What are units?
A unit is the basic countable quantity of a product in inventory. Units measure stock as a physical count, not a dollar value, so your inventory tracking system reports quantities first and applies cost later. The same product can be counted as each, case, or pallet, with one base unit setting the conversions between them.
Key characteristics
- Countable quantity, not value: a unit is a physical count of stock, kept separate from the dollar value that unit cost supplies later.
- Units of measure: one item can be stocked in several units of measure at once, anchored by a base unit with conversions linking every level.
- Distinct from item identity: stock keeping units (SKUs) identify which products you hold, while units count how many of each are on hand.
- Kept current by counting: unit totals stay accurate through periodic and perpetual counts, supported by scanning that records each movement.
- Accuracy depends on tracking: inventory accuracy research from Auburn University's RFID Lab found item-level tracking raises retail inventory accuracy from an average of 63 percent to 95 percent, and can cut out-of-stocks by up to 50 percent.
Example
Consider a craft cold-brew coffee roaster that sells canned coffee. It tracks each can as the base unit "each," receives cans by the case of 24, and stores them by the pallet. One product is now counted in three units of measure, while on-hand stock stays expressed in eaches.
A barcode inventory system scan at receiving updates the unit count automatically.
Related terms
FAQ
What do units mean in accounting?
In accounting, units are the quantity of stock on hand, and that count is multiplied by unit cost to value inventory and calculate cost of goods sold (COGS).
What units of measurement are used in inventory?
Common units of measure include each, dozen, case, and pallet, plus weight or volume measures such as pounds or liters. A business picks one base unit and converts the others to it.
What is the difference between a unit and a SKU?
A SKU is the code assigned to a specific product, while a unit is one countable quantity of that product. You count units of each SKU.