How do manufacturing companies keep track of raw materials, recipes, and production schedules without losing their minds? In the real world, a factory that builds car engines has thousands of parts coming from dozens of suppliers, and it needs to know exactly what is being used, what is being built, and what is being shipped. This topic matters for the MB-920 exam because it tests your ability to describe how Microsoft Dynamics 365 Supply Chain Management handles these exact problems: managing materials, controlling production, and enabling companies to manufacture products efficiently.
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A simple way to picture Production and Manufacturing
First, a bakery gets an order for 500 birthday cakes, which then forces them to figure out every ingredient and step needed to deliver those cakes on time. This is exactly how production planning works in a manufacturing system: the order kicks off the entire process.
Let's say you and a friend decide to run a cake factory. Before you can bake a single cake, you need a recipe. In manufacturing, this recipe is called a Bill of Materials (BOM). It lists every single ingredient: flour, eggs, sugar, butter, and the exact amounts. Without a BOM, you would just guess how much flour to buy, and you would end up with too much or too little.
Once you have the recipe, you need a plan for how to actually make the cakes. This is the production order. It tells you how many cakes to bake this week and what machines to use. Your factory has two big mixers and two ovens. The production order schedules the mixer for 2 hours and the oven for 1 hour. If you tried to bake 100 cakes without this schedule, your mixer would be idle while the oven was overloaded.
Finally, as you bake, you track what is actually happening. Did you use 10% more sugar than the recipe said? The system records this as a real-time consumption update. This helps you adjust future purchases and spot waste, just like you would notice if your friend was eating the cake batter before it got baked.
Let us start with the big picture. Manufacturing is the process of turning raw materials into finished goods. In a small shop, a person can keep track of everything in their head. But in a modern factory with thousands of products, you need a computer system to manage the complexity. This is where Dynamics 365 Supply Chain Management comes in. It is a piece of software, often called an Enterprise Resource Planning (ERP) system, that helps companies plan, execute, and control their entire production process.
The first key concept is the Bill of Materials (BOM). Think of it as the master ingredient list for a product. If you are making a chair, the BOM lists the wood, the screws, the glue, and the fabric. Each item on the BOM is a part or a raw material. The BOM also tells you how many of each part you need. For the chair, you might need four screws. The BOM is stored in Dynamics 365 and it forms the foundation of any production. Without a BOM, you cannot accurately order materials or calculate the cost of making the product.
The second key concept is the Route. A route defines the sequence of steps to manufacture a product. The route for the chair might include: cut the wood, sand the wood, assemble the frame, attach the fabric, and package the chair. Each step in the route is called an operation. Each operation can be assigned to a specific work centre, such as a sawing machine or a packaging station. The route also tells you how long each operation should take. This is called the run time. The route and the BOM together tell you everything you need to know: what to use and how to use it.
Now, how does a company actually start making something? This is where Production Orders come in. A production order is an instruction to manufacture a specific quantity of a specific item. It is created in Dynamics 365. The production order pulls the BOM and the route to figure out what materials are needed and what steps to follow. For example, if a company needs 200 chairs, it creates a production order for 200 chairs. The system then calculates that they need 800 screws, 200 square metres of wood, and so on. It also schedules the work on the factory floor, telling people when to cut wood and when to assemble.
A crucial part of this process is material consumption. When a worker goes to the warehouse to get the wood for the chairs, they record this transaction in Dynamics 365. This is called picking. The system then reserves that wood for that specific production order. As the worker uses the material, they report it back to the system. This keeps the inventory accurate. Without this, the company would think they have 1000 units of wood in stock when really they only have 800.
Another important capability is capacity planning. A work centre, like a cutting machine, can only work for a certain number of hours per day. Capacity planning makes sure you do not schedule more work than your machines can handle. Dynamics 365 can run a calculation called finite capacity scheduling. This means it only schedules a production order if there is enough time available on the machines. If the cutting machine is already fully booked for Tuesday, the system will automatically push the production order to Wednesday.
Finally, there is the concept of Quality Control. In manufacturing, you cannot just make products without checking if they are good. Dynamics 365 allows you to create quality orders. For example, every time the cutting machine starts a new batch of wood, a quality order can be automatically created. A worker then checks the wood against a set of measurements, and the result is recorded in the system. If the wood does not meet quality standards, the system can block it from being used and trigger a reorder. This prevents bad products from reaching customers.
All of these pieces work together. The BOM and Route define the product and process. The production order executes the plan. Material consumption keeps inventory accurate. Capacity planning ensures the factory does not get overbooked. And quality control makes sure the output is acceptable. Manufacturing in Dynamics 365 replaces manual spreadsheets, guesswork, and paper-based records with an automated, integrated system that gives real-time visibility.
Define the Product Structure
Create a Bill of Materials (BOM) for the product you want to manufacture. This is the very first step because without a BOM, the system cannot know what materials are needed. You list every part and its quantity.
Define the Production Process
Create a Route for the product. This step specifies the sequence of operations (what to do first, second, third) and assigns each operation to a work centre (e.g., cutting machine, assembly bench). This tells the system how the product is made.
Create a Production Order
Generate a production order for the desired quantity. This step officially authorises manufacturing. The system pulls the BOM and Route to calculate materials needed and to schedule the work on the factory floor.
Pick and Consume Materials
Workers go to the warehouse and pick the raw materials listed on the BOM for that production order. They record this picking in Dynamics 365, which reduces the inventory quantity and reserves the material for the order.
Report Progress and Completion
As each operation in the route is finished, workers report the completion in the system. When all operations are done and the final product is made, they report the final quantity as 'finished'. This updates inventory with the new finished goods.
Close the Production Order
Once the production order is complete and all materials have been consumed or returned, the order is closed in the system. This step finalises the costing, calculates the actual cost versus planned cost, and marks the order as ended.
Imagine you are working as an IT consultant for a small manufacturer called 'ChairCo'. They make custom office chairs. Before Dynamics 365, ChairCo used a paper system. The owner would write down an order, walk to the warehouse, count wood screws by hand, and give a scrap of paper to the factory workers. They constantly ran out of materials or built too many chairs of the wrong colour. Their inventory records were always wrong. They had no idea if they were actually making a profit on each chair.
You are brought in to implement Dynamics 365 Supply Chain Management. Here is what you actually do step by step:
First, you sit down with the production manager to build the Bill of Materials for their best-selling chair. You create a list in Dynamics 365: - 4 wooden legs (item L004) - 1 seat cushion (item C002) - 16 screws (item S005) - 1 backrest (item B001)
You then define the route. You create three operations:
OP01: Cut and sand the wood (work centre: Sawing Station, run time: 30 minutes per chair)
OP02: Assemble the frame and attach cushion (work centre: Assembly Bench, run time: 45 minutes per chair)
OP03: Package the chair (work centre: Packing Line, run time: 10 minutes per chair)
Next, you configure the capacity for each work centre. The Sawing Station can run 8 hours per day. You set this in the system. Now, when a salesperson enters a customer order for 100 chairs due next Friday, the system automatically calculates how much wood and screws are needed, checks if enough inventory exists, and then generates a production order. The production order says: start cutting wood on Monday morning at 8:00 AM, because the Sawing Station is available.
A worker on the shop floor logs into a tablet computer. The tablet shows the production order and the list of materials to pick from the warehouse. The worker walks to the warehouse, scans a barcode on the wood, and confirms they picked 400 units. This updates the inventory in real time: the system now shows 400 units of wood are consumed by this order. When the worker finishes cutting the wood, they tap 'Report as finished' on the tablet. The system then knows the wood is ready for the next step.
As a consultant, you also help them set up quality control. You create a quality order that triggers automatically whenever a new batch of seat cushions arrives from the supplier. The inspection checks for tears and colour mismatch. If a batch fails, the system automatically creates a purchase order to reorder from a different supplier. This means the production line never gets halted for bad parts.
Finally, you teach the production manager how to run the 'Production Status' dashboard. This dashboard shows all the open production orders, which ones are on time, which are late, and what materials are running low. The manager can now spot a problem before it becomes a crisis. Instead of walking around the factory shouting, they look at a screen and make decisions. This is the real power of the system: replacing chaos with structured control.
The MB-920 exam on 'Production and Manufacturing' is basically testing your ability to match concepts to their definitions. You do not need to know how to configure Dynamics 365. You need to recognise what each term means and where it fits. Here is exactly what they test.
They love to ask about the Bill of Materials (BOM). Expect a question like: 'Which component defines the list of raw materials needed to manufacture a product?' The correct answer is BOM. The trap answer is 'Route' because new learners confuse what steps you take (Route) with what materials you use (BOM). Memorise that distinction.
Another common question is about production orders. They might ask: 'What is the purpose of a production order in Dynamics 365 Supply Chain Management?' The correct answer is that it authorises the manufacturing of a specific quantity of a product and triggers the need for materials and capacity. They sometimes try to trick you by saying it is the same as a sales order. It is not. A sales order is a request from a customer. A production order is an internal instruction to make something.
They test the concept of routes. A typical question: 'What does a route define in production?' Answer: The sequence of operations and the work centres used. The trap is that test-takers confuse it with the BOM. The BOM is about materials, the route is about process steps.
Capacity planning is another exam favourite. They might ask: 'What is finite capacity scheduling?' Answer: A scheduling method that considers the available capacity of work centres and only schedules production when capacity is free. The trap is that they offer 'infinite capacity scheduling' which assumes you can always add more work regardless of machine availability. You need to know that finite capacity is the real-world method.
They also test quality management. Expect a question like: 'What is the purpose of a quality order?' Answer: To inspect materials or products against defined criteria to ensure they meet quality standards. The trap is that some candidates think a quality order is the same as a production order. They are separate. A quality order is for inspection, not for manufacturing.
Finally, they test the relationship between production and inventory. A question might be: 'When a worker picks materials from the warehouse for a production order, what happens to the inventory quantity?' Answer: It decreases because the material is consumed. The trap is the idea that inventory remains unchanged until the product is finished. That is wrong. Materials are reserved and consumed immediately upon picking.
Key exam topics to memorise:
BOM = list of materials
Route = list of operations
Production Order = instruction to make items
Capacity Planning = checking if machines have time
Quality Order = inspection step
Material Consumption = reducing inventory when parts are used
The Bill of Materials (BOM) is the master list of all raw materials, components, and quantities required to manufacture a single unit of a product.
A Route defines the exact sequence of operations, the work centres used, and the time required for each step in the production process.
A Production Order is the official instruction to start manufacturing a specific quantity of a product and it triggers material consumption and capacity planning.
Material consumption is recorded when workers pick raw materials from inventory, which reduces on-hand stock in real time.
Finite capacity scheduling ensures production orders are only scheduled when machines and work centres have available capacity, preventing overload.
Quality orders are separate from production orders and are used to inspect materials or finished goods against defined quality criteria.
Production can be triggered by sales orders, demand forecasts, or internal replenishment rules, not just direct customer requests.
The combination of a BOM and a Route provides the complete instruction set for manufacturing a product in Dynamics 365 Supply Chain Management.
These come up on the exam all the time. Here's how to tell them apart.
Bill of Materials (BOM)
Defines the list of raw materials and components needed.
Focuses on 'what' is required to build the product.
Used for material planning, purchasing, and costing.
Contains item numbers, quantities, and units of measure.
Route
Defines the sequence of manufacturing operations.
Focuses on 'how' the product is built step by step.
Used for scheduling, capacity planning, and labour tracking.
Contains operation numbers, work centre assignments, and run times.
Production Order
An internal instruction to manufacture goods.
Creates demand for raw materials and capacity.
Results in finished goods added to inventory.
Is closed when manufacturing is complete and goods are reported finished.
Sales Order
An external request from a customer to buy goods.
Creates demand for finished goods from inventory or production.
Results in revenue when the order is invoiced and shipped.
Is closed when the customer pays the invoice.
Finite Capacity Scheduling
Considers the actual available time on work centres and machinery.
Only schedules production when capacity is free, preventing overload.
More realistic and accurate for actual factory conditions.
Used in Dynamics 365 to avoid late deliveries due to overbooking.
Infinite Capacity Scheduling
Assumes unlimited capacity is always available.
Schedules production without checking machine availability.
Simplistic and often leads to unrealistic delivery promises.
Not typically used in real-world Dynamics 365 implementations.
Material Consumption
Occurs when raw materials are picked from the warehouse for production.
Reduces the on-hand inventory quantity of the raw material.
Is recorded at the start or during the production process.
Affects the cost of the production order as direct material cost.
Finished Goods Reporting
Occurs when the completed product is reported as ready.
Increases the on-hand inventory quantity of the finished product.
Is recorded at the end of the production process.
Affects the valuation of inventory and cost of goods sold.
Mistake
A Bill of Materials (BOM) and a recipe are basically the same thing in manufacturing software.
Correct
In Dynamics 365, a BOM includes not just the ingredients but also the exact quantities, the unit of measure, and potentially the waste percentage, and it is used for costing, inventory planning, and procurement, not just cooking instructions.
People hear 'recipe' and think it is simple, but the BOM is a formal data structure with multiple fields and relationships that drive the entire ERP system, so beginners underestimate its complexity.
Mistake
Production orders are only created when a customer places a sales order.
Correct
Production orders can also be created based on demand forecasts, stock replenishment rules, or internal needs like building samples or replacement parts, not just direct customer orders.
Beginners assume manufacturing is always 'make to order', but many companies 'make to stock' or 'make to plan', so the exam tests that you know production can be triggered by various sources.
Mistake
The route and the BOM are the same concept because both describe how to make a product.
Correct
The BOM defines what materials are needed, while the route defines the sequence of steps and the work centres used. They are two separate and distinct components in Dynamics 365.
Both concepts involve 'production instructions', so it is easy to lump them together, but the exam frequently distinguishes them, so conflating them is a common error.
Mistake
If a quality order fails, the production order automatically stops and the materials are sent back to the supplier.
Correct
A failed quality order typically causes a non-conformance record and may block the material from being used, but it does not automatically stop production or return goods. The system requires manual action to handle the failure.
People assume quality control is a fully automated kill switch, but in practice and in the exam, it is a reporting and flagging system that triggers human decision-making, not instant shutdown.
Mistake
Capacity planning in Dynamics 365 can only be done manually by the production manager.
Correct
Dynamics 365 includes automatic finite capacity scheduling that considers work centre availability, tooling, and labour, and can reschedule production orders automatically to avoid overload.
Beginners think all scheduling is manual because they are used to spreadsheets, but ERP systems are built to automate this, and the exam tests that you know the software can handle it.
Reveal each answer, then mark whether you got it right. Score 60%+ to unlock the next chapter.
A Bill of Materials (BOM) lists the raw materials and components needed to make a product. A Route defines the sequence of manufacturing steps and the work centres used. They are two separate but complementary concepts.
Yes, in Dynamics 365 Supply Chain Management, you must create a production order to officially authorise and track the manufacturing of any item that has a BOM and Route. Without one, the system cannot manage material consumption or costing.
Yes, you can change the BOM, but it only affects new production orders or orders not yet started. Existing production orders that have already consumed materials will use the original BOM. Dynamics 365 handles this through versioning and effective dates.
If material runs out, the production order will be paused or delayed. The system will show a shortage alert, and you may need to create a purchase order to restock or manually allocate material from another order. Dynamics 365 helps by generating material shortage alerts.
Finite capacity scheduling means the system only plans production when there is enough time available on the machines and work centres. It does not assume you can add extra capacity, so it prevents overbooking and late deliveries.
No, a quality order is separate. It is created to inspect materials or finished products against quality standards. A production order is for making the product. They can be linked, but they serve different purposes.
You've finished Production and Manufacturing. Continue through the MB-920 study guide to build a complete picture of the exam.
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