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Warehouse MethodsChapter 2

Batch above or below location — which did you choose, and can you change it?

8 min read
1,735 words
high priority
Mudassir Marwat

Mudassir Marwat

Founder & CEO, Cognilium AI

TL;DR

Where the batch number sits relative to location decides whether the order or the warehouse chooses which batch ships. Microsoft names both models, and the question of whether you can change your mind has three different answers — one yes, one no, and one that depends on whether the level structure matches.

Batch above or below location — which did you choose, and can you change it?

One line in a reservation hierarchy decides whether your order desk or your warehouse picks the batch. Somebody chose it during your implementation, probably in an hour, and whether you can revisit it has three different answers.

The line is the location dimension, and which side the batch sits on decides who chooses

A reservation hierarchy [GA] is a ranking of inventory dimensions. Reservations in Warehouse management (ms.date 2026-06-22) defines it: "The reservation hierarchy defines the different levels where reservations can be made. Each level represents a physical inventory dimension."

The default uses "the Site, Warehouse, Inventory status, Location, and License plate dimensions as physical inventory dimensions." Batch number is what people add, and where they add it is the decision.

  • Above the Location dimension — Who decides which batch ships: The order — a person or the reservation system, at order time · When it is decided: Before the warehouse sees it
  • Below the Location dimension — Who decides which batch ships: The warehouse, during picking work · When it is decided: After the location is known

Microsoft's rule for the general case is unambiguous: "If a dimension is above the location level, warehouse workers can't change it, because it's considered a strict picking requirement."

The two models have names, and they are the names to use

Flexible warehouse-level dimension reservation policy (ms.date 2026-04-28) gives them character-exact labels: Batch-below[location] and Batch-above[location], with Serial-below[location] and Serial-above[location] for serials.

For below-location, the advantage is postponement:

"decisions (which are effectively reservation decisions) about which batches to pick and where to put them in the warehouse are postponed until the warehouse picking operations start. They aren't made when the customer's order is placed."

For above-location, the consequence: batch or serial numbers "are recorded on the demand order, and the warehouse operations that find the quantities in the warehouse aren't allowed to change them" — and "the warehouse logic doesn't allocate them."

Above location buys process-industry function, and charges for it in flexibility

In a regulated or process business, the reservations page states the reason plainly:

"Process industry functionality for batches requires that the Batch number dimension is above the Location dimension in the reservation hierarchy. In this case, all functionality for first expiry, first out (FEFO), same batch reservation, batch disposition codes, and batch attributes is supported."

A real list, and why the choice is not free. The charge is on the front end and on the floor, in the row immediately above:

"You must determine the inventory dimensions above the location level before you can use the Warehouse management functionality. Typically, workers make this determination during order processing, or they let the reservation system make it." "If a dimension is above the location level, warehouse workers can't change it, because it's considered a strict picking requirement. For example, if the Batch number dimension is above the location level, a worker can't pick a batch that differs from the one that they were instructed to pick."

So the batch is settled before work exists, and the picker cannot substitute. For a regulated business that rigidity is the feature; for a distributor picking to whatever is nearest, it is the cost.

One more consequence sits on the below-location side. Where item and warehouse are both WMS-enabled (warehouse management system — the module that directs work on the scanner) and the issue type can generate work:

"the system only synchronizes dimensions above the location level. Therefore, if an item uses batch numbers, and the Batch number dimension is below the location level in the reservation hierarchy, the system doesn't synchronize the batch number from receipt to issue transactions."

Can you change it? Three questions, three different answers

  • Can I let orders commit a batch on an existing below-location hierarchy? — Yes, "At any point"
  • Can I switch that back off later? — Not while certain transactions exist
  • Can I move an item to a different hierarchy? — Only if the level structure matches

On the first two, the asymmetry is the point:

"At any point, you can allow batch-specific reservation for an existing Batch-below[location] reservation hierarchy in your deployment. This change doesn't affect any reservations and open warehouse work that were created before the change occurred. However, you can't clear the Allow reservation on demand order check box if inventory transactions of the Reserved ordered, Reserved physical, or Ordered issue type exist for one or more items that are associated with that reservation hierarchy."

Turning it on is a setting. Turning it off waits for your order book to drain.

The third question has a documented function and a bound that decides everything, in a Note:

"If an item's existing reservation hierarchy doesn't allow batch specification on the order, you can reassign it to a reservation hierarchy that does allow batch specification, provided that the hierarchy level structure is the same in both hierarchies. Use the Change reservation hierarchy for items function to do the reassignment."

Read the condition twice. Same level structure. Moving the batch dimension across the location line is a different level structure, so this function is not the mechanism for that move — it swaps between hierarchies that differ in whether orders may commit a batch.

Two more bounds, both Microsoft's. The flexible check box "applies only to reservation hierarchy levels that are below the warehouse location dimension."

And "Batch number and License plate are the only levels in the hierarchy that are open for the flexible reservation policy" — you "can't select the Allow reservation on demand order check box for the Location or Serial number level."

The flexible policy's price, and it is charged in the object this whole cluster is about

"Location directives aren't used when picking work is created for a sales line that uses order-committed batch reservation."

The location directive decides where a line is picked from — work templates and location directives (ms.date 2025-08-06) calls them "rules that help identify pick and put locations for inventory movement".

So an order-committed reservation takes that decision away from the directive set you tuned, per line, whenever a sales processor commits a batch.

The knock-on is documented too, in the same page's Limitations:

"For order-committed reservations, don't use container build templates where the Pack by directive unit field is enabled. In the current design, location directives aren't used when warehouse work is created. Therefore, only the lowest unit in the unit sequence group (the inventory unit) is applied during the containerization wave step."

The exception rule is the other half: "the batch number reserved for the customer can never be replaced with a different batch number, but its storage dimensions (location and license plate) can be changed".

The published unsupported list is short — catch weight management, physical negative inventory, reservation against ordered supply, and "Transfer orders and raw material picking."

The default nobody set, and it is a below-location default

they "prevent the warehouse work engine from enforcing batch-related rules during reservation. By default, this means that the reservation logic doesn't evaluate first expiry, first out (FEFO) rules, or batch disposition codes for those items in those warehouses. As a result, the system might reserve a quantity from a batch that is marked as unavailable through its batch disposition code."

The control is Batch reservation policy for non advanced warehouses at Warehouse management > Setup > Warehouse management parameters > General > Batches. Simple "is the default value for this setting". Advanced "applies both FEFO rules and batch disposition codes during reservation and during on-hand calculations, even when no batch is specified on the order line."

If you stock WMS-enabled items in non-WMS warehouses, there is a parameter you have probably never opened. For below-location items:

How we optimize around this choice, and where we would draw the line

Microsoft names a cost for Advanced: "There's a small performance overhead … because the system performs more validations during reservation and on-hand calculations." No figure is published, and none is invented here.

We treat an order-committed line as fixed. A batch committed to a customer is not ours to re-plan.

Pick-Path & Slotting Optimizer reads the hierarchy you already run and optimizes the decisions above it — which orders travel together, which item earns which slot — writing back into the wave, cluster and slotting objects Dynamics 365 executes, behind an approval step. Dynamics is the system of record; the optimization above it is a second system.

A working demo exists; it is not off the shelf. We build it against your systems and your constraints on request, and we have no delivered warehouse engagements — so this is a capability, not a report on somebody's building.

What to do this week

  1. Read your own hierarchy. Open Inventory reservation hierarchies and find where Batch number sits relative to Location. Say it out loud as Batch-above[location] or Batch-below[location] — that phrase is shared vocabulary with the documentation. 2. Check whether flexible reservation is already on. Look for Allow reservation on demand order on the Batch number level. If it is selected, some picking work is being created without location directives. 3. Look at the non-advanced-warehouse batch policy. Warehouse management > Setup > Warehouse management parameters > General > Batches. If it reads Simple, check the two scopes first: the gap is sales orders only, and items whose batch is below location. Above location, FEFO applies regardless. 4. Ask your order desk how often they promise a batch. That frequency decides whether the flexible policy is worth the location-directive trade, and nobody in IT knows the number.

About Cognilium Cognilium is the AI optimization layer for Dynamics 365 — complementary apps that optimize the pricing, inventory, warehouse and planning decisions your ERP manages but can't optimize. Built on Power Platform, Dataverse and Azure. https://cognilium.ai · https://www.linkedin.com/company/37180269/

If you are inside the reservation hierarchy decision, book a fifteen-minute call and we will walk it with you — what each side of the location line costs, and which parts you can still revisit. No deck. https://cognilium.ai

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The work behind this series
How warehouse pick optimization is actually solved

The methods behind the articles — slotting, batching, routing — and the data each one needs.

Mudassir Marwat

Mudassir Marwat

Founder & CEO, Cognilium AI

Mudassir Marwat's argument is that ERP systems record decisions they never optimise.

Founder & CEO of Cognilium AI; 37 AI agents in production across four products; 4 production AI products built and operated; three clouds in production (AWSGCPAzure)
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Next in this series
Why does your pick path zig-zag? Your location format is a sort key
Chapter 3 · 8 min
In short

Key takeaways

  • Where the batch dimension sits relative to the location dimension decides whether the order or the warehouse chooses which batch ships, and Microsoft's names for the two models are Batch-above[location] and Batch-below[location].
  • A dimension above location is a strict picking requirement, and Microsoft states that a worker cannot pick a batch different from the one they were instructed to pick.
  • Above location is what process-industry batch function requires — first expiry first out, same batch reservation, disposition codes and batch attributes are all listed as supported in that arrangement.
  • Whether you can change your mind has three answers, not one: allowing order-committed batches on an existing below-location hierarchy is permitted at any point, clearing it is blocked while reserved or ordered issue transactions exist, and reassigning an item to another hierarchy requires the level structure to match.
  • Order-committed batch reservation means location directives are not used when that picking work is created, so the object that normally decides where a line is picked from is bypassed line by line.
What goes wrong

Common mistakes to avoid

  • Treating the hierarchy as a technical detail owned by IT. It decides whether your order desk can promise a batch, which is a commercial capability with an operational price.
  • Assuming the flexible reservation setting is symmetric. Turning it on is documented as available at any point; turning it off waits for the reserved and ordered transactions to clear.
  • Reading the reassignment function as a way to move the batch dimension across the location line. The documented condition is that the level structure is the same in both hierarchies.
  • Leaving the non-advanced-warehouse batch policy at its default and assuming it covers everything. Under Simple, Microsoft states that FEFO and disposition codes are not evaluated — but only for sales orders, only for items whose batch sits below location, and only in warehouses that are not WMS-enabled. Above location, the page says standard strategies apply FEFO and disposition codes anyway.

Bring your own numbers

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