Category: Business CentralRead time: 5 MinsPublished on: 20 Feb 2026

Business Central Warehouse Management Explained: Processes, Features, and Recent Updates

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When inventory accuracy declines and picking speeds stagnate, warehouse teams often resort to manual workarounds to sustain order fulfillment. These seemingly minor inefficiencies can rapidly escalate into delayed shipments, bloated inventory levels, and diminished customer satisfaction. By implementing the Warehouse Management capabilities within Microsoft Dynamics 365 Business Central, organizations can establish rigorous structure and control over the critical stages of receiving, storage, picking, and shipping.

What is Microsoft Dynamics 365 Business Central WMS?

Microsoft Dynamics 365 Business Central Warehouse Management System (WMS) is a cloud-based ERP warehouse module designed for small and mid-sized businesses that require bin-level control, directed put-away and pick, cross-docking, replenishment automation, and barcode-enabled execution.

Unlike basic inventory management, the WMS functionality enables structured warehouse execution with physical task validation before inventory and financial posting. This ensures operational accuracy, traceability, and financial integrity across inbound and outbound processes.

Read the full blog to understand how its processes, features, and recent updates help you improve inventory accuracy and scale warehouse operations with confidence.

1. What is Warehouse Management in Business Central?

Warehouse Management in Microsoft Dynamics 365 Business Central is a coordinated system of functions. These systems govern the process of receiving, storing, moving, picking, and shipping of inventory in specified warehouse areas. It builds upon simple inventory management by providing bins, zones, warehouse documents, and task-based workflows that reflect the actual warehouse activities. The module allows a variety of levels of complexity, including simple bin tracking to complex, directed put-away and pick processes. It enables businesses to design warehouse operations that match volume, layout, and operational maturity.

Technically, the warehouse module management in Business Central isolates the handling of warehouses and the posting of inventory. It allows the entire mechanism to be controlled with warehouse documenting, including receipts, put-aways, picks, movements, and shipments. This segregation makes sure that physical activities in the warehouse are validated prior to affecting inventory and financial records.

Is Business Central a Full Warehouse Management System?

Yes. Business Central supports both basic warehouse functionality and advanced warehouse management configuration.

Businesses can start with simple bin tracking and scale to directed put-away and pick, license plate management, AI-driven bin suggestions, multi-wave picking, and mobile WMS execution.

This flexibility makes it suitable for:

  • Manufacturing companies
  • Distribution businesses
  • Multi-location warehouses
  • Batch- and serial-controlled industries
  • Growing SMBs upgrading from basic inventory systems

2. Core Features of Business Central Warehouse Management

  1. Bin and Location Management

    Using locations, bins and bin content, The WMS module allows to control inventory location. The bins can be characterized by type, capacity and activities that are allowed to ensure that the items are stored in a logical manner and retrieved in an efficient manner. This structure promotes the appropriate visibility of the stock at the warehouse floor level and not just at the location level.

    Other capabilities include:

    • Types of bins include Pick, Put-away, Bulk, QC (Quality Check) and Shipping.
    • Item, variant, lot and serial tracking bin content validation.
    • Volume, weight or quantity bin capacity.
    • Bin blocking for cycle counting, QC holds or operation restrictions.
  2. Zones and Bin Ranking

    The operational logic is added to the warehouse layout by zones and bin ranking. Zones sort bins according to functional use, like receiving, storage or picking. Bin ranking sorts out the best bin to be used in both put-away and pick operations. This saves on traveling time and enhances picking efficiency, particularly in large volume warehouses.

    Other capabilities include:

    • Several zones within a location, e.g. Replenishment Zone, Fast Pick Zone.
    • Ranking rules which generate the shortest travel paths.
    • Zone FIFO or (First In, First Out), FEFO or (First Expired, First Out) and LIFO or (Last In, First Out) picking.
    • Temperature or hazard-specific storage zone support.
  3. Warehouse Documents and Activities

    The warehouse operations are implemented using special documents like warehouse receipts, put-aways, picks, movements and shipments. These documents decouple physical processing from inventory recording, and validation and control can be done before it affects the financial records. Warehouse activities direct the users on a step-by-step basis, which ensures consistency and minimizes the number of errors in executing the activities.

    Other technical characteristics include:

    • Auditability of posted and unposted warehouse records.
    • Adjustments, reclassification and counting of items in warehouses.
    • Partial receipts, partial picks and split shipments.
    • Consolidation of shipments of more than one sale.
  4. Directed Put-Away and Pick

    Directed put-away and pick recommends ideal bins automatically using set rules like bin capacity, item characteristics and zone priority. This does away with manual decision making when storing and picking of the goods, enhances better use of space and shortens the order fulfillment period.

    Additional capabilities include:

    • Class, unit of measure or zone item-based put-away templates.
    • Pick rules are used to take expiry dates into account to comply with FEFO.
    • Automatic replenishment upon low pick bins.
    • Restriction rules, e.g. hazmat separation, temperature requirements.
  5. Inventory Posting Control

    Warehouse Management separates warehouse management and inventory posting. The physical activities are done and confirmed, and only then is the inventory posted. This design upgrades the accuracy of data, avoids early inventory updates and enhances the auditability of the warehouse activities.

    Other features include:

    • Separate warehouse posting or item posting validation points.
    • Publishing history logs in favor of compliance and audits.
    • Negative inventory prevention by sequencing transactions.
    • Automatic variance and inventory adjustments.
  6. The Movement and Replenishment of Inventory

    The system assists internal warehouse movements to relocate inventory between bins and zones. Replenishment rules ensure that pick bins are automatically refilled from bulk storage when quantities fall below defined thresholds. This keeps picking continuously and prevents stockouts during order fulfillment.

    Other characteristics are:

    • Movement worksheets that are generated manually or by the system.
    • Restocking according to min or max quantities, reorder points or velocity.
    • Breakbulk and unit-of-measure conversions.
    • Serial and lot-controlled item movement tracking.
  7. Cross-Docking Support

    Cross-docking enables products received in the warehouse to be directly shipped to outbound products without the need to be stocked. It is applicable to fast-moving or make-to-order products, and it helps to minimize the order cycle time, storage expenses and the handling time.

    The other cross-docking features are:

    • Pick outbound and receipt incoming are automatically linked.
    • Sales, transfer, and production cross-docking support.
    • Decreasing warehouse touches and lead time.
    • Viewing of outstanding outbound demand during receiving.
  8. Serial and Lot Control and Item Tracking

    Warehouse Management is fully fledged in terms of tracking serial and lot numbers at a bin level. This provides full traceability during receiving, storage, picking, and shipping. Traceability is essential for regulated industries, perishable goods, and quality-controlled inventory.

    Other characteristics are:

    • Lot expiration date, best before date and manufacturing date.
    • Unit of measure package tracking of cases and pallets.
    • Controlled compliance of pharmaceuticals, food and chemicals.
    • Complete trace-forward and trace-back capabilities on transactions.
  9. Sales, Purchasing and Production

    Sales orders, purchase orders, production orders and transfer orders are natively integrated with warehouse processes. Supply and demand automatically drive inbound and outbound warehouse activities and align the warehouse execution and business transactions.

    Extended integration consists of:

    • Picking of production order components and finished goods put away.
    • Transfer order transmission and reception using warehouse documentation.
    • Receive purchase with ASN support of advanced shipment notices.
    • Third-party fulfillments drop-shipment compatibility.
  10. Roles and Permissions in Warehouses

    Role-based access will make sure that employees in the warehouse are only doing what they are supposed to do. The permissions may be set to decide who may receive, pick, post or modify the inventory. This is performed to enhance the governance of operations and minimize the risk of unauthorized activity.

    Additional capabilities include:

    • Place employees in certain locations or zones.
    • Access control on a device or scanner level.
    • Financial and operational segregation of duty.
    • Auditing and compliance of user actions.
Benefits of Using Business Central as Your Warehouse Management System

Implementing the advanced warehouse module within Business Central delivers measurable operational improvements:

  • 15–30% improvement in picking accuracy
  • Reduced travel time through optimized bin ranking and zone logic
  • Real-time stock visibility at bin and zone level
  • Lower inventory variances through controlled posting validation
  • Improved compliance for regulated industries
  • Reduced dependency on standalone third-party WMS systems

By embedding warehouse execution within the ERP system, businesses eliminate integration gaps and achieve end-to-end supply chain visibility. To fully realize these operational improvements, businesses often engage specialized Business Central consulting services to configure warehouse policies, zone logic, replenishment rules, and mobile execution workflows aligned with their industry requirements.

3. Warehouse Processes Explained

Here is a complete overview of how warehouse operations function from inbound receiving to outbound shipping with accuracy, control, and efficiency:

Step 1: Receiving

Receiving starts with the entry of goods into the company as inbound goods, production output, or even transfer orders. At this point, the quantities, item numbers, lot or serials, and documentation are checked against purchase or transfer orders. This is being done to ensure that the correct material has been provided in the right condition and in the right quantity. Receiving defines the initial control point of the warehouse flow.

This step helps in operational control, visibility, and accuracy in the following way:

  • Develop a formal supplier warehouse handoff.
  • Intercepts quantity and quality deviation right at the dock.
  • Linked to the feeds to put-away tasks and maintain physical processing and financial posting as separate processes.
Step 2: Put-Away

Put-away moves received goods from the dock to designated storage bins. Business Central has the capability of proposing optimal bins using rules founded on bin ranking, zone setup, capacity, and item characteristics. Put away places inventory into the warehouse framework, which is ready to be picked in the future but does not block the dock space.

Here is how this phase ensures functional storage and space utilization:

  • Receipts inbound are converted to bin-level inventory.
  • Impose bin regulations on temperature, hazard classification, or FEFO.
  • Enhances the better use of space and eliminates dock congestion.
Step 3: Internal Movements

Internal movements repackage inventory across bins, zones, or areas to facilitate space optimization, replenishment, or reorganization. Movements make no change in ownership or monetary value but keep operational integrity on the warehouse floor level.

Here is how this step supports fluid warehouse execution:

  • Replenishes fast pick zones that contain high velocity products.
  • Ensures the physical layout is in line with demand patterns.
  • Allows uninterrupted satisfaction without interruption of the flow inbound or outbound.
Step 4: Replenishment

Replenishment ensures that primary pick bins always contain enough stock to fulfill outbound demand. Business Central initiates bin replenishment using min/max policies, velocity-based policies, or demand-driven policies in such a way that there are no mid-pick shortages in warehouses.

Here is how this step sustains fulfillment efficiency:

  • Automatic stocking of pick bins by bulk storage.
  • Minimizes picker travel time, eliminates order interruptions.
  • Conforms warehouse micro-structure to sales and production needs.
Step 5: Picking

Picking is a process of accessing items that are stored to meet sales orders, production orders, or transfers. In complex settings, Business Central creates structured pick instructions that are aware of FEFO, expiry, capacity, or zone considerations.

Here is how this step drives outbound accuracy and efficiency:

  • Checks the retrieval of correct items, lots, and quantities.
  • Reduces the travelling time with sorted pick routes and priority zones.
  • Supports single order picking, batch picking, or wave-like execution.
Step 6: Packing and Staging

The selected products are sorted, checked, and packed at staging points and then shipped. Packaging, labeling, compliance, and transport readiness checks are enabled through staging.

This is how this step guarantees compliance in shipment and accuracy on customers:

  • Sorts by shipment, mode of transport, or customer.
  • Checks integrity prior to loading.
  • Aids in labeling, recording, and load sequencing.
Step 7: Shipping

Outbound goods are shipped, received by carriers, and the process of fulfillment is completed. Business Central updates the inventory, post financial, unless configured at shipping stage, and shipment data to sales or transfer modules.

Here is how this step closes the outbound process with financial and logistical integrity:

  • Checks that the records of physical goods and systems are equal.
  • Produces shipment confirmations and other documents.
  • Offers clean handoffs to the customers, carriers, or internal destinations.

Additional Warehouse Process Scenarios

Step 8: Production Component Picking

Picking of production components assists in manufacturing as it supplies raw materials and parts to the production orders on the shop floor. The components are selected from the storage bins and transported to the production consumption areas or work centers according to the production order requirements.

  • Ensures that work centers involved in production are given appropriate materials, units of measure, and lot or serial information.
  • Eliminates delays during production by synchronizing the pick time with production times.
  • Updates reserved quantities and inventory availability for accurate material planning.
Step 9: Production Output and Put-Away

Once manufacturing has been carried out, the finished or semi-finished products are registered as output and stored in storage bins. Business Central permits directed put-away rules to select locations automatically or manual bin assignment based on the maturity of the warehouse.

This step:

  • Converts the shop floor production to on-hand inventory at the appropriate bin and location.
  • Favors palletization, QC stage, or quarantine of inspected goods.
  • Make sure that completed items can be sold, transferred, or processed.

Return Logistics (RMA) and Reverse Warehouse Flow

Step 10: Customer Return Intake

Return orders or RMAs are taken as customer returns. Returned goods reach receiving docks where they are checked to establish whether they can be restocked, repaired, or scrapped.

This step maintains the integrity of the inventory and financial accuracy in the following ways:

  • Separate customers return into examination areas to avoid spoiled stock.
  • Captures give back reason codes, defect types, and disposition status.
  • Financial reconciliation is done by going back to the original sales documents.
Step 11: Inspection, Disposition, and Routing

Returned inventory is also inspected after being consumed to determine ultimate disposition. Products can be sent to QC, put away, repair, vendor return, or scrap.

Here is how this step enforces controlled return handling:

  • Makes use of quarantine or QC bins of non-conforming products.
  • Assists in returns of defective items supplied by vendors.
  • Keeps audit trails to trace, comply, and validate warranties.

Cycle Counting and Physical Inventory During Operations

Step 12: Cycle Counting and Continuous Inventory Accuracy

Cycle counting enables the counting of the items, bins, or zones of choice without closing the warehouse. Business Central accommodates on demand, scheduled, or triggered counts of cycles, depending upon velocity or ABC classification.

This step:

  • Reduces reliance on annual full physical counts.
  • Enables posting of variance and review, and approval processes.
  • Allows bin blocking in the event of counting so that no movement is made twice or a miscounting.
Step 13: Full Physical Inventory

Complete physical inventories compare system quantities and real stock in the warehouse. This is usually done by freezing operations or limiting movement to ensure that counting is not compromised.

This step:

  • Checks inventory valuation, accuracy of COGS, and compliance.
  • Adjust the variances that are posted financially.
  • Assists auditors and controllers in tracing and inventory.

Mobile Device and Barcode-Enabled Warehouse Operations

Step 14: Scanner-Enabled Warehouse Execution

Handheld barcode scanners or mobile WMS devices can be used to carry out warehouse operations. Business Central can relate to mobile WMS extensions to provide a complete digital implementation of tasks.

This step increases the speed of execution, accuracy, and efficiency of the workforce in the following way:

  • Removes manual data entry by barcode scanning of items, bins, lots, and serials.
  • Takes users through guided processes such as receiving, put-away, picks, movements, and packing.
  • Minimizes picking mistakes, misposts, and inventory variances.
Step 15: Real-Time Validation and Feedback

Mobile WMS devices check entries against Business Central data in real time, before they can cause errors to inventory or financial postings.

This step improves operational control and quality of data in the following ways:

  • Avoid scanning of incorrect items, incorrect bins, or out-of-date lots.
  • Provides accurate FIFO, FEFO, and serial tracking in execution.
  • Gives real-time feedback and exception notification of damaged goods, shorts, or overages.

When Do You Need Advanced Warehouse Management?

It is advisable to use advanced warehouse configuration in the following situations:

  • Inventory accuracy drops below acceptable thresholds.
  • Manual picking causes delays
  • Warehouse travel time increases
  • Stockouts occur despite sufficient inventory.
  • Regulatory compliance requires serial or lot traceability.
  • Order fulfilment volume increases.

If warehouse complexity grows, upgrading from basic inventory control to advanced WMS becomes operationally critical.

4. What’s New in 2025 Release Wave: Advanced Warehouse Management Updates

Here are recent enhancements in Microsoft Dynamics 365 Business Central warehouse management. These updates build on existing capabilities to improve automation, performance, usability, and high-volume scalability:

  1. Enhanced Directed Put-Away and Pick Logic

    The 2025 release significantly enhances directed put-away and pick logic by introducing AI-informed bin suggestions that evaluate real-time demand patterns, item velocity, and warehouse congestion. Instead of relying on static put-away rules, the system now dynamically adjusts bin priorities based on recent picking activity, seasonal shifts, and SKU movement trends. This limits the unwarranted internal relocations and lowers the time spent travelling by the operator. It also assists warehouses in having the most efficient slotting of high-demand or fast-moving products.

  2. Multi-Wave and Smart Batch Picking

    Multi-wave orchestration has modernized wave picking, which serializes picking operations of multiple sales orders or production requirements. The system also considers priority, SLA commitments, order size, and criticality to come up with optimized pick paths that minimize walking distance and picking time.

    A wave-to-wave conflict detection guarantees that allocations of items are intelligently reserved. It also ensures that the zone-to-zone batch consolidation simplifies operations in the facilities with high throughput or mixed-order profiles.

  3. License Plate Enhancements

    Warehouse operations in the 2025 release now benefit from advanced license plate (LP) management, enabling pallets, cartons, and mixed loads to be handled as discrete, traceable units. License plates can be generated automatically on inbound receipt, validated during transfers, and staged for cross-docking or shipment. This provides detailed visibility into container content, improves traceability during put-away, moves, and outbound processes, and enables accurate KPI tracking across warehouse execution layers without manual reconciliation.

  4. Enhanced Cross-Docking Rules

    Cross-docking regulations have been enhanced to allow pre-qualified inbound-outbound connections, whereby goods can pass through storage bins without passing through them at all in case there is corresponding outbound demand. The system considers the item type, fulfillment priority, contract requirements, and SLA classifications to decide whether to cross-dock at receiving time or not. This minimizes lead times on fast-moving or made-to-order products. It reduces the handling touches and facilitates multi-carrier staging situations of complex outbound networks.

  5. Mobile WMS Enhancements

    The mobile warehouse application has been upgraded with usability and performance optimized in environments that are involved in high-frequency scanning. Support of external scanners has been enhanced, and offline staging has been provided to continue with the tasks despite the unstable network connectivity.

    Users benefit from streamlined task queues, context-aware prompts, and faster scan interpretation, reducing data entry errors and improving pick, pack, and movement efficiency across handheld and industrial mobile devices.

  6. Real-Time Stock Availability Indicators

    To facilitate real-time operational planning, the 2025 release will add live bin- and zone-level availability indicators, which will be updated as warehouse transactions are made. Pick bin health can be monitored, congestion or shortages detected, and demand variability can be responded to without having to wait until posting cycles.

    Visual heat maps and low-bin alerts enable proactive replenishment decisions. They improve order fulfillment reliability and prevent unplanned stockouts within critical picking areas.

  7. Improved Physical Inventory and Counting Workflows

    The processes of physical inventory and cycle counting are redesigned to minimize the time spent on operations and decrease freezing windows. Count templates may now be automatically generated according to item velocity, historical variances, ABC classifications, or according to rule-based criteria.

    Live execution can be integrated to enable counting activities to be done with the warehouse movements at the appropriate time. The reconciliation of variance and exception reviews is also made easier. It enhances the accuracy of the inventory without having to slow the warehouse throughput.

  8. Power BI Embedded Warehouse Dashboards

    The integrated Power BI experience now has warehouse-based dashboards, which allow visibility into pick velocity, zone utilization, stock aging, inbound processing times, and variance trends. These dashboards facilitate location-to-bin-level analysis of the data. It allows executives and supervisors to relate operational performance to financial results. Blending of cross-module data enables the warehouse measures to be compared with sales, production, and service information to gain a holistic view of the supply chain.

  9. Extended Integration with IoT and Automation

    The 2025 release is integrated with more IoT sensors, automation controllers, and AS/RS (Automated Storage and Retrieval Systems). The weight sensors, conveyors, and robotics have now become programmable to activate the tasks of the warehouse and allow real-time execution without the need to scan manually or to enter the data.

    Such a high degree of integration facilitates automated replenishment, real-time inventory, and machine-based exception management. This is why the solution can be applied to contemporary, high-density, high-throughput automated distribution centers.

Business Central Warehouse Management brings structure, accuracy, and scalability to modern warehouse operations. By aligning physical execution with controlled inventory posting, advanced picking logic, mobility, and real-time visibility, it reduces errors and inefficiencies. With recent updates, the solution supports high-volume, automated, and data-driven warehouses that must adapt quickly to changing demand while maintaining financial and operational integrity.

Ready to streamline and scale your warehouse operations with confidence? Connect with our experts to implement Microsoft Dynamics 365 Business Central warehouse management tailored to your business.

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