For wholesale and distribution businesses, the ability to ship on time while keeping inventory lean is a constant balancing act. Stockouts lead to backorders and unhappy customers, while excess inventory ties up cash and erodes margins. The solution lies in smarter planning, not just bigger warehouses.
Microsoft Dynamics 365 Business Central provides distributors with the tools to move from reactive replenishment to a demand-driven model. By leveraging planning parameters, safety stock and capable-to-promise functionality, businesses can reduce backorders, improve service levels and free up working capital.
Why Backorders Hurt More Than You Think
Backorders don’t just delay shipments; they damage customer trust and increase operational costs. According to Gartner, 61% of B2B buyers will switch suppliers after two late deliveries. For distributors, this means lost revenue and strained relationships.
Excess inventory isn’t the answer either. Holding too much stock ties up cash that could be invested elsewhere. Forrester reports that businesses optimising inventory through advanced planning can reduce carrying costs by up to 15% while improving fulfilment rates.
The Demand‑Driven Approach in Business Central
Business Central helps distributors replace guesswork with data-driven planning. Here’s how:
1. Planning Parameters That Work for You
Planning parameters in Business Central allow you to define reorder points, lead times and lot sizes based on actual demand patterns. Instead of relying on static rules, you can configure replenishment to respond dynamically to sales trends and seasonality. This ensures stock levels are aligned with real-world demand, not outdated assumptions.
2. Safety Stock for Service Assurance
Safety stock acts as a buffer against variability in demand or supply. Business Central calculates safety stock based on historical consumption and lead time, helping you maintain service levels without overstocking. By setting safety stock intelligently, you can absorb unexpected spikes in demand without resorting to costly expedited shipments.
3. Capable‑to‑Promise for Realistic Commitments
Capable-to-promise (CTP) functionality in Business Central gives your sales team accurate delivery dates based on current inventory and production capacity. Instead of making promises you can’t keep, CTP ensures commitments are realistic and achievable. This transparency reduces backorders and builds customer confidence.
Practical Steps to Reduce Backorders and Free Cash
Moving to a demand-driven replenishment model isn’t just about technology; it’s about process. Here’s a practical roadmap:
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Analyse Demand Patterns: Use Business Central’s forecasting tools to identify trends and seasonality. This forms the basis for accurate planning parameters.
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Review Lead Times: Work with suppliers to validate lead times and update them in the system. Accurate lead times are critical for reliable replenishment.
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Set Safety Stock Strategically: Avoid blanket safety stock levels. Instead, calculate buffers based on item criticality and demand variability.
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Enable CTP in Sales Orders: Train your sales team to use capable-to-promise dates when confirming orders. This prevents unrealistic delivery promises.
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Monitor KPIs: Track metrics such as backorder rate, inventory turnover and service level. Continuous improvement is key to sustaining results.
The Payoff: Better Service, Lower Inventory
By combining planning parameters, safety stock and capable-to-promise, distributors can achieve:
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Reduced Backorders: Fewer missed shipments mean happier customers and stronger relationships.
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Improved Cash Flow: Lower inventory levels free up working capital for growth initiatives.
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Higher Service Levels: Accurate delivery commitments and reliable fulfilment enhance customer trust.
As Microsoft notes, “Business Central enables organisations to optimise supply chain performance through intelligent planning and real-time visibility.” For wholesale and distribution businesses, this means turning inventory from a liability into a competitive advantage.
Ready to Transform Your Inventory Strategy?
If backorders and excess stock are holding your business back, it’s time to explore demand-driven replenishment in Business Central. Start by reviewing your planning parameters and safety stock settings, and unlock the power of capable-to-promise for accurate delivery commitments.