Inventory management and warehousing. The reason this concept matters for your MB-920 exam is because every single business that makes, sells, or moves physical products depends on knowing what they have, where it is, and when to get more. Without a system to manage inventory, businesses either run out of stock (losing sales) or hoard too much (wasting money).
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A simple way to picture Inventory Management and Warehousing
A supermarket warehouse manager runs the entire back-of-store operation. Their job is to make sure every product that customers want is available on the shelf exactly when they come to buy it. They do this by tracking every single item that arrives from suppliers (like a delivery of 500 tins of baked beans), deciding exactly where to store those items in the warehouse (on the high shelf, in a chiller, or in the bulk storage area), and then directing staff to move those items to the shop floor when the shelf starts looking empty.
Now imagine this manager uses a simple whiteboard with sticky notes to track everything. When a supplier calls to say a delivery is late, they scribble a note. When a customer buys the last tin of beans, they cross it off and stick a new note saying 'reorder'. This works okay for a small corner shop, but for a supermarket with 50,000 different products and hundreds of deliveries a week, the whiteboard becomes a chaotic mess. Notes get lost, someone forgets to reorder a popular cereal, and stock runs out.
This is exactly the problem that inventory management and warehousing software solves. In Dynamics 365 Supply Chain Management, the system replaces the whiteboard and sticky notes with a digital, real-time record. Every item has a unique identifier, its location is known at all times, and the system automatically calculates when to reorder. The warehouse manager can see, on a screen, exactly how many tins of beans are on the shelf, how many are in the back storage, and when the next delivery is due. No lost notes, no surprise shortages.
Let us begin with the basics. In business, inventory is simply the collection of goods a company holds for sale or for making its products. Think of a bicycle shop. Its inventory includes bicycles, tyres, pedals, helmets, and spare parts. Inventory management is the practice of tracking and controlling this collection. It answers three fundamental questions: what do we have? How much do we have? Where is it?
Warehousing, on the other hand, is the physical process of storing that inventory. It involves receiving goods from suppliers, putting them away in the right storage location, picking them when a customer order comes in, packing them for shipment, and shipping them out. In Dynamics 365 Supply Chain Management, inventory management and warehousing are two tightly connected features that work together.
Before digital systems, businesses tracked inventory using paper ledgers or manual spreadsheets. A store manager would count stock by hand every week and write down what needed reordering. This process was slow and error-prone. If a box of 100 items had only 80 in it due to theft or breakage, the paper record would still show 100. When it came time to reorder, the business might order too much or too little.
Dynamics 365 Supply Chain Management replaces all of that manual work with a digital system that updates in real time. Here is how the key concepts work.
The first critical concept is an ‘item number’. Every product in the system gets a unique identifier, often a code like ‘BIKE-RED-26’. This number is the key to everything. When a delivery of red bicycles arrives, the warehouse worker scans a barcode or enters that item number into the system. The system then knows that a certain quantity has been received.
Next comes ‘on-hand inventory’. This is the real-time count of how many units of a given item are available in the warehouse. Dynamics 365 updates this number automatically whenever stock is received, moved, picked, or shipped. If a customer buys one red bicycle, the on-hand quantity decreases by one instantly. This allows the business to see, without walking to the warehouse, exactly how many they have left.
Then there is ‘warehouse location’. A warehouse is not just one big room. It has different zones: a receiving dock, a bulk storage area, a picking area, and a shipping dock. Within each zone, there are shelves, bins, or pallet positions. Each location has a unique code, like ‘A-01-03’ (aisle A, shelf 1, position 3). When a worker puts away a box of items, they record which location they stored it in. This enables the system to tell a picker exactly where to walk to find the item later.
The ‘inventory status’ tells the system whether stock is available, reserved, damaged, or quarantined. For example, if a pallet of goods arrives with a damaged box, the worker can mark it as ‘quarantined’ in the system. That stock will then not be available to sell until someone inspects and clears it.
A vital feature is ‘inventory posting’, which links the physical movement of goods to financial accounts. When you receive inventory, the system automatically increases the value of your stock asset on the balance sheet. When you sell it, it decreases that asset and records the cost of goods sold. This ensures the company’s financial statements are always accurate.
Finally, ‘reorder point’ and ‘safety stock’ are automatic replenishment rules. A business can set a minimum quantity for each item, known as the reorder point. If the on-hand inventory drops below that number, the system can automatically generate a purchase order or a transfer request from another warehouse. Safety stock is an extra buffer held above expected demand to protect against unexpected spikes in sales or supplier delays.
In summary, inventory management and warehousing in Dynamics 365 Supply Chain Management provide a single source of truth for every physical item a company owns. They replace guesswork and paper trails with real-time, accurate data that helps the business plan purchases, fulfil orders faster, and avoid costly stockouts or overstocking.
Receiving
Goods arrive from a supplier and are scanned into the system using a handheld device. The system records the item number, quantity, and any damage. This step increases on-hand inventory and creates a location for the goods.
Put-away
The worker moves the goods from the receiving dock to a storage location. The system suggests the best location based on rules (e.g., fast-moving items near packing, heavy items on lower shelves). The worker scans the location to confirm.
Picking
When a customer order comes in, the system generates a pick instruction. The worker walks to the specified location, scans the item, and removes the correct quantity. The system reduces on-hand inventory at that location.
Packing
Picked items are brought to a packing station. The worker places them into packaging, adds a shipping label, and scans the completed order. The system updates the order status to 'packed' and can print a packing slip.
Shipping
The packed order is loaded onto a delivery vehicle. The worker confirms shipment in the system, which reduces on-hand inventory and posts the financial transaction (cost of goods sold) to the general ledger.
Cycle Counting
A portion of the warehouse is randomly selected for auditing. The worker physically counts items at specific locations and enters the count into the system. The system flags any discrepancies and adjusts the inventory records.
Imagine you work as an inventory clerk for a mid-sized company that sells office furniture online. You have one main warehouse in Birmingham and a smaller one in Manchester. Your job is to make sure that when a customer in London orders a desk, that desk is in stock and the system knows exactly where to find it.
Your day starts when a delivery truck arrives at the main warehouse with 50 desks from your supplier. You use a handheld scanner to scan each desk’s barcode, which corresponds to its item number in Dynamics 365. The system shows you have received the order. You then need to put these desks into storage. The system, using a feature called ‘location directive’, suggests the best storage location based on size and how often the item is picked. It directs you to put the first 20 desks in a high-bay location ‘H-10-01’ and the remaining 30 in a nearby bulk location ‘B-22-05’. You scan each location as you put away the desks, and the system updates the on-hand quantity and the location.
Meanwhile, a customer places an order for three desks. The system automatically checks on-hand inventory. It sees there are 50 desks across two locations. It then creates a ‘picking work’ instruction for a warehouse picker. The instruction says: ‘Go to location H-10-01, pick 3 desks.’ The picker scans the location, scans the item, scans the quantity picked, and moves the desks to the shipping area. The on-hand count for H-10-01 drops from 20 to 17. The system then updates the customer order status to ‘picked’.
Later in the day, you run a report called ‘inventory turnover’. This report shows how quickly stock is being sold. You notice that a certain model of chair has been sitting in the warehouse for 200 days without a single sale. You decide to mark it for a discount sale in the system. When the discount is applied, Dynamics 365 adjusts the value of that inventory in the financial records.
You also check the ‘reorder point’ for a popular desk lamp. The system shows that on-hand quantity has dropped to 15 units, which is below its reorder point of 20. The system has already logged a suggestion to purchase 100 more. You review it, approve it, and the purchase order is sent automatically to your supplier.
Finally, at the end of the month, your manager asks for a ‘cycle count’ of a small section of the warehouse. Instead of shutting down the whole warehouse for a full physical inventory, you use Dynamics 365 to pick a few locations. You go to those locations, physically count the items, and enter the counts into the system. If there is a difference between the system count and your physical count, the system logs a discrepancy and creates an adjustment. This keeps inventory records accurate without a massive manual effort.
The MB-920 exam expects you to understand the distinction between inventory management and warehousing as separate but related capabilities. They love testing whether you know what happens at each step of the inventory process and which Dynamics 365 module or feature is used for which purpose.
Here are the specific concepts the exam tests. - On-hand inventory: You need to know that this represents the physical quantity of stock available at a warehouse. A common trap question says ‘available on-hand inventory’ includes items that are reserved but not yet picked. The correct answer is that on-hand inventory is the total physical quantity, but ‘available’ on-hand excludes items already reserved for other orders. - Inventory status: The exam asks what statuses exist (e.g., available, sold, damaged, quarantined). A trap: they might claim that damaged stock is still counted in on-hand available. It is not — damaging stock moves it to a non-available status. - Warehouse location: They will ask what a location code identifies. The answer: a specific bin, shelf, or pallet position. They may try to trick you by saying it identifies the entire warehouse. - Picking and packing: The exam tests the difference between ‘picking’ (selecting items from storage) and ‘packing’ (putting them into packaging for shipment). They might combine these into one step — do not fall for it. - Reorder point and safety stock: Know that a reorder point triggers a purchase when stock falls below a threshold. Safety stock is extra inventory held to protect against variability. A trap: they might say safety stock is the same as the reorder point. It is not. - Cycle counting: The exam tests that cycle counting is a method of auditing inventory without a full physical count. A trap: they may say cycle counting requires shutting down the warehouse. It does not. - Item number and product dimensions: The exam can ask about how items are uniquely identified. They might test that a product can have dimensions like colour, size, or configuration. Each combination of dimensions can have its own item number or its own on-hand record. - Inventory posting: Understand that every inventory movement (receive, transfer, sell) has a financial impact that posts to the general ledger. The exam might ask which accounts are affected — typically inventory asset, cost of goods sold, and revenue.
When you see a question about inventory management in MB-920, look for keywords like ‘on-hand’, ‘location’, ‘reorder’, ‘safety stock’, and ‘cycle count’. The correct answer is almost always the one that keeps the system in real-time sync with physical reality. Wrong answers often suggest manual workarounds that the software eliminates.
Inventory management in Dynamics 365 tracks what you have, how much, and where it is stored in real time.
Warehousing in Dynamics 365 controls the physical processes of receiving, putting away, picking, packing, and shipping goods.
Every item in the system has a unique item number that links inventory records to warehouse locations and financial accounts.
On-hand inventory is the total physical quantity; available on-hand excludes items already reserved for other orders.
Cycle counting allows continuous inventory audits without shutting down the warehouse, unlike a full physical count.
Safety stock is extra inventory held to protect against demand spikes, while the reorder point triggers replenishment when stock gets low.
Inventory posting automatically updates the general ledger, keeping financial records accurate with every stock movement.
Warehouse locations have unique codes like 'A-01-03' that tell pickers exactly where to find items.
These come up on the exam all the time. Here's how to tell them apart.
Inventory Management
Tracks quantities and values across all locations
Answers 'what, how much, and where'
Focuses on financial and planning aspects
Warehousing
Manages physical movement within a single facility
Answers 'how to receive, put away, pick, pack, ship'
Focuses on operational and logistics processes
On-hand Inventory
Total physical quantity in the warehouse
Includes items reserved for other orders
Not directly available for new sales
Available On-hand Inventory
On-hand minus reserved quantities
Does not include reserved items
Represents what is genuinely ready to sell
Reorder Point
A predefined threshold that triggers replenishment
Based on historical demand and lead time
When on-hand drops below it, a purchase is suggested
Safety Stock
An extra buffer quantity held above expected demand
Protects against variability in demand or supply
Does not trigger orders by itself
Cycle Counting
Counts a small portion of the warehouse at a time
Can be done without stopping operations
Happens on a regular schedule (e.g., daily)
Full Physical Inventory
Counts everything at once
Often requires the warehouse to be closed
Happens once or twice per year
Mistake
Inventory management and warehousing are the same thing in Dynamics 365.
Correct
Inventory management tracks quantities and values across locations. Warehousing handles the physical movement and storage of items. They are separate capabilities in the same module.
Beginners see the two words used together and assume they are synonyms. The exam explicitly tests their differences.
Mistake
The on-hand inventory number always equals the number of items available to sell.
Correct
On-hand inventory is the total physical count. Available on-hand subtracts items already reserved for other orders. Reserved items are still physically there but not sellable.
People think 'on-hand' means 'ready for sale'. The system tracks both a gross and a net figure, which confuses those who have never used an ERP system.
Mistake
Cycle counting is the same as a full physical inventory count.
Correct
Cycle counting is an ongoing, incremental audit of a subset of inventory locations. A full physical count counts everything at once, often requiring a warehouse shutdown.
The word 'count' makes people think they are the same. Cycle counting is a key exam point because it sounds similar but is fundamentally different.
Mistake
Safety stock and reorder point are the same thing.
Correct
The reorder point is the trigger level that initiates a purchase. Safety stock is a buffer quantity kept above expected demand, not a trigger. They work together but serve different purposes.
Both relate to preventing stockouts, so beginners merge them into one concept. The exam uses them as separate test items.
Mistake
Inventory status only affects whether an item can be sold.
Correct
Inventory status also affects whether an item can be reserved, moved, or included in reports. A quarantined item cannot be moved to picking or shipped until its status changes.
Beginners focus only on sales availability and miss the other operational restrictions that statuses impose.
Reveal each answer, then mark whether you got it right. Score 60%+ to unlock the next chapter.
Inventory management tracks the quantity, value, and status of items across all locations. Warehousing handles the physical movement of those items within a specific warehouse, like receiving, picking, and shipping.
Every time stock is received, moved, picked, or shipped, a transaction updates the on-hand inventory count. The system uses barcode scanners or manual entries to keep the digital record matching the physical stock.
A warehouse location code is a unique identifier for a specific storage spot, like a shelf, bin, or pallet position. It tells workers exactly where an item is stored, making picking and put-away faster.
Yes. You can set a reorder point for each item. If the on-hand quantity falls below that point, the system can automatically generate a purchase order to replenish the stock.
Safety stock is extra inventory you keep above expected demand to protect against sales spikes or supplier delays. It acts as a buffer so you do not run out of stock unexpectedly.
Yes. Cycle counting is a built-in feature that lets you audit a subset of inventory locations regularly instead of doing one big annual count. It helps keep inventory records accurate without disrupting warehouse operations.
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