System Dynamics Corporation

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UNIT OF MEASURE EXPLAINED

A unit of measure is assigned to all inventory items and must be defined before a product can be entered.  Each product will have a stocking unit of measure, sales ordering unit of measure and a purchasing unit of measure. 



Using Unit of Measure Master maintenance - IN0300 the unit of measure can also have automatic conversions to other units of measures by way of a conversion factor.   The definition and use of these factors is ONLY used in the product master maintenance – IN0100 when entering NEW products for the first time.  The conversion factor will automatically populate the Sales reporting to stock factor and Purchase to Stock factor fields when entering a new products should the selling and purchasing units of measure be different from the stocking units of measure.  This can be overridden. 



ALL applications within Dynamic3i make use of the factors stored on the Product file only for any conversions the inventory item may require.
Product File Entries (IN0100)
Units Per Case

Enter the number of units in a case, if applicable. This field is for informational purposes only unless Route Accounting is being used.  If the industry directory (route_acct in the directory code on the User Master - GB4200) is set to flag route accounting functionality then the Order Entry application prompts for Quantity Case and/or Quantity Units.   Using the Units per case from the Product File entry as a multiplier a calculation of the actual shipping quantity will be made by using these fields and auto-populated into the Qty. Ordered field.   If item is not sold in cases then entry of Quantity Units will be allowed.

Note: Unit of Measure changes to existing inventory stock can have ramifications for the company financial system. See the note at the end of the documentation help for Product Master Maintenance – IN0100 for Suggested Procedure for a Unit of Measure Change.

Stocking Unit of Measure

Enter the unit of measure in which the product is stocked. All inventory transactions will be recorded in this unit of measure (ie. Adjustments, Physical Count, Transfers).

Care should be taken when deciding on what unit to stock in to avoid rounding problems. For example if you normally store a product in a box of 12 but also wish to buy or sell by individual units, you should pick a stocking unit of ‘each’ instead of a ‘box’. Otherwise problems will occur such as if you want to sell 5 individual units. Quantities are stored and calculated to 3 decimals. If there were 12 items in a box you would have to use an ordering factor of .083333 (factors are stored to 6 decimals). This would result in rounding problems because selling 5 units would end up relieving inventory of .417 (5 times .083333) units. Another sale of 5 units would relieve another .417, leaving .166 on hand. Trying to sell the remaining 2 would result in an error because it would try to relieve .167 and you do not have that much left. Because of this potential for rounding problems, programs will not allow a factor that does not round evenly into 3 decimal places. In general, you should always stock in the lowest unit you would ever buy or sell the product.

Sales Reporting Unit of Measure

Enter the unit of measure in which sales analysis is to report the units sold. This is valuable if the stocking unit of measure is in, for instance, pack sizes (12 pack and 24 pack size). If the sales reporting unit of measure is set to the stocking unit of measure 2 units sold of the 12 pack would look more favorable than 1 pack of 24. If the sales reporting unit of measure were weight, the two products would be reported as having sold the same amount.

Purchasing Unit of Measure

Enter the unit of measure in which the product is purchased.

Sales Reporting / Stock Factor

Enter the factor by which this product is reported in sales analysis as compared to how it is stocked.   An example may be that an item is reported in sales as cases and stocked in each.  With 12 in a case this factor would be 12

Purchase / Stock Factor

Enter the factor by which this product is purchased as compared to how it is stocked. Through receiving in purchasing, the quantity received will be multiplied by the purchase/stock factor and the result will be updated to stock on hand. The system will default to 1.  An example may be that an item is purchased from a supplier in cases and stocked in each.  With 12 in a case this factor would be 12.  When 1 case is purchased then 12 are received into stock.

Vendor Product Pricing entries (PO0300)

Vendor Price Unit
Enter vendor sales unit of measure.

Vendor Price / Purchase Factor
The Vendor Price Factor is used to convert the Purchase Order price to the vendor's unit price. It is used to calculate and print extended cost/price based on the vendor's unit of measure.

Purchasing Unit
Enter purchase unit of measure.

Purchase / Stock Factor
Enter the Purchase Stock Factor for the purchase unit.

Pricing Example using 3 different Unit Of Measures:
Assumes UOM’s are defined to the system

Suppose an item is:             

 

UOM
Stocked in each            : ‘Ea’,

Purchased in Case       : ‘Cases’
Vendor priced in Skids : ‘Skid’


Required information from Vendor:

Number of Items per case:  12
Number of cases per skid: 60
Vendors supplied price per skid: $864

Using this information you want the Purchase order entry to automatically calculate the PO price down into a dollar value per ‘Case’.  When the PO is received you need to have the inventory increased by the total number of units of the item.

With reference to the above diagram entries would be made as follows:

Vendor Price Unit would be entered as ‘Skid’.



To calculate the Vendor Price / Purchase Factor (VPPF) in this scenario you simply divide 1 by the number of stocking units in the Vendor pricing units.  In this case It is 1 divided by 60 as it was stated that there was 60 cases per skid.  For precision the entry would be .016666666666 into the Vendor Price / Purchase Factor field.

Purchasing unit would be ‘Case’.

To calculate the Purchase to stock factor (PSF) in this scenario you simply multiply 1 by the number of stocking units in the purchasing unit of measure.  In this case 1 multiplied by 12 as it is stated that there are 12 items in each case.

When the actual pricing record is entered for the item based upon the warehouse location the system will automatically increase the ‘Price Per’ factor in order to maintain precision.   In this example, after entry of the effective dates etc. and entry of $864 in the Vendor Price will result in the system calculating a ‘Purchase Price’ of  $14400 with a ‘Price Per’ of 1000 (In Vendor Price Unit)

When a Purchase Order is entered for this item for a quantity of 5 the system sees and calculates/defines a Purchase Order as follows:

A Purchase Order in the amount of $72.00.

Quantity purchased of 5 at a cost of 14400 per 1000 (5 * 14400/1000), assuming no taxation on the item.