When configuring inventoried items in Microsoft Dynamics GP, we need a clear understanding of the types of transactions which occur against inventoried items. You purchase items, sell items, transfer items between sites and bins, consume items during production, and produce items. That is A LOT of transactions. But…if you think about it, you probably already enter these transactions using Microsoft Dynamics GP. So why not let Dynamics GP track your inventory for you?
Okay, so this is a great idea, right?! But where do you start?
Obviously you need to know what items are considered inventoried items and you need to know where your items are located. However, just as important is your unit of measure schedule! We just looked at six transaction types which may occur against an item, but each inventory transaction can occur in different units of measure. You may purchase a box of 50 units but consume 1 unit for each finished good that is produced. Or, you may purchase a box of 50 units from one vendor, purchase a box of 100 units from another vendor, but sell a case of 25 units.
Putting all of this together – multiple purchases, multiple sales transactions, multiple manufacturing orders, all with various units of measure within one period – can be quite confusing! Consequently, why setting up a correct unit of measure schedule is so important!
Now you may be wondering how or where to even begin? Well, the first step to setting up a well-designed unit of measure schedule would be to ask the following questions about your company’s inventoried items:
- If using manufacturing, what is the lowest unit of measure an item(s) can be consumed? Each, mL, grams…?
- How are the item(s) stored in warehouse and how are the item(s) counted during cycle counts?
- What are the different purchasing units of measure for the item(s)?
- In what units of measure can the item(s) be sold?
- In what units of measure can the item(s) be transferred to different sites or bins?
After asking these questions, you can begin building your unit of measure schedule. First, determine the lowest unit of measure. Now consider the different purchasing, sales, and/or consumption units of measure for the item(s). Last, determine each unit of measure’s equivalency to the lowest unit of measure….Did that makes sense? Probably not, so let’s get to the example already!
I have three items: item A, item B, and item C; all which have a lowest unit of measure schedule as each. Item A and B are purchased and consumed during a manufacturing process. Item C is a product that is both purchased and sold product. When the items are purchased, they are purchased in different units of measure. The chart below represents the lowest unit of measure, default purchase unit of measure, consumption unit of measure, and the selling unit of measure for items A, B, and C.
To include all units of measure when looking to create a Schedule for the base unit of measure Each, we would need a unit of measure for Each, Case of 25, Case of 50, Pack of 10, and Pack of 50. Let’s create a Unit of Measure Schedule ID called EACH (see schedule screen-shot below) with a Base Unit of Measure set to Each. Next we need to define the unit of measure lines. The first line will be the base unit of measure so we create Each = 1 Each. The following lines will define the alternate units of measures to its equivalency in “Each”. Notice the additional lines are set to define Case 25 equals 25 Each, Case 50 equals 50 Each, Pack10 equals 10 Each, and Pack50 equals 50 Each.
This EACH Unit of Measure Schedule ID now will allow a user to purchase item A in a case of 50, purchase item B in a case of 25, purchase item C in a pack of 10, consume items A and B during production in one each, and sell item C in a pack of 50. Not to mention by defining all units of measure down to the base unit of measure, you are allowing Dynamics GP to track your inventory quantities accurately through each item transaction. Ahh-mazing – you probably didn’t even know Dynamics GP had this functionality!
But before we finish, there are just a few additional notes to make when designing your Unit of Measure Schedules:
- Pay attention to the Decimal Places Quantity in your Unit of Measure Schedule ID. In our example for EACH, we set this equal to zero. However, if you use Liters and need a unit of measure for Milliliters, will want to change the quantity decimal places to four or five.
- You can setup multiple Unit of Measure Schedule IDs – so you could could setup an ID for EACH, LITERS, GRAMS, or others that you need. However, only one Unit of Measure Schedule ID can be assigned to an item. This is why it is important to understand all the different measurements used to record an item transaction (purchased, consumed, or sold).
- If you want to create a measure such with an equivalency in something other than the base unit of measure, you must still create the equivalency in the base unit of measure. Continuing with our example, if you want to create Pack50 equals 5 Pack10, you must first create Pack50 equals 50 Each, then create Pack50 equals 5 Pack10.
- When using units of measure with lot numbered items, even though these items can be transacted upon in various unit of measures, the lots numbers will need to be assigned by the base unit of measure.
We looked at only three items whereas you probably have hundreds of items. So you can imagine that It takes dedicated time to design an accurate and useful unit of measure schedule. However, in doing so you allow the system to accurately track your inventory balances. In our next blog, Unit of Measures Design with Item Configuration Equals Inventory Accuracy, we will explain in additional detail how the combination of unit of measure schedules and item configuration allows Dynamics GP to accurately track inventory.
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