SKU/UOM Conversion

Application Note

SKU Conversion(Unit of Measure Reduction)

The SKU (stock keeping unit)/UOM (unit of measure) Conversion process is used to convert between part
numbers which represent different units of measure for the same physical item.
For example: The SKU Conversion program allows you to convert the case item number for a specific
item into the each part for the same item. This transaction would have the effect of removing 1 of the case
parts from inventory and putting 24 of the each part into inventory (assuming the case contained 24 of the
items).
The SKU/UOM conversion program can be used to handle situations where you use a different unit of
measure when you purchase an item than you use when selling the item. The SKU conversion program
can also be used to restock a small unit of measure item number from a larger unit of measure item
number for the same part – to handle situations where you may sell the item in both the large (case) and
small (each) unit of measure.
SKU or Unit of Measure Conversion is performed using the SKU Conversion (Unit of Measure Reduction)
program (FV079S03). This program is currently only available in the StreamII Application, and it is
normally located on the Bill of Materials Menu in that application. The SKU Conversion (Unit of
Measure Reduction) program allows you to perform the following tasks.
 Define the relationship between inventory items that represent different units of measure for the same
part.
 Process SKU conversion transactions.
When the SKU Conversion program is selected from the menu, the system activates the program and
loads it with any SKU Conversion records that have been set up in the system.
SKU Conversion records are stored in the Cross Reference File. Cross Reference records are used for
SKU conversion and for various other purposes in the system. Cross Reference records can be set up in
order to associate customer and vendor inventory item numbers with your internal item numbers. This
allows you to use to use the customer or vendor item number when placing orders for the vendor or
customer. Cross Reference records are also used to associate alternate item numbers in your system. An
alternate item number is an item that can be substituted for another item when the desired item is not
available.
The Cross Reference records that are used by the SKU conversion program are assigned a type of “S” and
they store the following information.
Item#: The top level item that is being reduced or split into smaller units of measure.
Alt Item#: The lower unit of measure item that is being increased by the transaction.
Type: The Cross Reference record type. Type “S” Cross Reference records are used for SKU Conversion
transaction processing.
Status: The Status of the Cross Reference record. Status “A” or “Active” cross reference records are
created by the program.
Ratio: The ratio of lower level items to the top level item. For example: If the top level item represents a
case of 24 units of the lower level part (the each item number), the ratio field in the cross reference record
should be set to 24. This indicates that reducing the top level item by 1 should produce 24 of the lower
level item.
The SKU Conversion program allows you to process transactions for existing SKU Conversion Cross
Reference records and it also allows you to create new SKU Cross Reference records in the program.
Creating New SKU Cross Reference Records
If a Cross Reference record has not yet been set up for the SKU conversion that you wish to process, you
can create the necessary record as you process the transaction.
 SKU/UOM Conversion
Application Note
You may do this by pressing Insert in the SKU Conversion program. When you press insert, the system
automatically prompts you to select the top level or large “UOM item” that will be converted or reduced,
and the lower level or smaller UOM item that will be increased by the transaction. Once you have
selected the appropriate items, the system displays a panel which shows the selected items and
descriptions. This panel, which is displaying the Cross Reference record that the program is creating, will
display an “S” in the Type field and an “A” in the status field. The Ratio field in the panel will be loaded
with a 1. At this point, you should enter the correct ratio for the selected items (i.e. 24 if you are
converting a case with 24 of the items in it to an each part) and then press the Save key to save the new
record. At this point, the new record is saved in the Cross Reference file and it will be available for
transaction processing.
You can also add an optional comment for each SKU Conversion Cross Reference record (1 for each of the
large unit of measure items). This comment can be used to store specific information that applies when
the large unit of measure item is used during SKU conversion processing. The Comments are created
and maintained in the SKU Conversion program using the Notes option that is available in the program.
Editing SKU Cross Reference Records
If you need to modify an existing SKU Cross Reference record, you can do so by selecting the record in
the SKU Conversion/UOM Reduction program and using the Zoom option. This action will cause the
system to display an edit panel and load the panel with the selected record. At this point you can modify
the record as required (normally only the ratio field is modified) and save the change with the Save key.
You may also delete an existing record in the program (assuming that you have been granted the
appropriate security rights) by highlighting the record in the program and using the Delete option to
permanently delete the record. This option would be used to remove records for parts that you no longer
process or to remove a record that was entered with incorrect item information (the large and small unit of
measure item numbers cannot be edited in the panel).
SKU Conversion Processing
Once the required Cross Reference record has been created, you can process an SKU conversion on the
system in the following manner.
1. Select the SKU Conversion program from the menu, and verify that the cross reference record has
been set up for the items you wish to process. If the cross reference record does not exist, create it in
the program as described in the previous section.
2. Select the appropriate SKU Conversion record and press Enter. At this point the system will prompt
you for the quantity of the Large UOM item you are converting. The system will then prompt you for
the bin that the large unit of measure item is being pulled from.
3. Once you have selected the bin for the large unit of measure item, the system will prompt for the bin
that the small unit of measure items will be put into (if a bin has not been defined for the smaller
item, you should create the bin using the Insert Key in the Bin Location list). Once you have created
and or selected the lower unit of measure item bin, the system processes the transaction as follows.
 The system decreases the quantity of the large unit of measure item by the quantity specified.
 The system increases the quantity of the small unit of measure item by the amount of the top level
item processed multiplied by the ratio in the cross reference record (this would be 1 multiplied by
24 if you were converting a case part to an each part).
 The system calculates the cost of the lower unit of measure items by taking the large UOM item
cost and dividing it by the ratio in the cross reference record. If the large UOM item was costed
at 240 and 24 items were pulled from it, the small UOM items would show a cost of 10 each for
the transaction.
 The system calculates a new average cost for the lower UOM item and it updates the inventory
item in all locations which are in the current division with the new cost. The calculation method
used is. Take the total quantity on hand for the low UOM item multiplied by the average cost of
the item to calculate the value on hand prior to the transaction. Add the quantity multiplied by
the transaction cost from the SKU conversion. This is the new extended value on hand for the
 SKU/UOM Conversion
Application Note
item. Divide the new extended value on hand by the total quantity of the lower UOM item in the
current division and update the average cost of the item in all locations in the division with the
result. This logic ensures that the cost of the item is normalized in all locations in the current
division and that the inventory subledger still is in agreement with the general ledger control
account after the transaction is processed.
SKU Processing Examples:
Cable.
 Your company purchases rolls of cable for $600.00 and this roll of cable contains 1000 feet
(the cost per foot is .60)
 Your company sells the same cable by the foot, and there are two unique inventory items in
the system for the part (the roll unit of measure, and the foot unit of measure). You may
have on hand quantities for each of these parts at any time.
 You currently have 100 of the foot uom item on hand in all inventory locations – at a cost of .
75 per foot. You have orders for a total of 425 feet of cable (total orders of 425 for the foot
uom item).
 You also have two of the roll uom item on hand (with a unit cost of 600 each).
 Someone in the warehouse or in purchasing, decides that one of the roll items needs to be
converted to the foot item (to complete open orders for the cable foot uom item). This
decision may be based on purchasing reports (which indicate you are short of the foot uom
item) or on a physical check of the cable stock in the warehouse).
 The operator selects the SKU Conversion (Unit of measure reduction) program from the
menu.
 An SKU conversion record is set up to process the items (if it has not already been setup)
The SKU conversion record defines the top level item to be reduced (Cable – Roll), and the
lower uom item to be increased (Cable – Foot), and the ratio to be used when converting the
roll item into the foot item (1000 in this case).
 The operator highlights the cross reference record for the items, then presses Enter. The
program prompts the operator “Enter the number of units of the large UOM item you are
converting” and they enter a quantity of 1. The system then prompts the operator to select
the bin that the large uom item should be pulled from, and the bin that the smaller uom
quantity should be put away in (you should create a new bin for the lower uom part if the
correct bin is not already present when you are prompted for it – you can do this “on the fly”
if necessary using the Insert key in the Bin Location list).
 Once valid bins have been selected, the program updates the items as follows.
 The system reduces the on hand quantity for the roll item by 1
 The system increases the quantity for the foot item by 1000
 The system updates the bin records for the large and small uom item.
 The system recalculates the cost for the small uom item as follows
 Old quantity * unit cost (100 * .75) + New quantity * unit cost (1000 * .60) = Total
extended value (75.00 + 600) or 675. Total new extended value / total new quantity
(675/1100) = new average cost for small uom item (.6136).