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Overview of the benefits and process flow of the establish stocking and replenishment policies

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Applies to: Dynamics 365 Finance, Dynamics 365 Supply Chain Management

This article describes the benefits and process flow of the establish stocking and replenishment policies business process area. This area encompasses the business processes for setting the rules that ultimately drive the execution of supply planning for the different items that an organization stocks. Planners decide which operational strategies to use for different items. As part of this process, they decide which items to make or purchase to stock, and which items to make or purchase to order. For items that they generally keep in stock, they must establish the target inventory levels for each location, based on demand history, forecasts, and space and capacity constraints. Organizations also establish the patterns for the planning process, such as the following examples:

  • How often they run planning
  • How far into the future they create plans for
  • How they coordinate the planning efforts for procurement, production, and inventory movements

Note

The stocking and replenishment policies that are described here refer to the policies that determine how inventory is supplied to a specific business location. Learn more about the policies that determine how inventory is positioned in a specific warehouse and movements within that warehouse in the content for the inventory to deliver business process.

Although planning policies are sometimes included in the initial rollout of Dynamics 365 Supply Chain Management, they are often implemented during a later phase. Many organizations establish stocking policies and manually run supply planning by using tools such as Excel. They might even have separate planning software, so that supply planning isn't included in the scope of a minimum viable product (MVP) implementation. The planning functionality in Dynamics 365 Supply Chain Management is flexible and can be configured after the initial go-live. It can also be updated as often as needed, so that it reflects changes in the company's stocking and replenishment policies.

Stakeholders

Many people in an organization must contribute to the decision-making process and design of the establish stocking and replenishment policies area. The list includes but isn't limited to the following roles:

  • Inventory stakeholders – Examples: Warehouse manager and Transportation planner
  • Planning stakeholders – Examples: Chief Operating Officer (COO), Vice President (VP) of Operations, Operations manager, and Planning manager
  • Production stakeholders – Examples: Production manager and Production scheduler
  • Procurement stakeholders – Examples: Buyer and Procurement planner
  • Finance stakeholders – Examples: Controller and Inventory accountant

Establish stocking and replenishment policies process flow

The following diagram shows the business processes in the establish stocking and replenishment policies area. The flow of the diagram represents the approach that most organizations use to periodically review and refresh their stocking and replenishment policies for their entire catalog of products. However, organizations must also establish stocking and replenishment policies for new items. Alternatively, they must update their policies for specific items on an ad-hoc basis. Although the process diagram doesn't show this alternate scenario, the business processes are generally the same in both scenarios.

Each solid gray rectangle on the diagram represents an end-to-end business process. The solid blue rectangle represents the business process area. The diagram shows the subprocesses for the business process area. The arrows on the diagram show the flow of the business process in an organization. If a subprocess can lead to more than one other subprocess, the parallel subprocesses are shown as branches.

Business process relationships with upstream and downstream processes that are explained in the next paragraphs.

The following steps are illustrated in the establish stocking and replenishment policies business process flow diagram.

  1. Start

    Parallel branches from 1, Start include:

    1. Inventory to deliver

      1. Define and manage warehouse operations
      2. Define inventory planning policies

    2. Plan to produce

      1. Define production strategies
      2. Define production planning policies

    3. Source to pay

      1. Develop sourcing strategies
      2. Define procurement planning policies

  2. Forecast to plan end-to-end process

  3. Define strategic and operation plans process area

  4. Establish stocking and replenishment policies

  5. Define planning policies

  6. Define inventory planning policies

    A parallel branch from 6, Define inventory planning policies is Define procurement planning policies.

  7. Define production planning policies

  8. End

Establish stocking and replenishment policies benefits

There are many key benefits that can be used to monitor and measure the success of implementing technology to support the establish stocking and replenishment policies area. The following sections outline the key benefits that an organization might monitor and measure for establish stocking and replenishment policies.

Reduce inventory stockouts

By stocking items as inventory buffers, companies can ensure that items are on hand when they are needed. Multiple options in Dynamics 365 Supply Chain Management guide companies to determine the appropriate target inventory levels, based on demand, capacity, and other key factors. Prevention of stockouts helps achieve the On Time and In Full targets, increase customer satisfaction, and reduce delays in the production process.

Reduce the cost of order fulfillment

By building a coordinated set of stocking and replenishment policies across the entire production and distribution network in a company, organizations can reduce unnecessary transfers of inventory, expedited freight costs for rush shipping, and customer penalties for service agreement violations. Dynamics 365 Supply Chain Management supports this approach by providing flexible replenishment rules, logic for setting target inventory levels, and a planning service that incorporates real-time feedback throughout the day to adjust to changes in the supply chain.

Reduce sales lead time

When the right amount of inventory is on hand for key items, customer orders can be fulfilled more quickly, because the business doesn't have to wait for a purchase order or production work to be completed. Companies gain an advantage by building customer loyalty and increasing customer satisfaction.

Next steps

If you want to implement solutions with Dynamics 365 to help with your forecast to plan business processes, use the following resources and steps to learn more.

  1. Define strategic and operational plans

  2. Establish stocking and replenishment policies (the article that you're currently reading)

  3. Forecast supply and demand

  4. Forecast and plan for intercompany trade

  5. Plan supply and replenishment

The following resources can help you learn more about the establish stocking and replenishment policies process area in Dynamics 365.

Contributors

This article is maintained by Microsoft. It was originally written by the following contributors.

Principal author:

Other contributors: