Learning to better manage your inventory can improve your company's efficiency, profitability, and ability to satisfy customers. How can you do that? One way is to master the purposes and meaning of UoM.
Read on to find out the UoM meaning and examples, learn the best practices for UoM inventory tracking, and see our list of helpful software solutions.
What is a UoM in Inventory: UoM Meaning
Inventory UoM stands for units of measure and is a standard way to count the number of units in your inventory. Depending on your business, a UoM might be a bolt, a piece, a liter, a foot, etc. Units of measure help you track your stock, determine what you have coming in from suppliers, and see how much you've sold. You may use different UoM types depending on the stage of the product – but we’ll discuss them later.
UoM Examples
Suppose your restaurant orders 20 butter. You could mean 20 blocks of butter, 20 pounds of butter, or 20 cases of butter. Unless you've clarified the UoM correctly, you won’t receive the quantity of butter you expect.
Let’s take a look at the examples of UoM. Depending on the nature of your business and the products you sell, UoM can be very different. Here are some common UoMs:
- Weight – Typical measure units such as kilograms (kg), pounds (lb), or ounces (oz). This is common for products like produce, meat, or bulk goods.
- Volume – Units like liters (L), gallons (gal), or fluid ounces (fl oz). This is often used for liquids or items sold by volume, such as beverages or cleaning products.
- Length – Used for items measured by length (fabric, yarn, cables), such as meters (m), centimeters (cm), inches (in), or feet (ft).
- Area – UoM for items measured by area, such as square meters (m²) or square feet (ft²). This is common for flooring materials or tiles.
Other UoMs your business can use include:
- Piece – Represents individual items: a jar of jam, a pair of pants.
- Bolt – A unit for hardware fasteners: a bolt of screws.
- Dozen – Used for items sold in batches of twelve: eggs, cat food cans, pens.
- Pack – A grouping of items, which may vary in quantity depending on the product: a pack of batteries.
- Case / Box – Contains multiple units of an item bundled together for easier handling and shipping but sold separately. For example, a case of water bottles can contain 24 bottles.
UoM Types
The UoM you use for tracking your item may change depending on the context and the type of transaction the item is involved in.
Imagine you purchase flour for your bakery in sacks (UoM: Piece) from your supplier. However, in your production process, you stock and measure the flour in kilograms (UoM: Weight) to ensure accurate recipes. Then, when shipping your baked cookies for sale, you might switch to counting the number of packed cookies (UoM: Box).
These types can vary according to their specific functions and operational requirements. Let’s take a look at the key 4 unit of measure types.
Stocking UoM
Warehousing departments use stocking UoMs in storage management. The UoM helps quantify transfers, simplify order picking, and aid in optimizing bin usage. For instance, stocking UoMs can allow you to precisely calculate how many individual items will fit into a particular storage bin or shelf.
Ordering UoM
Ordering UoMs are used when buying from suppliers or selling to consumers. Unlike stocking UoMs, they may differ based on the transaction context. For example, you might sell fasteners by the piece (individually) but stock them by the box (in bulk) for logistical efficiency and cost-effectiveness.
Shipping UoM
The shipping UoM is used for logistics functions that include packaging, loading, and unloading of goods. A simple example of a shipping UoM might be a pallet, which serves as a standardized unit for transporting and handling goods across supply chain nodes.
Standard UoM
When an item has a standard UoM, its measurement will stay the same regardless of the process or context you are referring to – ordering, shipping, or stocking. This consistency makes for simpler communication and coordination within the supply chain, preventing discrepancies and boosting operational efficiency. For instance, if a product's standard UoM is "meter," it will be consistently measured in meters when it's being ordered, shipped, or stocked.
Why Track Inventory UoM?
UoM tracking has many benefits for your company:
- Clarity. The primary benefit of inventory UoM is that it eliminates confusion when discussing inventory quantity internally and externally – with both suppliers and customers. This is especially important when managing inventory in multiple locations.
- Pricing consistency. Effective UoM tracking ensures consistency in unit pricing across different stages of inventory management. This helps in comparing prices of suppliers or product variants, potentially reducing procurement costs.
- Business efficiency. Tracking UoM can help avoid time and money losses. You surely don't want to stop an assembly line because you needed 100 cases of an item and received only 100 pieces.
- Meeting the product demand. An obvious benefit is ensuring you have the items your customers need. Providing goods to customers when they need them is essential in every industry but is more critical in healthcare and public safety.
- Smart storage. Tracking UoM can also ensure you use your storage space efficiently, optimize your bin location strategies, and minimize waste.
Finally, UoM tracking can help you make an informed strategic decision about your business by allowing for accurate sales and forecasting analytics.
UoM Tracking Best Practices
Companies that use UoM effectively share several best practices.
1. Keep Abbreviations Consistent
Ensure that all abbreviations for UoMs are in lowercase. For instance, use "kg" for kilograms and "ft" for feet. Consistency in abbreviations helps avoid confusion and streamlines communication.
2. Maintain Singular or Plural Consistency
Use the same UoM format consistently, whether singular or plural. For example, opt for either "2 kg and 200 kg" or "2 kgs and 200 kgs." This provides clarity across all inventory records.
3. Consistency in Pricing
Make sure your unit price is consistent with the chosen UoM. For example, if you're selling a product in units (e.g., each, dozen), your pricing structure should reflect this. Each unit should have a fixed price, and this price should be communicated to customers.
4. Standardize UoMs Across Functions
If different departments or multiple warehouses within your company use different UoMs for the same item, use the UoM used for procurement as the default one. Establish and maintain a consistent UoM for internal accounting processes, too. Consistency in UoM will minimize errors in collaboration between departments and simplify financial tracking and reporting.
5. Avoid UoM Conversions
Whenever possible, avoid converting UoMs. If conversion is unavoidable, create a comprehensive reference guide detailing the conversion factors. Ensure that all team members have access to and adhere to this guide to maintain consistency in UoM usage both internally and with suppliers.
6. Create SKU (Stock Keeping Unit) Numbers
Create unique SKU codes (see the guide on how to do it) and assign them to each product variant, specifying the unit of measure associated with it. This helps to accurately identify and track different units of the same product.
7. Leverage Barcode Scanning
Use barcode or RFID technology to label each product with its SKU code and unit of measure. Barcodes can encode UoM information, making it easier to accurately capture and record UoM data.
8. Train Your Staff
Conduct thorough training sessions to educate your staff on UoM tracking processes. Even the best UoM tracking in the world is useless if staff lacks understanding of the process.
9. Rely on Inventory Management Software
Invest in inventory management software that supports tracking inventory UoM. Many modern systems allow you to set up different units of measure for each product and even automatically convert between them when needed.
UoM Tracking Software: Spreadsheets vs. Systems
You can track UoM using one of two main types of software. Spreadsheet software is relatively easy to use to track UoM inventory. You can set up your spreadsheet with two columns dedicated to each UoM type. In the first column, you input the specific stocking UoM, while the second column records the quantity of UoM contained within each stocked container.
For example, you are handling paint. You buy the paint by the box, so your first column will have the number of boxes. You sell it by the piece so the second column will have the number of paint jars in each box.
While spreadsheet software is relatively easy, it has its drawbacks. As your business expands, you'll find yourself needing to manually update a growing number of items. This manual updating process can be time-consuming and prone to errors, especially when managing a larger inventory or making frequent updates.
Inventory management systems provide an automated way to track UoMs. The system will help you link a specific UoM to each item and use the appropriate unit throughout your inventory management process. Many such systems also let you and your team update and manage inventory from any device or location.
Regardless of which tracking system you choose, make sure you have manuals and procedures to use the system successfully.
Key Takeaways
Inventory Units of Measure (UoM) help clarify stock quantities or ordering preferences and can vary based on context, allowing businesses to order in bulk and sell individually. Efficient UoM practices ensure optimized warehouse space, pricing consistency, and meeting customer demands.
To make the most of UoM, maintain consistency in naming and base pricing, standardize UoMs across different functions, and try avoiding UoM conversion. Leverage spreadsheets or – if you’re a larger business with multiple warehouses – a dedicated inventory management system for precise and streamlined UoM tracking.
