How Do Items of Measure (UOM) work in ERP?

Once you go to a retailer to purchase a soda, you anticipate to have the ability to get it in a can or a bottle. However when the shop proprietor buys sodas from a provider, they organize them in packs or packing containers. It’s all the identical merchandise, a soda, however the items of measure are totally different. The truth that many objects are purchased and bought in different items is a type of issues that you simply don’t normally take into consideration — until you might be in a enterprise the place it’s obligatory. That’s the reason it’s so necessary that an ERP system can deal with totally different items of measure.

What’s a Items of Measure (UOM)?

A unit of measure (UOM) describes how the amount of an merchandise is tracked and managed; widespread items are ‘every’, ‘piece’, ‘pack’, ‘meter’, gallon’, and ‘pallet’. Usually, objects could be purchased, made, saved, costed, transported and bought in several UOMs. Due to this fact, not solely should a system help totally different UOMs, however there must be a typical for changing one UOM to a different.

UOMs are normally categorized based on their function.

• Stock: quantifies stocked objects in phrases that stakeholders perceive
• Value: used to calculate stock prices
• Manufacturing: used to deal with manufactured objects and part portions within the manufacturing course of, similar to in a Invoice of Supplies (BOM)
• Buying: the UOM wherein an merchandise is bought from a provider
• Gross sales: the UOM wherein an merchandise is bought

The place are Items of Measure (UOM) used?

There are a number of use circumstances for UOMs

1. Meals producers which have the product in different-sized containers, e.g., beer bought in single bottles (every), packs of 6, or circumstances.
2. One other UOM is ‘catch weight’. That is the place producers or distributors promote a product by weight; every product’s weight can differ, i.e., it isn’t a typical weight. An instance is a enterprise promoting hen, the place every hen piece should be bought by its weight fairly than a set value.
3. Companies that purchase and promote in several items. For instance, a fabricated metallic producer buys metal in sheets (meters) however cuts and delivers it to clients as items of metal; the identical product is bought in another way from the way it was bought.

How an ERP helps Items of Measure (UOM)

How an ERP system handles a UOM is important. Every totally different dimension shouldn’t be classed as a distinct product or SKU. As a substitute, the merchandise in stock must be the first product, and packaging variations must be a secondary consideration.

• Excellent order fulfilment: Offering a buyer with a product within the amount and packaging they need contributes to good order fulfilment, and dealing with a number of items of measure permits that. As well as, particular pricing offers could be set for sure UOMs to encourage clients to purchase objects in these items.
• Correct costing and pricing: Promoting by totally different UOMs permits a extra correct costing and pricing of merchandise.
• In Invoice of supplies: With a number of UOMs, a producer can use the unit {that a} explicit enterprise perform desires. For instance, manufacturing could measure metal output in meters, warehousing desires to depend it in rolls, and accounting prices it by tons. Within the manufacturing course of, the Invoice of Supplies could stipulate a selected UOM.
• A number of UOMs: With an ERP system that permits numerous UOMs, objects within the warehouse could be saved in several areas relying on the unit, e.g., ‘eaches’ in bins and circumstances in Warehouse A. As well as, stock valuation is made a lot simpler with UOMs as every UOM could be costed as an alternative of transformed to a base unit for calculating stock worth.
• Procurement flexibility: Assist for various UOMs permits procurement to order objects within the unit a vendor requires for a purchase order amount. The significance of conversion then is available in when changing bought portions into inventory and sellable portions. As well as, analyzing buying historical past will help make knowledgeable selections concerning the UOMs to purchase subsequent.

Utilizing UOM in ERP

Configuring UOMs in ERP permits for flexibility, together with defining business-specific UOMs and their conversions. Nonetheless, defining UOMs must be handled with the identical care and a focus because the Chart of Accounts. It’s a crucial side of an ERP implementation. A badly configured UOM will impression efficiency and effectivity. Conversely, correctly configured and used, UOMs give producers extra important alternatives for price financial savings in warehousing and procurement, improved customer support, and improved efficiency.