In this topic, you will learn how to assign units of measure to items by using unit of measure groups and describe the relationship of different types of units of measure for items in sales, purchasing and inventory.
I/ Business Scenario
Items are often purchased and sold in different units of measure. For example, paper may be purchased in cartons or pallets and sold in packs or 6-packs.
The company has set up unit of measure groups in order to add consistency and ease to assigning an appropriate set of units of measure to each item. An item’s assigned unit of measure group will contain all the different units that the item needs in purchasing, sales and inventory.
Unit of measure groups help better manage how similar items are handled in sales, purchasing and inventory processes by setting up relationships between the units used in different processes.
II/ Basic Units of Measure
Typically in business, an item may be sold in different types of packaging than how it is purchased.
In the graphic, we see an example for paper. Vendors sell the item in cartons or pallets and we sell the paper in either packs, small packs or groups of 6 packs.
Each item master record holds the units of measure used for purchasing, storing and selling that particular item.
When you set up the item, you assign a group containing the units of measure commonly used for this type of item. The group “manual” is provided for upgraded companies and used as the default until another group is assigned.
1/ Units of Measure in Items
When you create an item master data record, you assign a unit of measurement group.
The group contains all the relevant units of measure that you need for the item as well as the relationship between the units.
In our example, we can assign the Paper UoM group because it has all the measures we need.
2/ Grouping Units of Measure
We saw that a UoM group contains a set of relevant units of measurement.
Let us take a step back to see how they are made.
There is a table with a list of all possible units of measure. This is the Global UoM. We see this list on the left of the graphic.
Single items from this table are then grouped together into a group.
In our business example, we set up a group for paper.
Within a group, you define the relationships between the listed measurements based on conversion rules.
On the right we see the measurements that make up the UoM group “paper”.
Note that the measurements listed in the Global UoM table can be assigned to multiple UoM groups.
3/ One UoM Group Can Be Assigned to Multiple Items
OEC Computers can use this same unit of measure group for several different types of printer paper that they sell.
Once a UoM group is created it can be assigned to several item master data records.
In our graphic, the UoM group for paper is assigned to 3 item master records that need the same type of relationships between the UoMs in the group.
Because the paper UoM group has been defined flexibly, it can be used for several different types of printer paper that the company sells.
4/ Units of Measure in the Item Master
A unit of measure group can be very useful for managing all the functions that relate to item size.
After a unit of measure group is assigned to an item master data, you can then define barcodes, pricing and packaging for the item relating to each unit of measure within the group.
5/ Units of Measure Types for an Item
In the Item Master Data we define three different Unit of Measure types:
- The Inventory Unit of Measuree -This single unit of measure is used for posting all inventory transactions.
- The inventory unit of measure cannot be changed once transactions were made for this item.
- Note that the Inventory Unit of Measure field in the Item Master Data does not appear if the Manual group is assigned.
- The Sales Units of Measure - One item can have many Sales units of measure related to it.
- Each of these units of measure can be used in a sales or inventory document.
- The Purchasing Units of Measure - One item can have many Purchasing units of measure related to it.
- Each of these codes can be used in a purchasing or inventory document.
All inventory tracking and reporting is done in the inventory unit of measure. Availability checking is done for the inventory unit of measure.
6/ Units of Measure in Documents
In our business example, we set the inventory unit of measure to pack. Therefore, pack will appear as the unit on all inventory transactions.
We set carton for the purchasing unit of measure because this is the typical unit used by our vendors.
Regardless of how we buy it, we may choose to sell a product with different packaging. In our example, paper is most often sold packaged as a 6-pack. Therefore, we set the sales unit of measure to a 6-pack so that this measurement is the default for our sales documents.
You can overwrite the unit of measure and the items per unit in marketing documents as needed. For example, you usually buy from a vendor who delivers an item in cartons, each carton contains 12 units. However, you are trying out a new vendor who will supply the item in crates. Each crate contains 20 units. Since the purchasing unit of measure is a carton, the unit of measure in the purchase order defaults in as a carton. As long as the crate unit of measure belongs to the Paper UoM group, you can override “carton” and change the unit of measure and the items per purchase unit to “crate” in the purchase order without affecting the item master record. If the change is permanent, you can also make the same change to the default purchasing unit of measure in the item master data record.
Remember that regardless of which purchasing unit or sales unit is used in a document, the postings are always made in the inventory unit of measure. Therefore using our business example, a goods receipt PO for 1 carton will create an inventory posting for 12 packs, since each carton contains 12 packs.
Here are some key points:
- Units of measure (UoM) are defined globally for a company.
- A unit of measure group contains a list of units of measurement and defines relationships between the listed units of measurement based on conversion rules. When you create an item master data record, you assign a unit of measurement group.
- A flexibly-defined unit of measure group can be assigned to multiple items and will contain all the relevant units of measure that you need for these items.
- A unit of measure group assigned to an item can manage functions relating to item size such as barcodes, pricing and packaging for the item relating to each unit of measure within the group
- In the Item Master Data we define three different types of unit of measure types: inventory, sales and purchasing units of measure. An item may have multiple sales and purchasing units of measure.
- Each item has a single inventory unit of measure assigned for posting all inventory transactions. This setting cannot be changed once transactions are made for the item.