29 Jun’17

D365 Finance and OperationsPhysical Negative Inventory Dynamics 365 for Operations

Physical negative inventory functionality is mainly used for issuing the stock for insufficient inventory. If Physical inventory checkbox is selected then system will allow to issue an item though stock is not available into inventory.

Path: Inventory Management > Setup > Inventory > Item Model Group

Below is example how to issues stock if there is insufficient inventory.

  1. You can see the below item for which On Hand inventory is not available though I want sale these stock.
  2. Create the sales order and enter item, quantity, Unit cost and confirm the sales order.
  3. Post the Packing slip to sell or issue the stock.
  4. Check the On hand inventory after posting Packing slip. You can check On Hand Quantity is showing negative.


These functionality helps to issue stock through sales order, Production order, adjustment journal though stock is not available or insufficient.


Written by

Mayur Pokharkar

Functional Consultant

2 thoughts on “Physical Negative Inventory Dynamics 365 for Operations”

  1. If you have physical inventory available, but AX is showing no available quantities, you are are behind with stock intake or production order finishing, or you need to transfer stock from one warehouse / location to another. If you use negative physical inventory and allow for this scenario you will mess up your stock valuation if you are using any other valuation method than standard price. When using Lifo / Fifo / weighted average, do not allow for physical negative inventory, but make sure you have processed al purchase orders and production orders. Financial negative stock is a different matter …

    1. Yes, right. This parameter is sensitive for inventory value calculation. The decision whether to select or clear this parameter must be taken with the utmost care to prevent incorrect use
      of the functionality.

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