Quality management in Microsoft Dynamics 365 finance and operations: Part-2

Hi guys!!! In my last blog I discussed about the required setups for quality control process and explained a scenario where product passed the quality control process. You can read Part-1 here (LINK)

In this blog, I will explain the scenario when a product fails a quality control process and moves to quarantine warehouse for further inspection. I will also explain full blocking and per updated quantity scenarios for better understanding about which I mentioned in my previous blog.

In this scenario, I will take two products i.e., car battery of two different manufacturers. Product number are BT-0001 which is of Exide and BT-0002 of Amaron make. All the setups completed in previous blog will remain same and the few changes will be explained below.

I have created additional item sampling for 10% of the item received, which will be used for Amaron make product.

Test group is also created named as Amaron bat group, where item sampling 10% of the item received is mapped and acceptable quality level defined is 100 percent. You can also see another test group “Battery” created in previous blog is used for testing of product BT-0001 of Exide make.

Quality association completed in previous blog for the group battery (in which item BT-001 is added) is changed. Here, quality order will generate now “After the product receipt”, hence changes done for event type and execution. Event blocking is selected as “invoice” which means that invoice process cannot be completed until quality order is processed.

Quality association is created for product BT-0002.

In this setup you can see that quarantine warehouse is 18 for default main warehouse 11. It is mandatory to map a quarantine warehouse to proceed with quality order process when a product fails the testing. Further you can see default receipt and issue location is defined for quarantine warehouse 18.


You can see a purchase order is created where three items are added in the lines. BT-0001 and BT-0002 are the items for which quality parameters are already defined and purchase order is for 10 quantity each. However, item 1000 doesn’t have any quality parameter defined.

Product receipt is completed for all three items.

Since the setup is done to create quality order after the product receipt, you can see two quality orders are created for both the line items. This means that quality order will be generated for each line item added in the purchase order.

Also, you can observe that for item- 1000 there is no quality order created as no parameters/setup was completed for this item.

Further, you can see that based on item sampling quality order is created respectively for both the items i.e., BT-0001 and BT-0002.

Inventory Blocking: This is to be noted that as soon as quality order is generated, inventory is blocked for both the items which means that this inventory cannot be used/reserved until the quality order inspection is completed.

It can be observed that for item BT-0002 entire 10 quantity added in the purchase order is blocked, even though item sampling was 10 % of the item received. This is because full blocking was enabled in the item sampling, which means that until quality order of 1 quantity (10% of 10 quantity) is completed, entire 10 quantity cannot be used. Based on the business requirement, it is important to enable/disable full blocking.

Quality order processing: Based on the test defined for both the items, we can see that item BT-0001 has failed the test as acceptable level is 100 for all the tests. Item BT-0002 passed the quality order as result matches the test criteria.

Quarantine process: To close the quality order for item BT-0001, we need to validate it. Since, we know that item BT-0001 has failed the defined tests, it is required to move this stock to a separate location where this can be further inspected. This process of segregating stock from main warehouse inventory is called as quarantine.

As you can see item BT-0001 quality order is failed, a quarantine order is generated with number 000006. Further you can see under inventory transactions that how quarantine order is received in quarantine warehouse 18 at location A1-L1.

If you will look at on hand inventory for item BT-0001, 10 quantity is in quarantine warehouse 18 and this quantity is not available for use. Out of total 20 quantity for item BT-0001, only 10 quantities available in warehouse 11 can be used.

Based on product type and inspection, item can either be repaired to make it acceptable or it can be returned to vendor if not fit for use. As per agreement with vendor if permission is given then it can be directly scrapped from quarantine warehouse by using Scrap functionality.

For returning items to vendor, inventory must be first returned into default warehouse. You can define a designated location in the main default warehouse for this purpose.

In our scenario, lets assume that after the quarantine inspection items were repaired and deemed fit for use. Now to receive this inventory into main warehouse (11) we need to use item arrival journal. Click on Report as finished and then select the Item arrival journal (Warr) for all 10 quantities. Then click on End to close the quarantine order which will post the item arrival journal and inventory of 10 quantity will be received in warehouse 11 from quarantine warehouse 18.

Purchase order invoice: You can see the on-hand inventory for item BT-0001 shows now available physical as 20 in warehouse 11, since 10 quantities received through item arrival journal as explained above.

Now, we can process the purchase order invoice as quality order is closed for item BT-0001. You can see that invoice is successfully completed. However, it shows that quality order failed to meet the minimum requirements.

Here, the entire scenario is finished where we saw how quality order failed the test requirements and inventory was moved to quarantine warehouse for further inspection.

Per updated quantity scenario: I will quickly show how enabling/disabling per updated quantity tab in Item sampling setup impacts the quality orders.

As you can see, I have disabled per updated quantity for item sampling of 100%

Now let’s create a purchase order of 20 quantity for item BT-0001, assuming we have only received 10 quantities hence completing product receipt of partial 10 quantity.

Quality order is created for entire PO quantity of 20, though we physically received only 10 quantities.

Now let’s enable per updated quantity in item sampling of 100% item received.

Now, when a new purchase order of 50 quantity is created with a product receipt of partial quantity 25. Quality order is generated only for those 25 quantities which is 100% of product receipt quantity. This concludes that enabling per updated quantity makes system to understand that 100 percent (item sampling) is to be taken for only received quantity and not the entire purchase order quantity.

That’s it for this blog. Keep reading and sharing. Thank You!!!

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