Mastering Inventory Allocation in Multi-Channel Operations

In the dynamic world of multi-channel and multi-regional operations, the complexity of order fulfillment networks is ever-growing. The question arises: when faced with inevitable supply shortages, how can businesses strategically utilize their limited stock across key channels, customer groups, regions, and promotions? Moreover, how can they ensure that this precious stock remains safeguarded for its intended use?

Enter the innovative solution from Microsoft Dynamics 365 Supply Chain Management: Inventory Allocation. This new feature within the Inventory Visibility service is designed to empower companies to pre-emptively distribute their on-hand inventory as part of the sales operational planning, even before any sales occur.

Key Benefits of Inventory Allocation

• Inventory Protection: Ensures that allocated stock is ‘ring-fenced’, safeguarding it from other allocations, reservations, or sales demands.
• Oversell Control: Limits the quantities allocated to prevent over-consumption during the actual sales transaction.

Enhancing Sales Planning with Inventory Allocation

Before diving into the practical application, let’s clarify some essential terminology:

• Allocation Group: The entity that owns the allocation, such as a sales channel or customer group.
• Allocation Group Value: Specific values assigned to each allocation group, like “store” for sales channel or “VIP” for customer group.
• Allocation Hierarchy: The structured order of allocation groups that dictates the distribution of inventory.
• Virtual Common Pool: The total available inventory ready for allocation.

Real-World Application: A Case Study

Consider Contoso, a multinational company selling laptops both online and in physical stores. Faced with supply chain disruptions, Contoso must optimize its stock distribution between its online and in-store channels in Australia and New Zealand.

The process begins with Contoso defining its allocation groups and hierarchies, aligning with the company’s distribution strategy. This virtual allocation, based on current stock levels, doesn’t require immediate physical inventory movement. Contoso plans the allocation quantities, prioritizing by regions and then by sales channels.

Upon executing the allocation via the Inventory Visibility service, each group’s stock is ring-fenced, protected from external use unless adjustments are made. For instance, the Australia group is allocated 5,000 laptops, with 3,000 earmarked for online sales, leaving a contingency reserve in the common pool.

As sales occur, Contoso manages its regional and channel demands, ensuring that each allocation group’s orders are fulfilled from their respective allotments. For example, when a customer purchases a laptop from Contoso’s Australian online store, the Inventory Visibility service verifies the availability within the allocated stock, allowing the transaction to proceed smoothly.

Seamless Integration into Your Fulfillment Process

Incorporating inventory allocation into your fulfillment strategy offers enhanced control and transparency over your distribution network. This approach not only safeguards allocated stock throughout the planning and execution phases but also supports your commitment to sales channels, customer groups, and business partners.

Stay ahead in the complex landscape of supply chain management with Dynamics 365’s Inventory Allocation, where strategic stock utilization meets fulfillment excellence.