Transfer Order or Transfer Journal? The Differences Explained

It can be tricky to know whether you should use a transfer order or a transfer journal when moving inventory in Dynamics 365 Finance & Operations. The two options have similar names, and their screens look much the same in the system, but they function differently.

Broadly, transfer journals will be right for moving items from one location to another, while transfer orders are right when shipping products to different warehouses or sites where shipping documents are required. But there is some further context needed to make the correct choice each time.

In my previous role at a manufacturing business, I helped warehouse managers and other teammates determine which option to use when, for instance, moving items to a warehouse where goods would need to be accounted for with a tracking number during shipment. Read on to learn how to decide between a transfer order and a transfer journal and how each option works.

Table of Contents 

• Difference Between Transfer Order and Transfer Journal
• Transfer Orders in Finance & Operations
• Transfer Orders with Warehouse Management Processes
• Transfer Journals in Finance & Operations
• Transit Warehouse

Product name clarification: Even though most customers, commentators, and consultants still call it Dynamics 365 Finance & Operations or D365FO, Microsoft now technically licenses it as Dynamics 365 Finance and Supply Chain Management.

The Difference Between Transfer Journal and Transfer Order

The main difference between a transfer order and a transfer journal is that a transfer order enables more detailed tracking and lets you print a shipment label and delivery note.

Overall, the transfer journal is simpler, whereas the transfer order is more complex. The transfer journal will require you to enter data for the site, warehouse, and location inventory dimensions, for the “to” and “from” destinations. Whereas the transfer order will require you to enter the previous information, plus the required ship and deliver dates, and other fields like addresses based on the warehouses, transport days, and transit warehouse.

The main reason to use a transfer journal is that it allows you to transfer items between inventory locations, batches, or product variants without any offsetting costs associated with the transaction. The key advantage of a transfer order is that it tracks the transfer process in more detail. It’s ideal for organizations with multiple sites and multiple warehouse operations – for instance, if you take items from one central warehouse to restock multiple others in different locations around North America.

However, there are several vital details and exceptions to the above info, depending on your use case and warehousing configuration.

Transfer Orders in Finance & Operations

Transfer orders are a sophisticated feature designed to address several scenarios:

• They are utilized when the distance between two warehouses, whether on the same premises or at different locations, is considerable enough that the time goods spend in transit becomes a critical factor. Because of this, you need the ability to dispatch items from the source warehouse, monitor and track their movement en route, and subsequently accept them at the target warehouse upon arrival.
• You require shipping and tracking documents.
• The transfers are integrated into the routing operations of warehouse personnel, who are expected to execute tasks such as selecting items, recording the selection, packaging/shipping outbound goods, and documenting and accepting inbound shipments.

To fulfill these objectives, transfer orders employ the identical three-step stage selection and packaging procedure used by sales orders. It’s possible to issue pick lists to warehouse staff using the same sorting and grouping criteria applied to sales orders, followed by registration and eventual dispatch. If your system configuration allows, it is also possible to skip this process entirely, though it is not recommended.

The following steps are described for “simple” warehousing, but if you are using warehouse management processes in Dynamics 365, there are a few differences. See the warehouse management processes section below.

Creating a Transfer Order

Navigate to Inventory management -> Outbound orders -> Transfer order

Create a new transfer order by clicking the New button.

Enter the “from” warehouse and the “to” warehouse.

Click Add to add the items you want to transfer.

In the Item number field, enter or select the items you want to transfer and enter the quantity.

Releasing the Transfer Order for Picking

Navigate to Inventory management -> Periodic -> Release transfer order picking

Enter the transfer order number and then click OK.

If you select the “Deduct released for picking” check box, then the system will automatically deduct the relevant amount from the on-hand inventory.

Shipping the Transfer Order

Go back to your transfer order in Inventory management -> Outbound orders -> Transfer order

Click Ship within the Action Pane.

Click Ship transfer order to post the shipment.

In the screen that opens, select the available quantity as the update quantity. Verify that the product and quantity are correct and click OK.

Receiving the Transfer Order at the Destination Warehouse

Navigate to Inventory management > Inbound orders > Transfer order

Select the transfer order you want to receive.

Click Receive on the Action Pane.

Select Shipment in the Update field of the window that pops up.

Verify that the quantity and product below are correct and click OK.

You can input shipping, tracking, setup, and trade information on the transfer order header itself. For more information about what each of these fields can do, refer to the standard Microsoft documentation for Transfer orders.

To achieve traceability and transparency during the delivery, the order uses the transit warehouse, which is assigned to the originating warehouse. The items in this warehouse are always hard reserved against the transfer order, so we do not have to worry about their cost being recalculated if we are using moving or weighted average as our costing method. They are also considered “blocked” inventory and will not be available in MRP calculations or product reservation processes.

Warehouse management -> Setup -> Warehouse -> Warehouses

Transfer Order Limitations

However, there are some things we must be aware of before using transfer orders:

Although Finance & Operations offers the option directly on the transfer order form when receiving a transfer order, it is difficult to modify the data. This form is not designed to deal with high-volume receiving of transfers. The point of the transfer order is that it would be processed through warehousing functionalities (WMS or basic warehousing). If registration is mandatory for the items to be received, it must be done line by line on the order from this form before receiving. If any modification to default receiving locations or quantities needs to be done, it must be done through the registration form.

Once a transfer order is dispatched, it remains in that state. Unlike sales orders, where we can revoke a packing slip at any point before the generation of the invoice, this option is not available for transfer orders. The mandatory three-step selection and packaging sequence offers an opportunity to identify and rectify errors. Should the shipment of a transfer be recorded, the sole method to reverse it is to accept the goods at the receiving end and then return them using a specific transfer method.

This is because the inventory and its value are sitting in our books throughout the entire process; it merely changes location and cost center. This leaves little negotiating room for dealing with quantity errors. However, this not only adds manual work but will also impact the weighted/moving average calculation as the system will recalculate when inventory is received at the destination and then again when it is received back in the originating warehouse.

Transfer Orders with Warehouse Management Processes

The details of how transfer orders work in your system partly depend on whether you use advanced warehousing functionality. If you are, you will see “warehouse management processes” throughout the relevant screens of Finance & Operations.

In that case, the most significant difference for you to be aware of is that transfer orders are processed through a series of warehouse management activities. You will see “Load planning workbench” and “Wave processing workbench” with the transfer order, which means you will need to create and process loads and waves, respectively.

Let us expand on these:

Load Planning Workbench: You create loads for the transfer order. A load represents a group of items that are packed together for shipment. In the context of transfer orders, you would create a load for the items being transferred from one warehouse to another.

Wave Processing Workbench: This is where you process waves. A wave is a grouping of work that is processed together. In the context of transfer orders, you would create a wave for the work related to picking the items for the transfer order. The wave would then be processed, which involves picking the items from the warehouse and packing them into the load.

Mobile App Menu Setup: The mobile app menu needs to be set up to enable warehouse workers to carry out the tasks related to the transfer order. This includes picking items, packing items into a load, and shipping the load. The mobile app menu can be customized to suit the specific needs of your warehouse operations.

Remember, the exact steps and processes can vary depending on the specific setup and configuration of your Finance & Operations system. It is always a good idea to refer to the system’s documentation or consult with an experienced Finance & Operations Partner.

Transfer Journals in Finance & Operations

On the other hand, transfer journals are easier and have much more flexible functionality in Dynamics 365 for Finance & Operations. Transfer journals allow you to move inventory “on paper” between locations within the same warehouse without physically moving the items. These are generally used for internal purposes, such as when you want to reorganize your warehouse or correct a mistake in the location of an item.

Some common uses of transfer journals:

• They are used to relocate goods internally within the same warehouse from one location to another.
• They can also be used when items need to be moved from one warehouse to another that is close enough physically to not require shipping and transit documents.
• They do not require warehouse staff to process them as a regular part of their daily activities involving receipt and dispatch of goods.

How to Create and Process a Transfer Journal

Navigate to Inventory management > Journal entries > Items > Transfer

Click on New to create a new journal. Enter the necessary details such as the Name (select a journal name from the list), Description, Site (optional), and Warehouse (optional).

Next, add lines to the Journal; click on Lines to open the journal lines form. Here, you will enter the details of the items you want to transfer. You need to specify the Item number and Quantity, From site, To site, From warehouse, and To warehouse.

Now you can validate the journal. Once you’ve entered all the lines, click Validate to check for errors. If there are no errors, you can proceed to the next step. If there are errors, you will need to correct them before you can proceed.

Next, you can post the journal by clicking on Post to finalize the transfer. This will update the inventory levels in the specified locations.

Finally, you can review the transfer details by going to Inventory management > Inquiries and reports > Journals > Item transactions. Select the journal you posted and click on Transactions to view the details.

Transit Warehouse in Dynamics 365 Finance & Operations

In my experience, it’s common to run into a problem related to the transit warehouse when you are managing inventory levels. This is caused by inaccurate tracking of inventory during the transfer process. To fix this problem, you’ll need to implement a robust inventory management system and ensure regular audits of the inventory in the transit warehouse. This will help maintain accurate inventory levels and prevent issues related to overstocking or understocking. It’s also important to train staff on proper inventory management procedures to ensure consistency and accuracy in tracking inventory.

Watch this recorded webinar for a walkthrough of the key differences between Transfer Orders and Transfer Journals. It will help you understand when and how to use each option effectively.

For more information and help with your Dynamics 365 environment, please contact us.