Over the past 30 years working in manufacturing and consulting, one problem that I encounter with almost every client is incorrect units of measure (UOM). Having inaccurate or vague UOMs result in inaccurate inventories, material shortages, incorrect shipping and receiving, and bill of material (BOM) inaccuracies, problems that often are difficult to detect and challenging to correct.
For example: Your company purchases wire in rolls. When it is first set up in inventory, the vendor you use has the wire only in 100-foot rolls, so the item is created with a UOM of “ROLL.” Later, you switch vendors and the new one has 100-foot and 1000-foot rolls. You send out a purchase order (PO) for 10 rolls. The material arrives at your receiving dock and there are, indeed, 10 rolls, but the rolls are 1000 feet per roll, for a total of 10,000 feet. Clearly this is not what you wanted, and unless your receiving team is paying attention, this error won’t be identified until much later when you get the invoice. A better solution would have been to create a more specific unit of measure, such as “ROLL 100 FT.” This is very clear on a PO, pick list, bill of lading (BOL), invoice or other shipping document. Once a problem has been identified with a UOM, it can be difficult to change if the UOM already is on an open PO, sales order, BOM or inventory transaction. Many systems will not allow you to change a UOM once it is in use. This is why it is important to think carefully when setting up your units of measure.
Many systems let you to group related units into groups, classes, sets or schedules, which lets you define common alternates and conversions in your grouping and assign the group to many items with similar needs. This saves time and simplifies managing units across many items. For example: If wire, rope and tape come in feet or meters, you can create a grouping for Linear Measure that has the predefined equivalents as in the table below.
|Unit of Measure
||Unit of Measure
As you can see, you can keep adding to the grouping as your needs change without the need to update many related items. This functionality provides a lot of flexibility, allowing one item to be purchased in 1000-meter rolls, inventoried in feet, used in a BOM in inches and sold in yards.
While this is great for units of measure in the same family, use caution when crossing families. For example: Bulk fluids often are sold by the pound and used by the gallon, liter or ounce. When you convert from weight to a liquid measure, the specific gravity of the material being measured becomes significant. A cup of water is 8 ounces, but one cup of flour is not. In such a scenario, you can define a UOM grouping for one or more related items that takes this into account (i.e., items that use the same specific gravity can share a common grouping).
Other UOM considerations:
- Many systems require you to set a default or base unit of measure for each item or grouping. This is usually the unit of measure you use to count inventory, rather than the one you use to buy or sell products.
- Some systems allow you to set different default UOMs for sales and purchasing or associate-specific UOMs to vendors and customers. Your system may allow you to restrict specific UOMs to purchasing or sales (e.g., widgets are purchased by the CASE and sold by EACH, but purchasing in EACH is not allowed).
- You may need specific units for your sales price lists. For example:
- For a case of 24 widgets, the case price is $24.
- For a half case of 12 widgets, the price is $13 (not a half of $24 or $12).
- For a box of six widgets, the box price is $7.
- For a single widget, the price is $1.50.
- Don’t use EACH too broadly, and be careful that you don’t end up with “½ Each” or “Eaches” in inventory; EACH should not have decimal places. This may sound odd, but it is the most common UOM mistake I see. Here’s how it happens: Someone sets up a new item only bought in cases from one particular vendor. Rather than setting up a new unit of measure, however, they just assign it to “Each” or “EA.” The vendor considers a case the same as an EACH since they sell it only one way. No problem so far, but what if you need one item from the case and leave the rest in inventory? Rather than fixing the unit of measure for the item, decimals are allowed for EACH. Now there is a problem.
There are many other situations, but if you consider how you will use your units of measure carefully when setting up UOM groups and new inventory items, you will save yourself a lot of headaches later.