How does the conversion rate affect Inventory?

An item's unit of measure (UOM) conversion rate is the amount of the standard unit of measure that is packaged for sale. For instance, a case of sodas may contain 24 cans. Can or each may be the "standard" UOM, and case will be what's called the "purchasing" UOM. The conversion rate will be 24. You may see this noted by Systems Management as "24:1."

The inventory module will always default to the standard UOM, so when putting the case of sodas into inventory, it will show as a quantity of 24 cans or each (depending on whether CN or EA was used as the standard UOM). This allows the Inventory module to calculate the average value of the inventory over time. If the case of sodas was $6 when purchased and entered into inventory, that means each can is valued at $0.25, and when 5 cans are moved out of inventory, the system will calculate that the inventory value has dropped by $1.25, from $6 to $4.75.

It is important to ensure the conversion rates are accurate as they cannot be changed once set on an item. If the supplier starts providing the same item but in a new pack-size, say 30 cans of soda per case, this will require the need for a new item to be added to the item master with a 30:1 conversion rate.