The US wholesale trade industry is worth $11.6 trillion and continues to expand. In the US alone, there are approximately 408,000 wholesale distributors. That’s a lot. But the elephant in the room is: How are these gigantic industries operating so smoothly? And how are they managing their supply and demand? They do it by managing their inventories efficiently. One of the most important units in inventory management is PUoM and UOM. Understanding these terms will help you manage and control your stock in a standardized manner, such as the amount of goods you purchase from a supplier (in bulk, measured by PUoM) and then sell them individually to the customer (measured in UOM).
Let’s break it down!
PUOM Meaning in Inventory
What is PUoM?
In the context of inventory management, the PUoM stands for multiple words, such as Purchase unit of measure, Parallel unit of measure, Preferred unit of measure, or Planned Unit of Measure. However, the meaning is the same for all.
PUoM is a term we use in inventory management that refers to the,
A unit of measure in which a business purchases items from a supplier. For example, a case, a bundle, a roll, a pallet, etc.
In simple words, PUoM is a standardized unit that you set when buying items from a specific supplier. You can even establish multiple PUoMs for different suppliers using an inventory management system that makes it easy for a business to properly track and control its inventory.
For example, you might purchase raw materials from one supplier while buying finished goods from another. In this scenario, you must have a standard unit to store and track the inventory before it moves into the next phase of production or retail, respectively. And that’s PUoM meaning in inventory.
Take the above example: A business purchased 1 PUoM from its supplier. In this case, it depends on the business what the standard value of PUoM is for them. Here, it’s a pallet.
PUoM = 1 pallet (includes 12 cases).
On the other hand, if the business takes 1 PUoM = 1 case (includes 8 packs) and then sells it as a single unit (UOM), individual items will be measured in UOM.
Difference between PUoM and UOM
| Aspect | PUOM (Planned Unit of Measure) | UOM (Unit of Measure) |
| Definition | The unit is used for planning or purchasing inventory from a supplier (e.g., bulk orders). | The unit is used for tracking, selling, or storing inventory (e.g., individual sales). |
| Purpose |
|
|
| Primary Use | Used when ordering from suppliers (e.g., pallets, cases). | Used in daily operations
(e.g., units, kilograms, liters). |
| Flexibility | It can be different from UOM to align with supplier/warehouse requirements. | Fixed and consistent across sales, reporting, and storage. |
| Example | A wholesaler plans to purchase 50 bundles (PUOM) but sells 5,000 individual units (UOM). | A customer buys 10 units of a product (UOM = units). |
| Impact on Operations | It directly impacts procurement efficiency and cost savings (bulk discounts). | It directly impacts pricing, invoicing, and customer-facing transactions. |
What is Inventory management?
To understand PUoM further let’s first understand what inventory management is,
“Inventory management is a process of tracking, controlling, and managing stocks that a business holds.”
Inventory management is all about controlling what’s coming in, going out, and currently in stock. This cannot be done without understanding the basic units needed to keep inventory in check.
Why PUoM matters in Inventory management
Wholesalers mostly struggle with inventory management due to overstocking, which disrupts cash flow and storage costs, and understocking, which can cause stock-outs, dissatisfied customers, and backorders.
According to Myos, the average inventory accuracy in U.S. retail operations is only 63%, which can lead to stockouts, overstocking, and poor customer experiences. Myos also stated that managing overstocking and understocking issues alone can reduce inventory costs by 10%. This has increased the demand for inventory management systems (IMS) and warehouse management systems (WMS) to oversee inventory without tying up business capital in stock sitting on shelves. As for now, most US-based retailers currently hold approximately $1.43 in inventory for every $1 in sales, which clearly shows how overstocking can hold your capital unnecessarily. And how much you need to manage your inventory correctly before your business gets stuck in a poor supply and demand situation.
Standardized unit of measure
At this point, we don’t want to lock up money that we could be using for marketing, product development, and expansion in stock. That’s why we need a standardized unit of measure. With a standardized unit of measure across all departments and the inventory management system, you can:
- Error-free inventory management: With a standard unit of measure, it’s easy for you to reduce counting errors and discrepancies
- Accurate reporting: Standardized units make measuring inventory value and financial statements easy.
- Storage space prediction: Proper PUOM establishment helps in calculating warehouse space requirements
- Purchasing flow: You can predict the amount of stock needed and can place orders with exact specifications from suppliers.
- No overstocking: With all the data in hand, you can precisely measure the amount of stock needed and prevent overstocking,
PUOM in Different Inventory Contexts
PUOM in Inventory Control
With a standard unit of measure, you can accurately set reorder thresholds and safety stock levels, which is how you control your inventory.
At Seebiz inventory management, we offer these features where you can set a specific threshold for your reorder and out-of-stock inventory. When the item reaches the number you had manually set in the system, you will get a notification, and thus, you can manage your inventory in real time without leaving your customer dissatisfied.
PUOM in Inventory Systems
PUom in the inventory system helps track inventory levels accurately. Businesses can see how much each product is available by its unit of measure.
You can streamline your inventory process by integrating PUoM in various systems, including CRM and ERP.
With a PUOM set in ERP software, inventory data syncs correctly across different departments such as sales, procurement, and finance. This leads to better demand forecasting and planning.
On the other hand, by integrating PUOM in CRMs, businesses can easily convert PUoM to UOM. They can also provide better customer service by customizing offers based on how customers usually buy products (e.g., by bulk or individual items).
PUOM in Inventory Management Systems
Integrating PUoM in an inventory management system helps businesses automate their procurement processes.
This means that orders can be placed automatically when stock levels drop, reducing the reliance on manual orders.
By automating these small tasks, you can save money that you might be spending on human resources and minimize human error by ensuring that purchasing aligns with how items are stored and sold.
Setting PUoMs also helps manage bulk purchasing and cost-cutting. Buying in PUoMs allows companies to take discounts from suppliers, saving dollars and earning profits while selling individual items (Measured by UOM).
Relationship between PUoM and different inventory types
Depending on the type of business, there are several types of inventory. Therefore, PUoM specifications must align across multiple inventory types for better stock management.
- Raw materials
- Work-in-progress items,
- Finished goods (ready to sell),
- MRO (Maintenance, Repair, and Operations) items necessary to keep the business running smoothly.
- Safety stock
For each category, PUOM must be consistent. For instance, raw materials might be measured by weight, while finished goods could be counted individually or by pallet.
How PUoM is being used in different inventory management systems
There is no universal value for PUoM. It is rather a standardized unit that remains consistent within a single business (set by the business itself) but can vary between two businesses from one inventory type to another and from one inventory management system to another. For wholesalers, understanding how PUoM is used across different inventory management systems is important.
In inventory valuation, PUOM impacts calculating the Cost of Goods Sold (COGS).
Under U.S. GAAP, there are several ways to value inventory, such as First-In, First-Out (FIFO), Last-In, First-Out (LIFO), or average cost. Each method needs correct PUOM labels to accurately value the inventory.
| Inventory System | Definition | How PUOM (Unit of Measure) is Used |
| Periodic Inventory System | A system where businesses count stock manually at set times (e.g., monthly). | Ensures everyone counts items the same way during checks.
Avoids mistakes in tracking stock and calculating profits. |
| Perpetual Inventory System | A system that updates stock numbers automatically (e.g., after each sale). | Uses clear units (like “boxes” or “liters”) in software.
Keeps track of items in real time to prevent errors. |
| JIT Inventory Management | A system that orders stock only when needed to save space and money. | Measures exact amounts to avoid ordering too much.
Tells suppliers exactly what to send (e.g., “10 kg of steel”). |
| Two-Bin Inventory Control | A system that uses two bins to manage stock (one active, one backup). | It decides how much to put in each bin.
Uses units (like “packs”) to know when to reorder and avoid running out. |
Conclusion
Wholesale businesses manage large amounts of inventory on a daily, weekly, and monthly basis. That’s why setting a proper PUoM standard is essential for strategic planning and business growth.
Without proper inventory management, a wholesale business might collapse. At Seebiz, we understand the challenges wholesalers face while keeping track of and controlling their inventory. That’s why our IMS is optimized to help businesses overcome inventory issues by allowing them to set and automate multiple PUoMs for various suppliers. So you don’t have to juggle between multiple measurement standards manually.
Grow your business without a sitting inventory, reduce costs, and improve customer satisfaction through better product availability and faster order fulfillment.
FAQs
1. What does PUOM stand for in inventory?
Answer:
PUoM is a unit of measure measure in which a business purchases items from a supplier. For example, a case, a bundle, a roll, a pallet etc.
2. How is PUOM different from UOM?
Answer:
A business can set different PUoMs for each item supplier but the UOM remains consistent. For instance, A wholesaler plans to purchase 50 bundles (PUOM) but sells 5,000 individual units (UOM).
3. Why is PUOM important for wholesalers?
Answer:
Wholesalers mostly struggle with inventory management due to overstocking, which disrupts cash flow and storage costs, and understocking, which can cause stock-outs, dissatisfied customers, and backorders. That’s why setting a standardized unit across the inventory management system helps them manage their stock efficiently.
4. What would you call the inventory you plan to purchase?
Answer:
The inventory we plan to purchase is know as “Planned inventory”. And planned inventory being purchased from a supplier is measured by PUoM. For example; a wholesaler buy 50 pallets (PUoM=Pallet) but sells 8000 units (UOM = unit). Thus setting PUoM help bridging the gap between procurement and sales.
5. What are the best practices for implementing PUoM?
Answer:
- Keep PUoM consistent and aligned with supplier/warehouse metrics.
- Use CRM and other inventory software to automate conversions.
- Keep PUoM consent for a specific supplier (in case of multiple) or throughout the whole department to avoid miscommunication and failed inventory management.
6. What are the common inventory management challenges?
Answer:
When the units of measurement (PUoM, UOM) are not consistent across multiple departments, and there is no particular system to streamline PUoM to UOM conversion. As a solution, businesses must align measuring standards company-wide. Additionally, they should use inventory management systems or software that allow easy PUoM to UOM conversion to avoid mismanagement.
