A plant manager asks whether the schedule will hold and how machine uptime is tracking today. The CFO asks what the finished order actually cost after freight, customs, and scrap. The CIO asks how many disconnected systems it takes to answer both questions. In many factories, these answers live in three different tools, and reconciling them is a manual job in itself.

This article explains how Dynamics 365 Finance & Operations (F&O) manages manufacturing operations from the production order to the general ledger. It is written for the COO or operations director first, with targeted notes for the CFO who owns margin accuracy and the CIO or CTO who owns the architecture. It is especially relevant to manufacturers across Saudi Arabia and Kuwait, where national industrial strategies are pushing plants to scale faster than spreadsheets can manage.

What is Dynamics 365 Finance & Operations?

«Finance & Operations» is the name many people still use for Microsoft’s enterprise ERP applications. Microsoft now delivers them as two applications on a shared data model:

Dynamics 365 Finance: Covers the general ledger, payables, receivables, and enterprise cost accounting.

Dynamics 365 Supply Chain Management: Covers planning, procurement, inventory, warehousing, and production control-where manufacturing execution lives.
Within the Dynamics 365 family, these two applications are the ERP choice for larger or more complex organizations, alongside Business Central for smaller ones. For a manufacturer, the practical point is that production, inventory and finance are modules of one system rather than separate products linked by interfaces. A production transaction is visible to finance without a file being sent or a reconciliation being run.

Which manufacturing types does it support?

Supply Chain Management supports discrete, process and lean manufacturing, and Microsoft documents running them together in one environment, which it calls unified manufacturing. That matters because few plants are purely one type. A beverage plant, for example, may blend a recipe (process), pack it into countable units (discrete) and replenish packaging through kanban signals (lean).

Discrete Manufacturing: built on distinct units and bills of materials (BOMs), as in machinery, electronics, furniture or packaging.

Process Manufacturing: built on formulas and recipes for batch or semi-continuous production, such as food or pharmaceuticals. It supports co-products and by-products, batch attributes, potency management (adjusting quantities to the strength of an active ingredient) and catch-weight items (products whose unit weight varies from pack to pack).

Lean Manufacturing: models production as flows governed by kanban rules, where consumption pulls supply instead of a forecast pushing it.

How does F&O plan production?

Planning starts from three elements, defined once and reused in every production order:
Bill of materials (BOM) or formula: the raw materials, quantities and expected yield.
Route: the operations and their sequence, the work centers and machines used, and setup times.
Scheduling: the system calculates start and end times for each operation based on material availability, machine capacity and labor.

Because the schedule is built on the same inventory balances the warehouse uses, it does not rest on assumptions kept in a separate file. Its accuracy still depends on the quality of the BOMs and routes entered, a point we return to in the AI section.

For the COO: you can see how a late material or a machine breakdown affects the orders behind it before the problem reaches the shop floor.

For the CIO: master data (BOMs, routes, machine specifications) sits in one controlled place with role-based access, which reduces reliance on scattered spreadsheets.

From scheduling to the shop floor

F&O can be connected to machine and sensor data, either through its own shop-floor execution features or through integration with an IoT platform or a specialized manufacturing execution system (MES). The right approach depends on the machines, the data volume and how much detail the floor needs.
Once that data flows in, plants can follow:
Overall Equipment Effectiveness (OEE): the share of planned time that is truly productive.
Downtime causes: to find recurring failures rather than just knowing they happened.
Maintenance needs, including predictive maintenance where enough data exists.

Inventory and warehouses

F&O tracks each item by location, status and batch or serial number across raw materials, work in progress (WIP) and finished goods.
Warehouse Management (WMS): directed put-away and picking, and work orders for warehouse staff.
Inventory Visibility: a service that shows stock balances across multiple sites in near real time.

Landed cost for imported materials

For Gulf manufacturers that depend on global supply chains, the cost of a material rarely ends at the supplier’s invoice. Freight, insurance, customs duties, clearance and handling all change what the material really costs before it enters production.
The Landed Cost module in Supply Chain Management tracks goods in transit and container shipments and allocates these charges to the material items using rules the company defines, for example by value, weight or quantity. Those rules need careful setup during implementation, and the exact timing of allocation depends on your costing method. Once configured, they reduce manual adjustments and bring material cost closer to reality.
For the CFO: product margin is calculated on a material cost closer to the actual one, so the gap between planned and achieved margin narrows.

Linking production to cost and the ledger

Because production and finance share one system, production transactions post to the general ledger according to your posting setup, without re-entry, and manual reconciliation between operations and accounting is reduced. Three tools support the CFO:

-Costing Versions: Compare standard costs, planned costs, and actual costs side by side.

-BOM & Route Rollups: add up direct materials, direct labor, machine overhead and allocated indirect costs for each product.

-Variance Analysis: classifies the difference between standard and actual cost, such as material usage, scrap or efficiency variances, when a production order is ended. How and when variances post depends on your costing method and period-close setup.

(For a deeper look into cost modeling, you can review our companion article: "Manufacturing Cost Calculation: Why Excel Isn’t Enough".)

Reporting and architecture

Because finance, inventory and production share one data model, reports draw on a single source. Power BI and Excel connect to this data for dashboards and analysis. Very large or cross-system analytics may still call for a separate data layer, which we size with you during design.

For the CIO: F&O is built on Microsoft Azure and uses Microsoft Entra ID (formerly Azure Active Directory) for identity and access. It can be extended through Power Platform and integrated with specialized systems, such as scales and label printers, without modifying the core application, which keeps upgrades simpler.

Where do Copilot and AI fit?

Microsoft is adding AI capabilities to Supply Chain Management, including the Copilot assistant and agents for tasks such as supplier communication. The ERP MCP server lets AI tools query system data, such as inventory and open production orders, without a custom integration for each tool. Microsoft’s 2026 release wave 1 (April to September 2026) focused on agents. Availability varies by version and region, so we check the current release plan before building any decision on it.nguage queries across inventory, open work orders, and supply constraints.

A Strategic Note on AI: AI capabilities rely entirely on high-quality foundational data. Automated forecasts built on inaccurate BOMs, unrecorded scrap, or missing inventory records will only generate errors faster. Manufacturers should focus on establishing disciplined core processes before layering on advanced AI tools.

A real-world example: Fresh Mark

Fresh Mark, a US meat processor operating four continuous-production facilities with over 2,500 employees, migrated from an aging Dynamics AX 2012 setup to Dynamics 365 Finance and Supply Chain Management (Microsoft Customer Stories, July 2024).

Key Outcomes Reported:

IT Cost Reduction: Reduced annual IT operational expenditure by 20% in year one by consolidating legacy warehouse and transport systems.

Minimized Downtime: Maintenance and system update downtime dropped from hours over weekends to 30–60 minutes during scheduled off-peak windows.

Unified Reporting: Consolidated warehouse, transportation, quality, and financial data into Power BI, improving cross-departmental decision-making.

Perspective: While vendor case studies primarily highlight IT and administrative efficiencies, the key takeaway for enterprise industrial leaders is the stability and scalability achieved by eliminating fragmented, out-of-support legacy systems in continuous 24/7 manufacturing environments.

Who is F&O right for, and who is Business Central right for?

As a general rule, Dynamics 365 Finance and Supply Chain Management suits larger or more complex manufacturers, while Business Central suits small and mid-sized manufacturers with simpler structures. Both support core manufacturing, including production orders, BOMs, and routes, so the real question is complexity, not just company size.

Dynamics 365 Finance & Operations (F&O) is usually the better fit when:
Operational Complexity: You run several plants, operating units, or complex global supply chains.
Manufacturing Modes: You require mixed-mode manufacturing (combining discrete, process, and lean production under one roof).
Costing & Advanced WMS: You need advanced Landed Costing for imported raw materials, sophisticated floor warehouse management (WMS), and IoT shop-floor integration.
Finance Structure: You operate across multiple currencies, jurisdictions, and require complex intercompany financial consolidations.

Dynamics 365 Business Central is usually the better fit when:
Operational Complexity: You operate one or a few production sites with straightforward workflows.
Manufacturing Modes: Your plant focuses primarily on standard discrete manufacturing or light process production.
Costing & Advanced WMS: Standard costing, standard inventory tracking, and basic warehouse management are sufficient for your day-to-day operations.
Implementation & Finance: You prioritize a faster, lighter implementation and your financial/legal structure is simple.

A company can also start in Business Central and transition to F&O as operations expand. Mazaya implements both, so our recommendation follows your exact requirements rather than a specific product we need to sell. A short assessment of your sites, volumes, and finance structure is the most reliable way to decide.

Frequently Asked Questions (FAQ)

1. Is Dynamics 365 Finance & Operations the same as Supply Chain Management?

They are part of the same solution suite. "Finance & Operations" is the widely recognized enterprise ERP name, which Microsoft packages as two integrated modules: Dynamics 365 Finance and Dynamics 365 Supply Chain Management.

2. Can one plant run discrete, process, and lean production together?

Yes. Dynamics 365 Supply Chain Management natively supports mixed-mode manufacturing, allowing production orders, batch formulas, and kanban schedules to operate within the same facility and ledger.

3. Do we still need a separate MES (Manufacturing Execution System)?

Only if you need detailed shop-floor execution, such as real-time machine tracking or electronic work instructions. F&O includes its own manufacturing execution features, and many plants add a specialized MES later, when the floor requires it. An MES typically sits below the ERP, and in a highly automated plant it works alongside control systems such as SCADA.

4. How does F&O calculate the true cost of imported raw materials?

Through its Landed Cost module, F&O tracks and allocates freight, duty, insurance, and customs charges directly to the raw material items, delivering an a landed cost closer to actual before materials are issued to production.

We are overspending on our Dynamics 365 support contract in Saudi Arabia. What are our options for changing to a better-value partner?

You have more room than most companies assume. A support contract is separate from your Dynamics 365 licenses and your data, so changing the support arrangement does not mean changing the system. There are four common routes:

-Renegotiate with your current partner: move from a flat retainer to a tiered or hours-based model, remove services you do not use, and set response times that match how critical each process really is.

-Move to a new Microsoft partner: run a short tender with the same scope and ticket history for each bidder, so quotes can be compared like for like.

-Split the work: keep routine requests with an internal super-user or a lower-cost provider, and keep a specialist partner for escalations, upgrades and finance or manufacturing changes.

-Add or adjust Microsoft support plans: check whether a Microsoft support plan covers part of what you now pay a partner for.

Before deciding, do four things. Analyze 12 months of tickets to see what you actually use. Check the notice period, exit terms and ownership of customizations and documentation in your contract. Confirm who holds your licenses and the partner-of-record arrangement with Microsoft (verify the current process for changing it). Then agree a handover plan with a parallel-run period, so no month-end close or production run is left uncovered.

Ready to assess your plant’s ERP readiness?

A software demo is most effective when evaluated against your actual products, routes, landed cost factors, and reporting requirements.

Contact Mazaya Integrated Solutions to request a Manufacturing ERP Readiness Assessment or a tailored demonstration with our industry consultants. We will evaluate your operational flow across planning, production, landed costing, and financial reporting.
Website:mazayasolutions.com
Email:info@mazayasolutions.com
Saudi Arabia: +966 9200 299 99
Kuwait: +965 2240 0340

About Mazaya Integrated Solutions

Mazaya Integrated Solutions is a Microsoft Solutions Partner with over 20 years of experience delivering enterprise software solutions across the Gulf region. Established in 2005 and headquartered in Riyadh with regional offices in Kuwait, Mazaya specializes in end-to-end consulting and implementation services for Microsoft Dynamics 365 (Finance & Operations, Business Central, CRM), AI, automation, cloud infrastructure, and cybersecurity.

Holding multiple ISO certifications (ISO 9001, 27001, 42001 for AI Management, and more), Mazaya partners with industrial enterprises and government entities across Saudi Arabia and Kuwait to transform operational complexity into measurable business results.