Reverse planning in Microsoft Dynamics 365 Business Central includes a feature called Identify Overstock Inventory. You use it to find items where you hold too much stock and too much tied-up inventory value.
You define overstock item templates with your own criteria. You can set thresholds based on reorder quantity, safety stock quantity, and inventory value. For example, you can find items where the reorder quantity exceeds twice the normal reorder quantity, where the safety stock quantity at the end of the period is more than three times the safety stock, or where the inventory value is above a fixed amount such as 20,000.
The tool includes both your current stock and your incoming supply, such as purchase orders and production orders. This lets you predict future inventory levels and decide whether to cancel incoming supply, sell out items, or lower prices to move stock. You can also use it to find items approaching their expiration date based on remaining shelf life.
What Identify Overstock Inventory does
With reverse planning you can find what we call overstock inventory. The purpose is to find items where you have too high an inventory value, or where your inventory exceeds a multiple of your safety stock, your reorder point, or safety stock plus reorder point.
This way you can find items where you have too much in stock and want to reduce it. Maybe you want to sell out items. Maybe you bought too much for the wrong reason, or the market didn’t turn out the way you expected and you didn’t sell as much as you planned. The point is to find the items where you have too much inventory value tied up.
You can also include supply in the calculation. So it’s also a way to find purchase orders or production orders that you’ve created but not yet placed, or that you might want to cancel.
Setting up overstock item templates and criteria
When you open the Identify Overstock Inventory page, you can define different overstock item templates. You can create as many as you want. In each template you set your criteria.
You choose whether an item should match all criteria or just one of them. If you set it to match any single criterion, an item shows up when it falls under one of the rules. You can also require items to match several criteria at once.
The criteria can include things like:
- The reorder quantity within the period is higher than twice the normal reorder quantity
- The safety stock quantity in the ending inventory of the period is higher than three times the safety stock
- The highest inventory value exceeds a set amount, for instance 20,000
You also set the period to look at and which orders to include, just as you do with the other reverse planning functions. You can choose to include only released orders, open orders, and so on.
Reading the calculation results
When you run the calculation, you see which items match your criteria. In one example the result was eight items, some of them flagged because of their high inventory value.
A city bike showed an inventory value of 80,000, which clearly needs attention. A mudguard back had an inventory value of only 331, which isn’t much, but its highest inventory was 85 and its reorder quantity on the line was 40.
Because the calculation looks at all your supply orders and demand orders, you can predict what your inventory will look like in the future, not just today.
Acting on overstock items
This is a tool to decide what to do with stock you’re carrying too much of. You can:
- Cancel incoming supply where that’s still possible
- Sell out items that aren’t moving
- Lower the price on items that have become too old to sell at the current price
If an item chain up the list is getting too old and nobody’s buying it, you can find it here and decide to lower the price or do something else to get it into the market.
You can also run this against remaining shelf life if you have items that expire based on an expiration date. So you can find all kinds of too-high inventory value with this feature.
The CFO tends to like this tool, because lowering your inventory is something everybody appreciates.
Q&A
What is the Identify Overstock Inventory feature in Business Central?
It’s a reverse planning feature that finds items where you hold too much stock or too much tied-up inventory value, so you can decide to reduce them.
What criteria can you set for finding overstock items?
You can set criteria based on reorder quantity, safety stock quantity, and inventory value. For example, you can flag items where the reorder quantity exceeds twice the normal reorder quantity, where the ending safety stock is more than three times the safety stock, or where the inventory value is above a fixed amount.
Does the overstock calculation include incoming supply?
Yes. It includes purchase orders and production orders, so you can predict future inventory levels and decide whether to cancel incoming supply.
Can you create more than one overstock template?
Yes. You can define as many overstock item templates as you want, each with its own criteria.
Can you use overstock inventory with shelf life and expiration dates?
Yes. You can run the calculation against remaining shelf life for items that expire based on an expiration date.