UOM (Unit of Measure) - Meaning, Importance, Types & Example

Published by MBA Skool Team, Last Updated: August 15, 2021

What is UOM (Unit of Measure)?

UOM stands for Unit of Measure. UOM are used to quantify the inventory items and enables to track them. It’s a physical unit (like kg, dozen, meter etc.) in which we measure and manage different items. Different UOMs can be used for different transactions i.e. purchasing UOM will be different from storing UOM. E.g. we purchase steel in terms of tons but it can be used in square meter or inch etc.


Types of UOM

There are 4 types of UOM are as follows:

Stocking UOM

It refers to the unit of measure that’s used to measure inventories in a warehouse. Stocking UOMs are used to measure goods involved in transactions like transfers, container management, picking, ordering, put away etc. It simplifies the warehouse operations.

Ordering UOM

It’s used to order goods. It can be used for sales order as well as purchase orders.

Shipping UOM

it’s used for shipping purposes and includes transactions like packaging, loading, unloading etc.

Standard UOM

It refers to UOM that remain same for all operations mentioned above i.e. stocking, ordering and shipping.


Importance of Unit Of Measure (UOM)

Unit of Measure is extremely important in inventory management as it quantifies the inventory item in terms which all stakeholders would understand.

If 2 parties are transacting on an inventory item, UOM defines how much and in what unit the quantity is expected. There would be no confusion or miscalculation in terms of price. The rates are usually defined for a particular UOM e.g. 5$ per kg or 10 euros per dozen. If there is no UOM clearly defined in the order or quotes, it will take lot of administrative effort to communicate the exact quantity.

Also UOMs need to be standardized to make sure that all stakeholders especially across countries. Some country might use Kilograms or kilometers and other country might use pounds or miles.


Example of UOM

Let us take an example of retailer ordering inventory for wheat to be sold to end customers. Now it is very important for retailer to define the UOM. If he says 200 and assumes that the distributor knows can lead to issues.

So while ordering, it should be mandatory to clearly define UOM as Kgs and make sure that the rates are selected as per kg to make sure that there is no error and issues in business.

Hence, this concludes the definition of UOM (Unit of Measure) along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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