> ## Documentation Index > Fetch the complete documentation index at: https://docs.vortexiq.ai/llms.txt > Use this file to discover all available pages before exploring further. # Margin Erosion Alerts, Microsoft Dynamics 365 > Top finding for the Finance Controller. SKUs whose unit margin has materially eroded in the last quarter. How to read it, why it matters, and how to act on... **Metrics type:** [Key Metrics](/nerve-centre/overview#metrics-types-explained) • **Category:** [Ecommerce Platform](/nerve-centre/connectors#connectors-by-type) > Top finding for the Finance Controller. SKUs whose unit margin has materially eroded in the last quarter. ## At a glance > Alert table of SKUs whose Gross Margin % has dropped > 20% over the last 90 days vs the prior 90 days, ranked by absolute revenue at risk. The Controller's worklist for cost-control conversations. | | | | ------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | **What it counts** | For each Item with revenue in both windows: `(Margin% this 90D) minus (Margin% prior 90D)`. Items where the drop exceeds 20% (relative) AND the revenue is > \$5K appear in the alert table. | | **Revenue minimum** | \$5K USD equivalent over the window, to suppress noise from low-volume SKUs. Tunable. | | **VAT / tax treatment** | Net of VAT on both sides. | | **Currency** | Multi-Company: each Item's revenue and COGS translated to Reporting Currency for consistent comparison. | | **FIFO turnover note** | A SKU sometimes shows "margin erosion" purely from FIFO layer turnover (consuming a higher-cost layer this period). The card flags this if Avg Unit Cost has risen > 5% but Selling Price unchanged; the recommended action is then "verify cost layer", not "raise prices". | | **Sales Credit Memo handling** | Excluded. Returns post negative revenue + reverse COGS; the per-SKU margin% remains stable across a return. | | **Time window** | `90D vsP` (90-day window vs prior 90-day window) | | **Alert trigger** | `any SKU dropped >20% margin` (relative drop, e.g. 30% margin to 24% margin = 20% relative drop) | | **Sentiment key** | `margin_erosion` | | **Roles** | owner, finance | ## Calculation Calculated automatically from your Microsoft Dynamics 365 data. See the At a glance summary above for what the metric tracks and the worked example below for a typical reading. ## Worked example A US wholesale electronics distributor on BC. 90-day window 14 Jan 26 to 13 Apr 26 vs prior 90D. | SKU | Description | Revenue (USD) | Margin% prior | Margin% this | Relative drop | Suspected cause | | ------------------ | --------------- | --------------- | ------------- | ------------ | ------------- | -------------------------------------- | | ELEC-LAPTOP-A14 | Laptop A14, 14" | \$1,840,000 | 22.8% | 16.4% | -28% | Vendor cost rose, prices unchanged | | ELEC-MONITOR-27UHD | Monitor 27" UHD | \$620,000 | 31.4% | 22.6% | -28% | FIFO layer turnover (Q4 cost spike) | | ELEC-DOCK-USB4 | USB4 Dock | \$480,000 | 38.2% | 24.8% | -35% | Markdown campaign for clearance | | ELEC-KEYBRD-MX | MX Keyboard | \$284,000 | 41.6% | 30.4% | -27% | Channel mix: shifted to marketplace | | ELEC-MOUSE-LOG | Logitech mouse | \$182,000 | 28.4% | 19.8% | -30% | Vendor minimum-advertised-price change | | **Top 5 total** | | **\$3,406,000** | | | | | Five things to notice: 1. \*\*Laptop A14 ($1.84M revenue, 28% margin drop) is the biggest dollar impact.** A 6.4 percentage point drop on $1.84M of revenue = \$118K of margin loss in the 90-day window vs prior. The Controller's first conversation is with the vendor. 2. **Monitor 27UHD is FIFO turnover, not policy.** The card flags this with a "verify cost layer" suggestion. Before the merchant raises prices, the procurement team should confirm whether the new layer is the new normal or a one-time spike. 3. **USB4 Dock is intentional clearance.** The merchandising team ran a 30%-off promotion to clear ageing stock. The margin drop is by design; the card surfaces it so it does not get conflated with the unintended drops. 4. **Keyboard channel mix shift.** The merchant added a Walmart Marketplace channel which has higher fees + lower selling prices. Margin% dropped on the SKU even though the unit cost is unchanged. Action: route the SKU to higher-margin channels, or surcharge the Walmart price. 5. **The Vendor Minimum-Advertised-Price (MAP) change on Logitech mouse is a category-wide signal.** All Logitech SKUs likely showing similar drops. Pair with [Margin by SKU](/nerve-centre/kpi-cards/microsoft-dynamics/margin-by-sku) for the brand-level view. ## Sibling cards merchants should reference together | Card | Why pair it with Margin Erosion Alerts | | ------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | | [Gross Margin %](/nerve-centre/kpi-cards/microsoft-dynamics/gross-margin-percentage) | The headline; this card is the SKU-level cause. | | [Margin by SKU](/nerve-centre/kpi-cards/microsoft-dynamics/margin-by-sku) | Per-SKU detail; full list, not just alert candidates. | | [Landed Cost Variance](/nerve-centre/kpi-cards/microsoft-dynamics/landed-cost-variance-vs-standard) | Procurement-side root cause when COGS spikes. | | [Average Landed Cost per Unit](/nerve-centre/kpi-cards/microsoft-dynamics/average-landed-cost-per-unit) | Tracks cost-side trajectory by SKU. | | [Margin Compression Alert](/nerve-centre/kpi-cards/microsoft-dynamics/margin-compression) | Headline-level trigger when many SKUs erode at once. | | [Total COGS](/nerve-centre/kpi-cards/microsoft-dynamics/msd-cogs-total) | Aggregate COGS movement. | | [Top SKUs by Inventory Value](/nerve-centre/kpi-cards/microsoft-dynamics/msd-top-skus-value) | Concentration check. | ## Reconciling against the vendor's own dashboard **Where to look in Business Central:** > **Item Card > Statistics > Avg. Sales Profit %** (per-Item lifetime, not period vs period) > **Reports > Sales > Sales Statistics by Item** (per-Item period revenue + profit) > **Power BI > Sales Insights > Margin by Product tile** BC does not have a native period-vs-period margin-erosion view. Most merchants build a saved Excel pivot from Sales Statistics. The card automates this every 15 minutes. **Why our list may legitimately differ from BC's reports:** | Reason | Direction | Why | | ------------------------------ | -------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | | **Window selection** | Either | Card uses 90D vs prior 90D; BC defaults to fiscal-period vs prior fiscal-period. Different window lengths produce different signals. | | **Adjust Cost batch timing** | Small | Pre-batch margins are approximated; post-batch exact. | | **Sales Credit Memo handling** | Card excludes returns in margin% | Some merchants include them; configurable. | | **Multi-Company aggregation** | Card sees more SKUs | Per-Company SKU views miss SKUs that span Companies. | **Cross-connector reconciliation:** This is a BC-internal alert. The closest cross-connector finding is [Dead Stock with Active Ad Spend](/nerve-centre/kpi-cards/microsoft-dynamics/dead-stock-with-active-ad-spend), which surfaces the SKUs being marked down for clearance while ads still fire. The two cards together identify both the cost-side and demand-side margin compression. ## Known limitations / merchant FAQs **Why 20% relative drop as the threshold?** A 20% relative drop on a 30% margin = a 6 percentage-point drop in absolute margin. That is material for any business. Merchants in low-margin categories (electronics, industrial wholesale) often tighten to 10%; high-margin (apparel, specialty) loosen to 30%. **Why is the same SKU appearing on this card for 3 months in a row?** Because the prior-period baseline is rolling. If margin permanently shifts to a lower level, the card stops alerting once the drop is no longer relative-to-prior. To check, look at the trendline: a one-time drop shows as a step; a continuing slide shows as a curve. **Does FIFO turnover trigger false positives?** Yes by design, the card flags them with a "verify cost layer" suggestion in the row. The recommended action is then to confirm whether the new layer reflects current vendor pricing or a transient batch. **What about new SKU launches?** Excluded if the SKU has \< 90 days of revenue history (no prior baseline to compare against). **Multi-Company tenants: same SKU sold in two Companies, which margin counts?** Per Company, separately. The card lists `Item No. + Company Name` so the same SKU can appear twice if both Companies' margin eroded. This avoids masking Company-specific cost or pricing issues. **How does this interact with the Margin Compression Alert?** Margin Compression Alert fires at the headline level (the consolidated Gross Margin % drops > 2pp vsP). This card is the SKU-level worklist. The Compression Alert tells you "something is wrong"; this card tells you "here are the 5 SKUs causing it". **Does the card account for Item Charges (freight, customs)?** Yes. Item Charges allocated to Items roll into Unit Cost, which drives COGS, which drives margin. A spike in freight charges shows up as margin erosion on the affected SKUs. **Power BI's Sales Insights: same alert?** Power BI's Margin by Product tile shows the snapshot but does not auto-alert on relative drops. The merchant has to manually notice. This card surfaces the worst movers daily. *** ### Tracked live in Vortex IQ Nerve Centre *Margin Erosion Alerts* is one of hundreds of KPI pulses Vortex IQ tracks across Microsoft Dynamics 365 and 70+ other ecommerce connectors. Nerve Centre runs the detection layer; Vortex Mind investigates the cause when something moves; Ask Viq lets you interrogate any number in plain English. [Start for free](https://app.vortexiq.ai/login) or [book a demo](https://www.vortexiq.ai/contact-us) to see this metric running on your own data.