Accurate demand forecasting and inventory planning are critical for manufacturing success. Without proper planning, businesses may overstock materials, leading to cash flow issues, or run out of essential components, delaying production and causing missed deadlines.
Microsoft Dynamics 365 Business Central helps manufacturers automate inventory management, reduce waste, and improve production efficiency. With powerful Material Requirements Planning (MRP) and Master Production Scheduling (MPS) capabilities, businesses can make smarter, data-driven decisions about inventory and supply chain operations.
In this blog, we'll walk through Business Central's forecasting and planning tools, explore different reordering policies, and explain how manufacturers can leverage these features to optimize their operations.
Understanding SKUs vs. Item Cards in Business Central
Many manufacturers struggle to determine whether they should use Stock Keeping Units (SKUs) or Item Cards when setting up inventory in Business Central. While both options track inventory, there are key differences.
- Item Card: Used when a company has one primary inventory location and does not require location-specific inventory planning.
- Stock Keeping Unit (SKU): Required when a company operates multiple warehouses and needs to set different inventory policies per location, such as lead times, reorder points, or safety stock levels.
If your business has multiple warehouses or fulfillment centers, SKUs allow for better control over inventory by enabling separate tracking per location.
How Business Central Handles Demand Forecasting
Forecasting is an essential part of manufacturing and supply chain management. Without accurate demand predictions, businesses risk either stockouts or excess inventory. Business Central helps manufacturers avoid these issues by allowing them to forecast demand based on historical data and expected sales trends.
Types of Demand in Business Central
- Independent Demand – Demand for finished goods, typically driven by customer sales orders and forecasts.
- Dependent Demand – Demand for raw materials and components, which is calculated based on Bill of Materials (BOM) requirements.
Where to Find Forecasting in Business Central
Forecasting in Business Central can be accessed by navigating to the Forecast module, selecting the forecast period (e.g., monthly, quarterly, yearly), and entering the anticipated demand per item.
Once forecasts are entered, Business Central automatically integrates them into the planning process, allowing manufacturers to generate production and purchasing recommendations based on demand.
Inventory Planning: Choosing the Right Strategy
Effective inventory planning ensures that businesses maintain sufficient stock levels without tying up unnecessary capital. Business Central offers multiple reordering policies that allow manufacturers to customize inventory replenishment based on their specific needs.
Which Reordering Policy Should You Use?
- Fixed Order Quantity: Orders the same fixed quantity whenever stock hits the reorder point. Best for items with steady demand.
- Maximum Order Quantity: Ensures that total inventory never exceeds a specified maximum level. Best for space-constrained warehouses.
- Lot-for-Lot: Aggregates demand over a specific period and places optimized replenishment orders. Best for fluctuating demand.
- Order Policy (Make-to-Order): Matches sales orders to purchase orders, ensuring just-in-time inventory. Ideal for custom manufacturing.
For example, if a manufacturer sets a fixed reorder quantity of 500 units, Business Central will always replenish 500 units when stock reaches the reorder point. However, if Lot-for-Lot is used, the system will calculate the total demand over a given period and place a single optimized order to cover it.
MPS vs. MRP: Understanding the Difference
One of the most common inventory planning mistakes manufacturers make is confusing MPS with MRP. While they are related, they serve different purposes.
Key Differences:
- Master Production Scheduling (MPS): Plans finished goods production based on forecasted demand.
- Material Requirements Planning (MRP): Calculates the raw materials and components needed to fulfill production orders.
When to Use MPS?
- To plan finished goods production before determining material requirements.
- To align production schedules with customer demand and avoid overproduction.
When to Use MRP?
- To ensure raw materials and components are available when needed.
- To automate purchasing decisions based on BOM dependencies.
Most manufacturers run MPS first to finalize their production plan and then run MRP to determine what materials need to be ordered.
Best Practices for Forecasting and Planning in Business Central
To maximize the benefits of Business Central's planning tools, manufacturers should follow these best practices:
- Use historical sales data to refine forecast accuracy.
- Set a planning time fence (e.g., two weeks) to prevent last-minute order changes.
- Leverage Business Central's Action Messages to automate order recommendations.
- Monitor Item Availability by Event to track how forecasts impact inventory replenishment.
By implementing these best practices, manufacturers can reduce last-minute order changes, streamline inventory management, and prevent stock imbalances.
Final Thoughts & Watch the Webinar
Manufacturers who still rely on manual spreadsheets for inventory planning risk inefficiencies and costly mistakes. Business Central's forecasting and planning tools provide a data-driven, automated approach that ensures manufacturers always have the right stock at the right time.
Watch the full webinar here:
Microsoft Dynamics 365 Business Central Forecasting & Planning Webinar
For more information on how to optimize your forecasting and inventory planning with Business Central, contact WebSan Solutions for a personalized demo.