External Logistics Centers in D365FO: Part 2
By Sergey Kebets, Senior Functional Consultant, Industry Consulting Service (ICS)
In the scope of the previous article (please see External Logistics Centers in D365FO: Part 1), we discussed the capabilities of the D365FO system for supporting the process of keeping production in the external logistics centers. In Part 2, I will develop this theme and will try to answer the following questions:
- What should be transferred to the external logistics center?
- For what period of time should we transfer products to the external logistics center?
In the first part of the article, we discussed that the user should decide what should be moved to the logistics center. For these items, the Demand forecast will be created for the logistics center warehouse. The system will create the planned transfer orders for these demands, and items will be moved to the logistics center (for more details, please see Part 1 of the article).
But we should not forget that the external logistics center is only a safety mechanism in case our main warehouse capacity is not enough. We have the warehouse capacity, and we want to use it as soon as possible. And only when we see that the products can’t be kept in our warehouse, then these products should be moved to the external logistics center.
The scheme of working without the logistics center (LC) looks like below.
As you can see, we are not using the LC because the capacity of the main warehouse is enough for our on-hand. However, the user should analyze the on-hand of the main warehouse and all incomings and all outgoings of goods, and based on this information a decision can be made to transfer some products to the logistics center.
If the items were transferred to the LC, the user should then decide when these items should be moved back. For this, the user should check two entities:
- Warehouse capacity
If the user sees open demand in the main warehouse, the user can decide to transfer the necessary items from the LC to cover this demand. See the scheme below.
Alternatively, the user may find that the main warehouse has enough space for the items we keep in the LC. Based on this information, it can be decided to move these items back to the main warehouse. In this case, the scheme looks like below.
From these schemes, we can conclude that the keeping time is the minimal time between the moment we moved our products to the LC and the moment we should deliver this item to our customer or can move this item back to the main warehouse.
Let’s look at these processes in Dynamics 365 for Finance and Operations.
We will use the same modules of D365FO as we used in Part 1 of the article. I recommend that you read the first part of the article to better understand this part.
As explained in the Theory section, the user should analyze the on-hand of the main warehouse, all incomings, and all outgoings. We have a few instruments in the system for this.
The first instrument is the Net requirements form. On this form, the user can see all incomings and outgoings. Below you can find an example.
The problem with this form is that we can’t see how much space is occupied in the warehouse by the on-hand. Another problem is that we can’t see the general picture of the warehouse as a whole.
The second instrument is the Warehouse utilization report. We use it to address the problems described above. Below is an example of a filter for this report.
Hint: we should analyze the locations in the keeping zones. Zones we use for processes (inbound, outbound) should not be included in the report.
An example of a Warehouse utilization report:
In this report, we see how the warehouse is used right now. Based on this information, the user can decide at what moment we should start moving products to the logistics center. Unfortunately, this report can’t show us the situation in the future. The user should calculate it manually.
The third instrument is the Locations form. On the Locations form, the user can get an additional slice of information for each location or zone of the warehouse. Below you will find an example.
On this form, the user can analyze the available and current volume, and available and current weight. Also on the form, the user can analyze the situation in separate zones of the warehouse. Based on this information, the user can decide to move a separate group of products to the logistics center.
By using these instruments, the user can identify a moment when the warehouse is overloaded and all processes are hindered. To avoid this scenario, we should do the following:
Determine the maximum usage percentage of the warehouse. Usually, we use 90%. When we see that the load of the warehouse approaches this value, we must prevent this situation and free up more space in the warehouse.
Calculate the maximum load of the warehouse in volume. For this, the user should multiply the maximum volume of the warehouse by the maximum usage percentage. Here is an example of this calculation. Let’s assume that the maximum volume of our warehouse is equal to 220,000. Then the calculation will look like this: 220,000*90/100=198,000. As a result, you will get the maximum amount of the warehouse load that can be used without losing the speed of processing incoming and outgoing transactions.
Check all incomings and outgoings. If we add all incomings to the current load of the warehouse and subtract outgoings, we will understand our planned load of the warehouse.
Ideally, this analysis should be performed on all transactions one by one. It means that the user should prepare a queue of all incomings and outgoings by date. And then calculate the load of the warehouse after each order. The user should add all incomings and subtract all outgoings from the current on-hand.
An example of this calculation for each transaction:
But such a calculation can be very laborious. A more straightforward approach might be to calculate the result for a time period. For this, the user should divide the analyzed period into smaller periods of time and calculate the result for each such period. I recommend using weeks for this, but it can be any time period. If we use weeks, we will exclude local excesses that may be fixed in the near future. The results for each period should be added to the current load of the warehouse. Below you will find an example of this calculation.
The example of the calculation for periods:
As you can see in our calculation, the maximum volume value will be exceeded in Weeks 3, 4, 5, 6, and 8. This means the user should plan the transfer of goods to the external logistics center for preventing this situation.
Find the volume that should be transferred to the logistics center. One of the methods to solve this task is to find the biggest deviation from the maximum value. In our table above, it is Week 6 where the deviation is 36,000. The user can plan the transfer of this volume to the external logistics center to prevent the overloading of the warehouse.
Find the week when products should be moved to the external logistics center. The transfer should be planed for the week in which we see the first excess. In our example, it is Week 3.
Find the week when products should be moved back from the external logistics center. The products should be moved back after the last excess. In our table, it is Week 9 (the last excess will be in the 8th week).
In the result, you get the following picture:
The table shows that the products should be kept in the external logistics center for 7 weeks. However, this period can be shortened if the user divides the full volume into parts and finds a way to move these parts back to the main warehouse separately.
The D365FO system has several instruments for analyzing warehouse capacity. The user should use a set of instruments to understand the current situation in the warehouse and the ability of the warehouse to keep all planned incomings. Based on this information provided by the system, the user should create a Demand forecast for the logistics center (a transfer order will be generated automatically by the system) and a transfer order for the main warehouse.
With a sufficiently long planning horizon, the system can provide an accurate period of keeping (time between incoming and outgoing of goods). If the planning horizon is short (we cannot find the demand or possibility to order items back from the LC),
the logistic center can be informed about the minimal keeping time (the planning horizon).
In the third and final part of the series, I will discuss how Dynamics add-on solutions developed by ICS can help address all the issues raised in Part 1 and Part 2 of the article and automate these processes.