Units of measure and packaging levels

Any ERP

ExplanationIntroductory6 min read

In short. Every item has one base unit, and every other unit (the case you buy, the box you stock, the each you sell, the hundred you price by) is a conversion factor back to it. Most unit of measure errors are a wrong or rounded factor, so set factors carefully and check them against the supplier.

Written for Finance and operations, administrators, report writers.

A distributor buys by the case, stores by the box, sells by the each and quotes by the hundred, often for the same item on the same day. An ERP keeps that straight by storing every quantity in one base unit and converting everything else through factors. When a factor is wrong, the error multiplies through purchasing, inventory value, pricing and margin at once. Units of measure deserve more care than they usually get at item setup.

Units at a glance

Unit role	Question it answers	Example
Base unit	What is the smallest unit we track? Every quantity is stored in it	Each (EA)
Purchasing unit	How does the supplier sell it to us?	Case of 1,000 (CS)
Stocking unit	How do we count and store it?	Box of 100 (BX)
Selling unit	How do customers order it?	Each or box
Pricing unit	What quantity does a price apply to?	Per hundred (C) or per thousand (M)

Each role can have its own unit, and each unit has a conversion factor, the number of base units it contains. A case of 1,000 has a factor of 1,000, a box of 100 has a factor of 100 and the each has a factor of 1.

Converting between units

Quantity in unit B = quantity in unit A × factor of A ÷ factor of B

The packaging hierarchy

Physical goods nest. A typical hierarchy runs from the each up to the pallet:

Level	What it is	Typical identifier
Each	The single consumer or use unit	GTIN-12 (UPC) or GTIN-13
Inner pack	A small bundle inside a case, such as a box of 10	GTIN-14
Case	The shipping carton	GTIN-14
Pallet	A logistics unit of many cases	SSCC for the specific pallet

Not every item uses every level, and the counts differ by supplier. Record the counts at each level (for example 10 each per inner, 10 inners per case, 40 cases per pallet) so that your units, your put-away rules and your replenishment quantities all agree. Pack sizes are also the natural rounding points for order quantities. See Safety stock, reorder point and EOQ.

Where conversions go wrong

Rounding the factor or the cost

Unit costs for small parts are often fractions of a cent. If cost per base unit is stored with too few decimal places, extended costs drift. A part that costs $0.0425 each, stored as $0.04, is understated by about 6% on every line.

Price per hundred and per thousand

Industrial distribution often prices small parts per hundred ("C", from the Roman numeral) or per thousand ("M"). A price of $6.80 C means $6.80 for 100 pieces, or $0.068 each. The classic mistake is keying a per-hundred price against an each, which prices the order 100 times too high, or keying an each price against a per-thousand pricing unit, which prices it 1,000 times too low.

Calculator

Per-hundred and per-thousand pricing

C means per hundred and M means per thousand. Keying a per-hundred price as a per-each price overstates the line by 100 times.

Fractional units

Some items are sold in fractions of a unit: hose or wire by the foot, sheet goods by the square foot, bulk liquids by the gallon. Decide whether the base unit allows decimals, and how many. A base unit of feet with no decimals cannot record a sale of 2.5 feet, and someone will work around it by changing the quantity or the price.

Catch weight

With catch weight items, you count in one unit but price in another that varies piece to piece, such as cheese sold by the wheel and priced by the pound. Each piece's actual weight has to be captured at picking or shipping to invoice correctly. Treating an average weight as exact overstates or understates every invoice by a little, which adds up.

Supplier units that differ from yours

Your supplier's "case" may hold 12 while yours holds 24, or the supplier may invoice by the pound for an item you stock by the each. If the purchasing unit and factor on your side do not match the supplier's document, receipts and invoices will not match the purchase order and three-way matching fails. Record the supplier's unit and pack size for each supplier item, and confirm it when the supplier changes packaging.

Changing a factor on a live item

Changing a conversion factor after an item has stock, open orders or history can re-state quantities on open documents or leave history in the old unit. Treat a factor change as a controlled change. Check open purchase and sales orders, count the stock and test the change in a non-production copy first.

A worked conversion

The numbers below are invented. A fastener has a base unit of each (EA). The supplier sells it in cases of 1,000 at $42.50 per thousand (M). We stock it in boxes of 100 and sell it by the each at $6.80 per hundred (C).

Unit	Factor to each
EA (each)	1
BX (box)	100
CS (case)	1,000

Buying. A purchase order for 12 cases is 12 × 1,000 = 12,000 each. At $42.50 per thousand the order costs 12 × $42.50 = $510.00, and the cost per each is $42.50 ÷ 1,000 = $0.0425.

Stocking. The receipt goes into stock as 12,000 ÷ 100 = 120 boxes.

Selling. A customer orders 350 each. At $6.80 per hundred the line is 350 ÷ 100 × $6.80 = $23.80. The cost of those 350 each is 350 × $0.0425 = $14.875, so the gross margin is $8.925, or 37.5% of the sale.

What goes wrong. Keyed as $6.80 per each, the same line would be $2,380.00. With cost stored to two decimals as $0.04, the line cost would show $14.00 and the margin 41.2% instead of 37.5%.

GS1 identifiers

GS1 standards give each packaging level and each shipment a globally unique number, which is how trading partners and scanners agree on what a barcode means. The table summarizes the three you meet in item setup and shipping.

Identifier	Identifies	Where you meet it
GTIN (Global Trade Item Number)	A trade item at one packaging level. GTIN-12 is the number in a UPC barcode; GTIN-14 identifies cases and other groupings	Item and supplier item records, receiving scans, catalogs
GLN (Global Location Number)	A party or a location, such as a company, a store or a distribution center	EDI documents, ship-to and bill-to addresses
SSCC (Serial Shipping Container Code)	One specific logistics unit, such as a pallet	Shipping labels and advance ship notices

For units of measure, the key fact is that each packaging level has its own GTIN. Storing the case GTIN against the each, or the reverse, makes a scan of one case receive as one each. When you set up an item, map each GTIN to the unit and factor it represents.

Weights and measures rules

In the United States, NIST publishes two handbooks that most states adopt in some form. NIST Handbook 130 collects uniform laws and regulations for weights and measures, including packaging and labeling and methods of sale. NIST Handbook 133 sets out procedures for checking that packaged goods contain the net quantity their labels declare.

For a distributor, these matter when you sell by weight or measure, repackage bulk goods into smaller units or print net quantity on labels. Check your state's adoption and any product-specific rules before you repackage.

Before you set up items

Choose the base unit as the smallest unit you will ever buy, stock, sell or count. It is hard to change later.
Set every factor from the supplier's documents, not from memory, and record the supplier's own unit per supplier item.
Store unit cost with enough decimals for your cheapest items, and check that extended values round only at the line total.
Make pricing units explicit on price sheets and quotes, so "C" and "M" prices are never read as each prices.
Map each GTIN to its packaging level and test a receipt scan of an each, an inner and a case.