Shortage Management

General

A shortage occurs when the ordered quantity of a product cannot be delivered. This is generally linked to poor anticipation of supply needs.

This results in potential customer dissatisfaction and in certain cases may be subject to compensation. It is therefore important for a supplier or customer to be able to monitor their shortages as best as possible (“Shortage rate” performance indicator).

The goal of the shortage management functionality is to allow complete recording of the quantities originally ordered. In standard Dynamics 365 Business Central , an order can only be closed if the ordered quantity is completely delivered.

In the event that a shortage occurs (the ordered quantity cannot be honored) if the user wishes to close his order then he must adjust the quantity ordered with the quantity actually delivered, thus losing all traceability of the ordered history.

In order to preserve these quantities originally ordered, we have added fields for storing the quantities initially ordered on purchase/sales orders, on purchase/sales invoices, as well as on receipt/shipment documents and all associated archived documents (orders archived, invoices recorded).

Setup

The setup of shortage management can be done at three levels.

1. At the sales module level (Sales and Receivable page for sales module, Purchase and Payables page for the purchasing module).
2. At the customer level (for purchases at the supplier level).
3. At the ship-to address level (no equivalent on the purchasing part). When two settings are contradictory, it is the most “fine” level which wins (so Recipient Address>Customer>Sales & Receivables settings).

There are three ways of managing shortages,

• Standard mode: This is the standard management mode of Business Central, without automated management of shortages. The user will have to manually modify update the quantity if they wish (the quantity initially ordered is not kept in the specific field.)
• Change order quantity mode: In this mode the quantity ordered is automatically adjusted when a shortage is identified (when we validate a shipment or receipt with a shortage.) The quantity initially ordered is also kept in a specific field. This allows you to quickly close the order as the shortage is identified.
• Manual Adjustment mode: Allows users to manually validate and adjust inventory and warehouse document lines for shortages. The quantity is updated to reflect the actual shipped or received amount, and any deviation is tracked.

Note that when you configure the outage management mode you will also find a fourth possible option. This option called Default is to be used only on the customer/vendor or ship-to address level. If you wish to define a general setting and only manage exceptions. It is possible to define a management mode Standard, Change Order Quantity or Manual Adjustment in the configuration of the sales or purchases module. Newly created customers/vendors/ship-to addresses systematically inherit the Default mode referring to the “higher” setting. This allows you to adjust only the cases of customers/ship-to addresses that need to operate in the other mode.

The choice of management mode is made in the Shortage management method field.

This field is available on the following pages:

Limitations

• Return Orders (Sales/Purchase Return Orders) are not supported for shortage management. All returns will be handled with standard behavior.

• Lines with negative quantity are considered standard and not supported by shortage management.

Change Order Quantity

When the Change Order Quantity method is configured on the customer, Business Essentials adjusts the sales process to reflect real delivery outcomes while preserving traceability.

In this mode, when a sales order is partially shipped, the system automatically updates the ordered quantity to match what has actually been delivered. This ensures that the order remains aligned with the operational reality without requiring manual corrections.

At the same time, the system preserves the original commitment by storing the Initial Order Quantity on the sales line. This provides full visibility over what was initially agreed with the customer versus what was ultimately delivered.

This distinction is maintained throughout the process:

• On the sales document, the adjusted quantity reflects what remains relevant for processing.
• In the Sales Lines, both values are visible:
  • Initial Order Quantity (original commitment)
  • Ordered Quantity (adjusted value)
• When the document is archived, both values are retained, ensuring historical traceability.
• When a sales invoice is posted, the same information is carried forward, providing consistency between operational and financial documents.

This approach allows companies to adapt dynamically to partial deliveries while still preserving a clear audit trail of the original demand.

Complete Shortages

A complete shortage occurs when it is not possible to fulfill any part of a customer order. In these scenarios, Business Essentials provides a mechanism to capture the shortage even when no shipment or invoicing takes place.

When using the Change Order Quantity method, if an order cannot be fulfilled, the user can delete the sales order. During this action, the system prompts the user to confirm whether the shortage should be recorded.

If confirmed:

• The order is archived instead of being fully lost
• The original ordered quantity is preserved in the archive
• The shortage is recorded for future analysis

This functionality ensures that even unfulfilled demand is not lost, allowing companies to:

• Track missed sales opportunities
• Analyze customer service levels
• Improve planning and supply processes

Manual Adjustment

The Manual Adjustment method provides granular control over shortage handling, allowing users to manually validate and adjust order lines for shortages. This method is available for Sales Orders, Purchase Orders, Inventory Documents, and Warehouse Documents.

Posting from Orders

When the Shortage Management Method is set to Manual Adjustment on a Sales or Purchase Order the system will have the same behavior as Change Order Quantity Method.

Posting from Inventory Documents

When posting from Inventory Pick or Inventory Put-away documents with Manual Adjustment:

• Completed Field: A Boolean field Completed is available and editable for each line. When checked, the line is considered finalized for shortage management.

• Quantity Adjustment: If Completed = True, the Quantity on the source order line is updated to the sum of the quantities posted for that line.

• Deviation Tracking: Quantity Deviation = Initial Order Quantity − Quantity

• Item Tracking Lines: Tracking lines are updated to reflect the actual inventory activity (Lot No., Serial No., Package No.).

• Total Shortage Handling: If a line is posted with Quantity to Handle = 0 and Completed = True, the line is considered completed and can be deleted after posting. The Quantity on the source document is set to 0, and Item Tracking Lines are deleted.

  • Warning Message: “There are some lines with total shortage. Do you want these lines to be registered as shortages?"
  • Error Handling: If a user tries to update an order line (purchase or sales) with total shortage, the system displays an error to avoid losing the tracking of the total shortage.

Posting from Warehouse Documents

When posting from Warehouse Shipment or Warehouse Receipt documents with Manual Adjustment:

• Completed Field: The Completed field is visible and editable for each line linked to a Sales or Purchase Order.
• Quantity Adjustment: If Completed = True, the Quantity on the source order line is updated to the actual shipped/received quantity from the warehouse document line.
• Deviation Tracking: “Quantity Deviation” = “Initial Order Quantity” - “Quantity”
• Item Tracking Lines: Tracking lines are updated to reflect the actual warehouse activity (Lot No., Serial No., Package No.).
• Reservation Entries: Reservation entries are updated to match the actual quantity shipped/received.
• Total Shortage Handling: If a line is posted with Quantity to Handle = 0 and Completed = True, the warehouse document is considered completed and can be deleted after posting. The Quantity on the source document is set to 0, and Item Tracking Lines are deleted.
  • Warning Message: “There are some lines with total shortage. Do you want these lines to be registered as shortages?"
  • Error Handling: If a user tries to update an order line (purchase or sales) with total shortage, the system displays an error to avoid losing the tracking of the total shortage.
• Warehouse Pick: The Completed field is not present on Warehouse Pick documents. Completion is managed directly on the Warehouse Shipment.

Drop Shipment

Business Essentials introduces a dedicated configuration field — Default Policy in Drop Shipment — to handle scenarios where the Shortage Management Method differs between sales and purchase documents.

This setting ensures consistency during drop shipment processes by defining which document (Sales or Purchase) drives the shortage management behavior.

How It Works

In drop shipment processes, it is common for:

• The customer (Sales Order) to use one shortage management method
• The vendor (Purchase Order) to use another

This configuration allows you to decide which rule should be enforced across both documents once the process progresses.

Example

• Default Policy in Drop Shipment = Sales Order
• Customer: Shortage Method = Change Order Quantity
• Vendor: Shortage Method = Standard

When documents are created:

• The Sales Order inherits: Change Order Quantity
• The Purchase Order initially inherits: Standard

However, when the Purchase Order (Drop Shipment) is posted:

• The system aligns both documents
• The Sales Order and Purchase Order will both use: Change Order Quantity