Anybody familiar with the plastics industry knows, inventory is a moving target both literally and figuratively. Silos, feed tubes, gaylords, and blenders are used to move inventory throughout the production facility and feed the lines that make products. In some cases, production lines may have a closed loop system where trim and scrap pieces can be re-ground (co-product) and fed immediately back into the plastic making process. Or, there may be cases where the scrap is unusable (bi-product) and is waste. You many also buy raw materials in one Unit of Measurement (UoM), Inventory in other UoMs, and sell in yet other UoMs. How is this reconciled (this is for another blog, by the way)? All of these variables can make it difficult to reconcile the potential disconnects between the state of the inventory in the physical world and that of the inventory in Dynamics 365 for Finance and Operations which is used to track it. So the following question comes to mind: How should all of these inventory pieces be tracked?
Follow The Money
This blog post will focus on the tried and true investigator’s model which follows the money. One can spend an inordinate amount of time, effort and money trying to keep the physical world in line with the systematic world, but does that bring value to the business? Inventory may be more accurate, but that will often come at the expense of increased labor costs and reduced production efficiencies. Nobody wants to fall into the trap of spending more money tracking material than the material itself is worth, so the foremost consideration is the cost of the inventory in question.
If the material is a low cost item, it is sensible to reconcile inventory as part of routine cycle counting. Materials of this type are typically readily available, so having some short-term variances between the physical world and that of Dynamics 365 should not jeopardize the overall production process. In addition to their low cost impact, these materials can often be used to fulfill multiple customer orders thus reducing the risk of having obsolete inventory.
When dealing with higher cost, specialty material, these items will likely dictate being a little more thorough with inventory picking during the production process as these materials will not only carry higher inventory values, but also lower levels of inventory. Inventory variances could result in unnecessary ordering of replacement material, or worse yet, not having what you need to complete a customer order. Additionally, the higher cost of inventory can lead to misleading Customer profitability numbers should unaccounted for variances occur in the production process.
When carrying out this reconciliation process, the cycle counting functionality within Dynamics 365 can be of great help maintaining accurate inventory levels. Each released product within Dynamics 365 can be assigned a cycle counting group that can be derived based from such measures as item cost, item velocity, or item lead times. Examples of such groups could be based on a time measurement such as daily, weekly, or monthly or they can be based on inventory levels, such as items that have dropped below their minimum level or reached a zero stock level. The Counting group can be found here:
Product Information Management/Products/Released Products under the Manage Inventory tab as shown below:
Once the Counting group is defined at the item level, it can be used to help create the necessary Counting journals to carry out the cycle count. Counting Journals can be found under the following menu path:
Inventory Management/Journal Entries/Item Counting/Counting
For more information on how to carry out the counting process, check out the following blog series: