What an Item Hierarchy Is and Why It Matters for Your Business

An item hierarchy is the division of your items into groups and subgroups — that is, into categories and subcategories.

For example, if you sell water purification units, as our client L-dema does, you might group them into two broad groups: units for professional use and units for home use. Within those groups you can then create subgroups, so that in L-dema's case the home-use units break down into two large subgroups: jugs and bottles.

Below are several reasons why the way you set up this division matters for your business:

#1. A well-defined hierarchy can significantly improve the quality of your reporting

Reports matter a great deal for business decisions, and being able to generate them at different levels is valuable. An item hierarchy makes that possible: you can produce a sales report for a given month, then add another level by producing a sales report for a given month within a given category. And if you want to go a step further, you can produce a sales report for a given month within a given subcategory.

#2. A hierarchy you have already built transfers easily to an e-commerce site

If you plan to expand by building an e-commerce site, the ideal situation is that the hierarchy you defined earlier simply carries across to the site. That makes the site far easier to track, since it then behaves as one more shop — you can produce the same kinds of reports as for your other sales channels, because the hierarchy is identical.

#3. Adding new items to an existing structure is straightforward

Once a hierarchy is properly built, finding the right "place" for a new item — that is, which category or subcategory it belongs to — is very simple. This matters because it means any member of staff can add a new item to the existing structure, which makes your processes more efficient.

TiramisuERP lets you build an item hierarchy very easily, with an unlimited number of levels — although our users' experience suggests you should not go beyond three.