This MB-920 practice question tests your understanding of describe the core capabilities of the finance and operations apps. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A company uses Dynamics 365 Supply Chain Management. They want to enable a vendor to manage their own inventory at the customer's site (consignment inventory). What process should they set up?
Vendor collaboration
Why wrong: Vendor collaboration allows vendors to view orders, not manage consignment.
Purchase order with drop shipment
Why wrong: Drop shipment is direct delivery, not consignment.
Consignment inventory
Consignment inventory allows vendor-owned stock at customer site.
Transfer order
Why wrong: Transfer orders move own inventory, not vendor-owned.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Consignment inventory
Consignment inventory in Dynamics 365 Supply Chain Management allows a vendor to own stock that is physically located at the customer's site. The customer only pays for the inventory when it is consumed or transferred to their ownership. Setting up the consignment inventory process enables the vendor to manage replenishment and visibility of their stock at the customer location through vendor collaboration features.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
Vendor collaboration
Why it's wrong here
Vendor collaboration allows vendors to view orders, not manage consignment.
Purchase order with drop shipment
Why it's wrong here
Drop shipment is direct delivery, not consignment.
Consignment inventory
Why this is correct
Consignment inventory allows vendor-owned stock at customer site.
Related concept
Read the scenario before looking for a memorised answer.
Transfer order
Why it's wrong here
Transfer orders move own inventory, not vendor-owned.
Common exam traps
The trap here is that candidates often confuse 'vendor collaboration' (a communication feature) with the actual consignment inventory process, or they mistakenly think a drop shipment or transfer order can achieve the same vendor-managed inventory at the customer site.
Detailed technical explanation
In Dynamics 365 Supply Chain Management, the consignment inventory process uses a specific inventory model where the vendor's stock is tracked in a 'Vendor-owned' inventory status at the customer's warehouse. When the customer consumes the inventory, a purchase order is automatically generated to transfer ownership and trigger payment. This process relies on the 'Consignment replenishment order' and 'Consignment replenishment journal' to manage the vendor's stock levels and consumption.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
A cloud solutions architect for a retail company is evaluating services for a new workload. The correct answer here reflects best practice for the specific scenario described — not a general cloud recommendation. Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option. Cloud exam questions reward reading the constraint carefully: the same technology can be right or wrong depending on the use case.
What to study next
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FAQ
Describe the core capabilities of the finance and operations apps — This question tests Describe the core capabilities of the finance and operations apps — Read the scenario before looking for a memorised answer..
The correct answer is: Consignment inventory — Consignment inventory in Dynamics 365 Supply Chain Management allows a vendor to own stock that is physically located at the customer's site. The customer only pays for the inventory when it is consumed or transferred to their ownership. Setting up the consignment inventory process enables the vendor to manage replenishment and visibility of their stock at the customer location through vendor collaboration features.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Read the scenario before looking for a memorised answer.
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Last reviewed: Jun 24, 2026
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