Business value

A general requirement in order fulfillment is to ship as many sales lines as possible on time against minimal shipment costs.

The "fulfillment policy" was introduced in the Microsoft Dynamics 365 for Finance and Operations Fall release 2017, instead of the former "fulfillment percentage" on the customer record.

Challenges in standard :

• The fulfillment functionality is limited to the first release of the sales order. Once the sales order is partially released, even if one bolt M6 becomes available, Microsoft Dynamics 365 for Finance and Operations will release the sales order again. This results in a shipment with one line. And a new shipment with one line when the accompanying nut M6 becomes available, and so on.
• Theoretically it is possible to exclude partially released sales orders in the Automatic release of sales orders. However, you still have to include the partially released sales orders e.g. once a week, to ship the backorders. There is no automatic consolidation of all remaining backorder lines of the sales order in a single shipment.
• The checkmark “Prevent partial delivery” on the sales order line (formerly known as “Complete”) checks too late, and checks on an illogical moment in the procedure. The first check is upon closing the container at the packing station and then upon packing slip posting. But there is hardly an acceptable way to reverse the partially picked line. And if no packing station is used, the worker can not even put the goods at the baydoor when there is a violation of the prevent partial delivery checkmark.
• With the checkmark on the customer table “Fill entire order” it is possible to delete a shipment for which reservation fails on one or more shipment lines (e.g. when some inventory is on non-pickable locations). Drawback is that it can not be overruled on order level, and can not consolidate backorder shipments. The behavior of this checkmark depends on the quantity that is released to the warehouse:
  • Physical reserved: only sales order lines that are fully or partially reserved on warehouse level will be included in the shipment. A single sales line that is reserved on warehouse level but is not on a pickable location, will reverse the whole shipment.
  • All: "Fill entire order" reverses a shipment if one sales order line fails upon wave processing
• Intercompany direct-delivery sales orders only respect the fulfillment policy of the intercompany customer. The fulfillment policy of the customer on the original sales order is ignored.

In Dynamics Order Entry Optimization the backorder strategy is integrated with Microsoft Dynamics 365 for Finance and Operations Warehouse management at the moment the sales order is released to the warehouse.

Wins:

• Avoid unnecessary transport costs caused by excess number of partial shipments and backorder shipments
• Checks on a logical step in the process:
  • Automatic release of sales orders takes the backorder strategy into account
  • Release from sales order screen takes the backorder strategy into account
• Setting on customer, exceptions possible on sales order level
• Implementation ease
• Automated cancellation of backorders
• In an IC direct delivery scenario: whether the original sales order requires deliver in full or allows backorders, this is respected when releasing the IC sales order to the warehouse. 

Considerations:

• Release to warehouse is the main go/no go point. Checks beyond this point only disturb the warehouse process.
• Exception: some customers do not accept partial delivery on line level. This should be checked:
  • Upon release to warehouse
  • At the packing station and
  • When printing the packing slip
• Prevent partial delivery should be possible to enforce on customer level. Prevent partial delivery should be possible in combination with “Max one backorder”, “Backorder allowed” and “No backorder”
• Prevent partial delivery should be possible to (de-)select on order line level
• The main reason for using backorder strategies “Deliver in full” and “Max one backorder” is to find the best balance between service level and transport costs.
• In case there is an unexpected short pick, this should not block the remaining packing and shipping process.
• A backorder with a reference to a purchase order or production order should not be cancelled automatically.
• All open order lines for a specific customer or for a specific item or item variant should be deletable in a more automated manner.

Prerequisite

Backorder Strategies depends on the fullfillment policies of the Microsoft Dynamics 365 for Finance and Operations Warehouse management module.

Setup

Activate the ALF license

This will enable the Backorder Strategies functionalities.

Fulfillment policy

Warehouse managment > Setup > Release to warehouse > Fulfillment policies

Customer

Sales and marketing > Customers > All customers > Fast tab Warehouse

Specify a fulfillment policy. If no fulfillment policy is selected, backorder allowed is used.

Intercompany customer

Sales and marketing > Customers > All customers > Ribbon tab General > Setup: Intercompany > Tab Sales order policies

This setup can also be accessed from the IC vendor in the legal entity in which original sales orders are entered.

Procedure

Sales order

The backorder strategy is inherited from the customer’s fulfillment policy to the sales header, fast tab Delivery, and can be overwritten.

Fulfillment percentage is not inherited to the sales header and the fullfillment percentage on the customer's fulfillment policy remains active.

The setting Prevent partial delivery is inherited from the Order fulfillment policy (or Default fulfillment policy of the customer) to the sales line, tab General, and can be overwritten on the sales line.

The user can override the fulfillment policy on the sales order. In that case, the backorder strategy on the sales order and the prevent partial delivery flag on the existing lines in this sales order will change automatically. 

Intercompany direct delivery sales orders

The backorder strategy on the original sales order is always initialized equally on the intercompany sales order.

If synchronization of backorder strategy is active, the backorder strategy can only be changed from the original sales order header and is updated automatically on the intercompany sales order. The backorder strategy on the intercompany sales order is non-editable.

Intercompany non-direct delivery sales orders

The backorder strategy on the original sales order is always initialized equally on the intercompany sales order. There is no automatic synchronization after the intercompany sales order is created.

Button Calculate, Confirmed delivery dates (optionally)

After the sales order with all lines is entered, use “Calculate, Confirmed delivery dates” to align the dates of the sales order lines.

Automatic release to warehouse

Warehouse management > Release to warehouse > Automatic release of sales orders

This is the main go/no go point. If not reserved before, this process reserves on warehouse level (assuming that on the warehouse, the Reserve when orders are released by a batch job is active).

• Backorder strategy is only checked when the “Quantity to release” is “Physical reserved”.
• The functionality checks the presence of any open inventory transactions without physical reservation remain on the order against the backorder strategy on the sales order.
• Advised setting is “Allow release of partially released orders” is Yes. If not selected, backorders will not be released.
• "Keep reservations on release failure". If there is a backorder strategy violation, the reservations on warehouse level can be firmed or discarded.

This matrix shows the conditions for release to warehouse, depending on the backorder strategy on the sales order.

1) Prevent partial delivery: each sales line must be delivered in full.

2) Fulfillment percentage is always checked in the first release unless customer has fulfillment 100 % but backorder strategy on sales order is not Deliver in full.

3) Sales line full reservation: No inventory transactions with Issue status On order or Ordered reserved exist on this sales line.

4) Full reservation: all sales lines reserved: No inventory transactions with Issue status On order or Ordered reserved exist on this sales order.

5) Remaining sales lines full reservation: All remaining sales lines reserved: No inventory transactions with Issue status On order or Ordered reserved exist on this sales order.

Release from sales order

Sales and marketing > Sales orders > All sales orders > Tab Warehouse management > Button Release to warehouse

Reserve the sales order lines upon entry, and release to warehouse from the individual sales order or sales order list page.

Manual release to warehouse screen

Warehouse management > Release to warehouse > Release sales orders to warehouse

Warehouse management > Release to warehouse > Release to warehouse (deprecated)

On these forms, the user can select a new fulfillment policy that overrides the fulfillment policy from the order. 

Wave processing

Warehouse management > Outbound waves > Shipment waves > All waves

Automatic or manual. This is the second go/no go point. Items are now reserved on location level. However, if an item is not available on a pickable location, the standard checkmark “Fill enter order” can reverse the shipment if one of the shipment lines fails.

Packing station and packing slip

Warehouse management > Packing and containerization > Pack

The backorder strategies are not checked on the packing station and when printing the packing slip. The disturbance of the process in case of a shortpick would cause more costs than the extra transport costs for an unforeseen backorder.

Exception Prevent partial delivery:

This is often a strict customer requirement. Only if Prevent partial delivery is set on the sales line, and the last container is closed, Microsoft Dynamics 365 for Finance and Operations checks that the setting on the sales line is not violated. But if so, the user decides whether to change the sales line setting or to reverse the picked line back to the warehouse location.

Thanks to the fact that Order Entry Optimization only releases order lines that comply with the prevent partial delivery setting, this situation should only occur in the event of an unexpected shortpick. The same check is executed again upon packing slip posting and printing. The reason is that the packing station is not a mandatory process step: it is possible to pick the goods, put them on a final shipping location, and post the packing slip.

Cancel backorders

Sales and marketing > Periodic tasks > Clean up > Cancel backorders

This functionality cancels remaining backorders with backorder strategy "No backorder".

Especially retail customers tend to order every time again. If the ordered items are not received, these customers re-order next time if the demand is still there.

Cancel backorders can run in batch every night, can delete the backorders for certain customers and sales orders automatically. The sales line functionality Update line, Deliver remainder, Cancel quantity is executed for all the sales order lines within the selection.

Criteria:

• No open or in process work line may exist (if there is only a load line without work, this load line is auto deleted).
• No shipment lines for this order may exist that are related to a shipment with status smaller than "Shipped".
• No Inventory transactions for this order with Issue status = "Picked" may exist.
• No reference from sales line to a different order line (purchase order, production order etc.) may exist.
• If the checkmark "All ship dates" is off:
  • If on the sales line confirmed ship date is filled, it must be smaller than or equal to the specified date.
  • If on the sales line confirmed ship date is empty, the requested ship date on the line must be smaller than or equal to the specified date. 
• If the checkmark "All ship dates" is on:
  • Open sales lines with confirmed and non-confirmed ship dates in the past and future will be cancelled
  • Use this setting only if the sales order does not contain any sales order lines with ship dates that are deliberately set for future ship dates.
• Open sales orders for which no other line has been released to the warehouse, will not be cancelled.

In the dialog, the user can choose the required number of days after the originally planned shipping date. The specified until-shipping date is 1 day in the past (=yesterday) by default. It is possible to cancel until today (0 days in the past).

If backorders with future shipdates should already be cancelled, switch on "Ignore ship date".

The selection filter can not be changed by the user.

Cancel backorders for item or customer

Sales and marketing > Periodic tasks > Clean up > Cancel backorders for item or customer

In the undesired event that a customer is heading for a bankruptcy etc., the remaining open sales orders must be cancelled. Or if a vendor announces that supplies of a particular item will be stopped, all open order lines for this item should be cancelled. This functionality is also an automated Update line, Deliver remainder, Cancel quantity.

For safety reasons, either one customer, or one item / item variant can be selected per run.

Backorder strategy for cross docking orders

The fulfillment policy and the connected backorder strategy are validated automatically when the sales order is released. In case the sales order depends on a marked purchase order that will be cross docked, and the backorder strategy is Deliver in full, this will cause a blocking error.

For these type of sales orders a batch job can be invoked to override the fulfillment policy on the sales order if:

the backorder strategy is Deliver in full or Max one backorder

the order has ordered reserved transactions

(optionally: the planned shipment date of the sales order is in a specific time window after the expected receipt of the purchase order).

Define a new fulfillment policy "Full + cross dock" or similar, backorder strategy = Backorder allowed.

On the fulfillment policy "Deliver in full", define the cross docking fulfillment policy, with on optional time window.

Sales and marketing > Periodic tasks > Update order fulfillment policy for cross dock orders

The sales order fulfillment policy will be updated if needed, and the sales order can be released to warehouse automatically or manually without an error.

Release notes