Inventory consignment ownership process in Microsoft Dynamics Finance & Operations

In this article we will show you the process of inventory consignment and inventory ownership process in Microsoft Dynamics 365 for Finance and Operations.

First we will understand the functional part of this process then we will jump over to dynamics and see step by step process.

In this scenario where vendor/supplier sends the stock/inventory to the organization however seller/vendor holds possession until the utilization. Once the company received the goods, it will be stored in company’s site or warehouse. Later on, the company can take the ownership of the item once the item is ready to be consumed on a production order/sale. Until changing the ownership, item is still owned by vendor. Until the consumption. It could be production consumption or sale.

In order to perform the inventory consignment process we need to setup the vendor as inventory owner and the tracking dimension to be setup as “Owner” which identifies the separate entities ownership. You can identify using this tracking dimension which inventory is owned by a vendor and by a company.

In this process we will create new types of order which identifies the vendor ownership inventory, these order are named as Consignment replenishment order. When these types of order is created the it adds the inventory to the system having vendor ownership on it.

In order to change the ownership of the inventory created by Consignment replenishment order from vendor to company we will create a Inventory ownership change journal by creating and posting of this journal the ownership of that inventory will be changed from vendor to company also a purchase order is created and received as well to sold the inventory from vendor to company.

Before going to the actual process first we need to setup some prerequisites in Finance & Operations.

Inventory owners

In order to setup a vendor as consignment vendor, we need to create its inventory owner record. For that navigate to

Inventory management –> Setup –> Dimensions –> Inventory owners

Click New button and select Vendor which you want to make consignment vendor and Save.

Tracking dimension group

The tracking dimension group to be setup as “Owner” which identifies the separate entities ownership. You can identify using this tracking dimension which inventory is owned by a vendor and which is owned by a company. For that navigate to

Product and information management –> Setup –> Dimension and variant groups –> Tracking dimension group

Create new tracking dimension group named as “Owner” by clicking New button, set Owner dimension active for this tracking dimension group.

Inventory journal name

Create inventory journal name for journal type Ownership change so that when inventory ownership journal is created it will pick journal name from here. For that navigate

Inventory management –> Setup –> Journal names –> Inventory

Inventory management parameters

In order to populate inventory ownership journal name to be populated from inventory journal name which we setup in previous step we need to give it to the inventory journal parameters. For that navigate

Inventory management –> Setup –> Inventory and warehouse management parameters –> Journals tab

Set the default journal name for the Ownership change field.

After all these setups are done now we will proceed to the process, the process flow diagram is defined below,

Create new product

Create new product. For that naviagate

Product and information management –> Products –> Released products

Click New button. Select Owner tracking dimension group. Fill the rest of the fields.

*Make sure that Owner tracking dimension could be assigned to the products which have Standard cost or Moving average products.

Create and activate item price

For create and activate price navigate to

Manage costs tab –> Setup group of fields –> Item price button

Create new record by clicking New button. After saving it, click Activate pending prices button to activate this price.

Create Consignment replenishment order

For creating consignment replenishment order navigate to

Procurement and sourcing –> Consignment –> Consignment replenishment orders

Click New button to create new consignment replenishment order.

Now create the line in consignment replenishment order.

Give Item number value is the item we just created in previous step and quantity to 100.

Now check the inventory transaction of this line in consignment replenishment order, you will notice that the owner inventory dimension is automatically setup.

Post product receipt for consignment replenishment order

To post product receipt for consignment replenishment order, click on Product receipt button in Generate section.

Enter the External product receipt number and External product receipt date and click OK button.

After posting of product receipt for a consignment replenishment order, check its inventory transactions again it will be now set to Purchased.

Up till these steps the inventory of these products of 100 units is added to the system but within the ownership of a vendor.

Create inventory ownership change journal

In order to change the ownership of inventory from vendor to company we will now create inventory ownership change journal to do so. For that navigate to

Inventory management –> Journal entries –> Items –> Inventory ownership change

OR

Procurement and sourcing –> Consignment –> Inventory ownership change

Click on New button to create new inventory ownership change journal.

Journal name will be defaulter from Inventory management parameters.

Create journal line now.

Enter Item number, From site (To site will be defaulted from From site), From warehouse (To warehouse will be defaulted from From warehouse), From owner as vendor account, Quantity as 100 units.

Post inventory ownership change journal

After creation of inventory ownership change journal, click on Post button in the menu bar, it will open up a dialog click on OK button then to post the inventory ownership change journal.

It will take some time and a message will appear saying that the “Posting – Journal“.

Check inventory transaction of inventory ownership change journal line. You will notice that purchase order is created and received transaction in the Received status.

For creation of Consignment replenishment order using X++ code follow the link given below

Create consignment replenishment order using X++ code

For creation of inventory ownership change journal using X++ code follow the link given below

Create and post inventory ownership change journal using X++ code

Thank you for reading this article hope you find it useful.

Omar Iqbal

Technical Consultant

References:

1. https://gfeaxblog.wordpress.com/2018/06/06/microsoft-dynamics-365-for-finance-and-operations-inventory-consignment-process/
2. https://docs.microsoft.com/en-us/dynamics365/supply-chain/inventory/tasks/change-ownership-consignment
3. https://adeelkhanaxian.wordpress.com/2017/05/18/inventory-ownership-change-_-dax365/