With the general availability of roadmap feature ID 576867—tracked in the Microsoft 365 Message Center as MC1301473 and documented in the Dynamics 365 Supply Chain Management 10.0.48 release notes as the Cluster picking strategy capability —Microsoft has overhauled how warehouse administrators govern serial and batch number capture during cluster picking. First introduced in public preview on April 24, 2026, and reaching general availability on June 5, 2026, for Worldwide Standard Multi-Tenant cloud environments, this update adds an explicit strategy selector to cluster profiles. It gives operations teams granular control over whether workers pick and scan tracked items in a single consolidated step or process them position by position at the storage location.
Why Cluster Picking Struggled with Tracked Inventory
Cluster picking is one of the primary labor-saving strategies in Microsoft’s Warehouse Management System (WMS). Instead of walking the warehouse floor for a single sales order at a time, a worker uses the Warehouse Management mobile app to group multiple released work orders into a cluster—essentially mapping each order or work ID to a separate physical position (such as a tote, bin, or compartment) on a picking cart.
When dealing with standard, non-tracked merchandise, the traditional Process by location workflow is straightforward:
- The worker walks to pick location
A-01-01. - The mobile device prompts for the combined quantity needed across all positions on the cart (for instance, 3 total units).
- The worker scans the item once for the total quantity and then executes a "sort" step on the mobile screen, distributing 1 unit to Position 1 and 2 units to Position 2.
That consolidated flow breaks down when items are tracked by batch number or serial number below the location level in the inventory reservation hierarchy. In Dynamics 365 Supply Chain Management, a Batch-below[location] or Serial-below[location] reservation hierarchy means the sales order does not pre-assign a specific batch or serial number when the order is entered; instead, the warehouse worker decides which specific batch or serial unit to grab upon arriving at the storage bin.
Under the legacy location-based cluster flow, scanning three serialized items together and then trying to tell the handheld device which serial number landed in Position 1 versus Position 2 during the post-pick sort step creates unnecessary cognitive load and scanning friction. One distracted tap swaps the digital record between two customers' boxes, leading to compliance failures in regulated industries, mismatched warranty registrations, or painful audit discrepancies.
Key Summary: The Core Problem
- Cluster picking consolidates multi-order picks at a single storage bin to reduce warehouse travel time.
- Below-location tracking defers the selection of specific batch or serial numbers until the picker physically reaches the bin.
- The friction point: Picking a lump sum of serial- or batch-tracked items and sorting them across cart positions afterward forces workers to manually match specific tracking numbers to specific totes after the initial grab.
Inside the New Cluster Picking Strategies
To solve this, Microsoft added a Cluster picking strategy enum on the General FastTab of the Cluster profiles setup page. According to Microsoft Learn's documentation for Dynamics 365 Supply Chain Management version 10.0.48 and later, administrators can choose from three distinct operational modes depending on how their inventory is tracked and how their floor workers operate:
| Strategy Option | How Picking Works at the Location | Post-Pick Sort Step | Best Use Case |
|---|---|---|---|
| Process by location (Default) | Worker picks the combined quantity across all cluster positions in a single step. | Required: Worker distributes the picked quantity to each position after picking. | Untracked items, or workflows where capturing tracking numbers once before distribution is preferred. |
| Process by position (tracked items) | Worker handles each cluster position one at a time, only for batch- or serial-tracked items below the location level. Non-tracked items still use location-based picking. | Eliminated for tracked items: Batch and serial numbers are scanned per position at the moment of picking. | Mixed-inventory warehouses that want consolidated speed for basic items and strict per-order accuracy for tracked goods. |
| Process by position (all items) | Worker handles every cluster position individually at the location, regardless of whether the item has tracking dimensions. | Eliminated for all items: Every pick is tied directly to a specific position from the start. | Operations prioritizing uniform worker prompts and zero post-pick sorting across all SKUs. |
A Concrete Floor Example: Location vs. Position Processing
To see how this changes the day-to-day rhythm on the warehouse floor, consider Microsoft’s documented scenario involving a two-position cluster at location A-01-01 for a serial-tracked product:
- Position 1 (Sales Order 1): Requires 1 unit.
- Position 2 (Sales Order 2): Requires 2 units.
If the cluster profile uses Process by location, the mobile device prompts the worker to pick all 3 units from A-01-01 together, followed by separate sort prompts to allocate 1 unit to Position 1 and 2 units to Position 2 before moving the cluster to staging.
If the administrator switches the profile to Process by position (tracked items) or Process by position (all items), the handheld workflow changes immediately:
- Prompt 1:
Position 1 – Pick 1 unit from location A-01-01— The worker grabs the first item, scans the item and its serial number, and places it directly into Position 1. - Prompt 2:
Confirm Position 1— The worker confirms the position. - Prompt 3:
Position 2 – Pick 2 units from location A-01-01— Still standing atA-01-01, the worker grabs the next two units, scans the item and both serial numbers, and places them into Position 2. - Prompt 4:
Confirm Position 2— The worker confirms the second position. - Prompt 5:
Put cluster to staging— Once all positions at that location are satisfied, the worker moves on.
Because each pick action is bound to a specific cluster position from the outset, the system pairs the exact serial or batch scan to the exact customer order in real time.
Important Exception: Serial Capture at Packing
What happens if your warehouse sells serialized items, but your item configuration doesn't require workers to scan serial numbers until the goods reach the packing station? Microsoft engineered a smart exception into Process by position (tracked items): if an item is configured so that its serial number is captured at packing rather than picking, the system automatically excludes that item from by-position processing. Because the picker doesn't need to scan a serial number at the rack, Dynamics 365 falls back to the faster Process by location flow for that SKU.
Step-by-Step: Configuring the Cluster Picking Strategy
According to Microsoft Learn documentation, enabling and configuring this capability requires Dynamics 365 Supply Chain Management version 10.0.48 or later, where the feature is enabled by default in Feature Management.
Administrators and warehouse system makers can configure the behavior using the following procedure:
- Open Dynamics 365 Supply Chain Management and navigate to Warehouse management > Setup > Mobile device > Cluster profiles.
- Select an existing cluster profile from the list and click Edit, or select New to build a dedicated testing profile.
- Expand the General FastTab.
- Locate the Cluster picking strategy field and select your desired mode:
- Process by location
- Process by position (tracked items)
- Process by position (all items)
- Save the cluster profile.
If you also want workers to verify item bar codes during each pick, ensure product confirmation is enabled on the mobile device menu item under Warehouse management > Setup > Mobile device > Mobile device menu items by selecting Work confirmation setup on the Action Pane and checking Product confirm for the relevant work type.
Critical Admin Gotcha: Automatic Overwrite of Cluster Sort Criteria
Before flipping this switch in a production environment, ERP administrators need to be aware of a major configuration side effect documented by Microsoft Learn.
In a standard Process by location setup, administrators have full freedom to customize the Cluster sorting FastTab on the cluster profile—defining the exact fields and ascending/descending sequence that dictate how a worker travels through the warehouse.
However, the moment you save a cluster profile with either Process by position (tracked items) or Process by position (all items) selected, Dynamics 365 automatically deletes all existing sort criteria on that profile and replaces them with four mandatory ascending defaults:
- Location (Ascending)
- Item number (Ascending)
- Work ID (Ascending)
- Line number (Ascending)
Why Does the System Overwrite Your Sorting Rules?
Think about the physics of position-based picking. If the system did not sort primarily by Location and then Item number, the mobile app might direct a worker at bin A-01-01 to pick Position 1, walk across the warehouse to bin D-04-02 to pick Position 2, and then walk all the way back to A-01-01 to pick Position 2's share of the first item. Grouping by Location and Item number first guarantees the worker stands at A-01-01 and cycles through all cluster positions requiring that item before walking to the next bin.
Note two additional administrative behaviors:
- Manual edits carry routing risks: While Dynamics 365 allows you to manually edit those four sort fields after they are auto-generated, Microsoft warns that altering the sequence can break location grouping and cause workers to backtrack across the warehouse.
- Reverting doesn't restore old rules: If you test a position-based strategy and later switch the profile back to Process by location, the four auto-created sort criteria remain in place. You must manually rebuild your custom sorting rules if you had bespoke routing logic prior to the change. Always screenshot or document your existing Cluster sorting FastTab before changing the strategy dropdown.
Architectural Boundaries: What This Feature Does (and Doesn't) Change
To get the most out of this update, IT architects should evaluate how it interacts with the rest of the Dynamics 365 warehouse stack:
- Reservation Hierarchy Scope: This feature is explicitly scoped to items tracked below the location level (
Batch-below[location]andSerial-below[location]). When batch or serial dimensions sit above the location level in the reservation hierarchy—or when a customer order uses an order-committed batch reservation—the specific batch or serial requirement is already dictated before warehouse picking begins. - Known License Plate Staging Limitation: Keep an eye on raw material picking scenarios. Microsoft’s cluster picking documentation notes that if multiple work records exist for an item with Material picking in license plate locations set to Staging, the Warehouse Management mobile app can throw a
"Current work is frozen"error during cluster picking. Administrators should either pick from non-license-plate-tracked locations for raw material cluster picking or set Material picking in license plate locations to Order picking.
Final Takeaway for Warehouse IT Teams
For organizations running mixed catalogs—where high-velocity commodity goods sit alongside serialized electronics, medical devices, or batch-tracked food and pharmaceuticals —the Process by position (tracked items) setting is the standout option. It preserves fast, consolidated picking for untracked items while automatically shifting the mobile workflow into a strict, tote-by-tote scan sequence the moment a worker arrives at a bin containing below-location tracked stock. Test the profile in a sandbox environment first, back up your cluster sorting rules before saving, and verify that your handheld scanning prompts match your floor workers' physical cart setup.