendor consignment in Dynamics 365 right now!
The first step in setting up your D365 environment for vendor consignment is to setup your items to be tracked by owner. The owner dimension is a tracking dimension just like batch number or serial number and therefore is configured in Product Information Management > Setup > Dimensions and variant groups > Tracking dimension groups. Just like with batch and serial number tracking if the owner dimension is turned on and an item is assigned to the tracking dimension group with this setup the owner dimension will be mandatory on all inventory transactions.
The second step in setting up vendor consignment is configuring which vendors you will be supporting vendor consignment for. To complete this set up navigate to: Inventory Management > Setup > Dimensions > Inventory Owners
From this screen you not only setup which vendors you will be supporting vendor consignment for, but also assign the Owner dimension for that vendor. The owner dimension gets automatically gets setup as the vendor account number, additionally an owner dimension will get setup by default for your company with the same code as the legal entity you are in – this dimension would indicate that you are the owner.
Next, we must setup an item to be used in vendor consignment, the two critical pieces of setup for an item to be used for vendor consignment are as follows:
- Tracking dimension group must be a tracking dimension group with Owner dimension active
- Item group must be an item group that uses either Standard Cost or Moving Average
The final mandatory setup for supporting vendor consignment is configuration of the Ownership Change journal name so we can start to do vendor consignment transactions. This is setup where all other inventory journals are setup in Inventory Management > Setup > Journal Names > Inventory
We must make sure a journal is setup with Journal Type Ownership change to be able to change the owner on a piece of inventory between us and the vendor – for example, one we want to buy a piece of inventory from the vendor, we would want to do the ownership change from the vendor dimension to our legal entity dimension.
Now that we have all the necessary setup complete, let’s see it in action!
To receive in consignment inventory from a vendor we must create a consignment replenishment order, which is essentially a purchase order without any financial transactions ($0). To create a consignment replenishment order, navigate to Procurement and Sourcing > Consignment > Consignment replenishment orders
Select new, pick your consignment vendor and click OK. Then add your lines, this will now allow you to receive product in from the vendor.
As mentioned above, when product is received against a replenishment order no physical or financial vouchers happen, only the inventory subledger is affected. You will show on hand as many as you physically received in your warehouse, but all at $0 and no effect on your inventory GL. The inventory owner dimension for this inventory on hand will be the vendor that you received the inventory from, until you but it from that vendor.
Finally, once you decide that you want to use the inventory and buy it from the vendor you will need to do an ownership transfer journal to change the ownership dimension on your inventory from the vendor to your company, once it is owned by your company you can use it to fulfill sales orders. To do an ownership transfer journal navigate to Inventory Management > Journal Entries > Inventory ownership change.
An inventory ownership change journal looks very similar to an inventory transfer journal, except instead of from and to warehouses/locations we have from and to owners on the lines of the journal. You will select the vendor as the “From owner” and your legal entity as the “To owner”.
Once this journal posts it will also simultaneously create a received PO (since the inventory has already been received), with a physical receipt voucher, at the PO price setup on the item, trade agreement, or the costing version. This PO is now ready to be invoiced by the vendor at any time.
You now have all the tools to be able to utilize vendor consignment functionality in Dynamics 365 for Finance and Operations. Hope this post helps to get started on automating your vendor consignment processes! For additional information please feel free to reach out to us at firstname.lastname@example.org or (312) 345-8817.
All the best!
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