To run a successful business, manufacturers rely on detailed inventory management to accurately track the inflow and outflow of products. Lot numbers simplify this process by tracking the product’s location, manufacture and expiration date.

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What This Article Covers

• What Is a Lot Number?
• Lot Number vs. Serial Number vs. SKU
• Importance
• How To Create
• How To Use
• Final Thoughts

What Is a Lot Number?

A lot number is a unique code assigned to identify a batch of products with similar attributes. This includes the product’s processing location and its manufacture or expiration date.

Lot and batch numbers are synonymous and essential to your inventory management system as they help track stock and product information effortlessly. They are also known as lot codes or code numbers.

Lot numbers are essential in industries where quality assurance is vital, such as automotive, pharmaceutical, food and beverage, cosmetics, and more. It is easy to trace and recall damaged or expired products.

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Lot Number vs. Serial Number vs. SKU

With the common goal of product tracking, distinguishing between lot and serial numbers and SKUs can take time and effort. Before we dive into the various facets of lot numbers, let us learn the difference between these other tracking codes with overlapping characteristics.

Stock Keeping Units (SKUs) are internal identifiers assigned by a specific business to identify store inventory. These unique numbers are not universal and are only valid at the store or manufacturer.

Serial numbers, on the other hand, are unique identification numbers assigned to individual items that help improve inventory traceability. It is helpful for product registration with the manufacturer and tracking customer warranties.

Lot numbers combined with serial numbers provide enhanced traceability. Unlike the other two, lot numbers have the added element of location and time.

Importance

Lot numbers play an essential role in supply chain management by enabling manufacturers to track products from their inception to shipping. But how does implementing lot numbers help with your inventory management?

Let us look at some of the benefits of lot number tracking:

Ensure Quality

While testing products from different batches during quality assurance, lot numbers help identify defective items. It also provides other information like product ingredients, creation date and manufacturer. The purpose of this is to ensure quality standards for raw materials used.

Simplify Recalls

So your suppliers recalled a raw material, but your orders are already processed and shipped. What do you do? Using the processing date of the defective products, you locate their batches and conduct effective recalls.

Maintain Legal Compliance

Whether it is the Drug Supply Chain Security Act (DSCSA) or the Food Safety Modernization Act (FSMA), lot number tracking is a legal requirement in industries like pharmaceuticals and food and beverage. Compliance is critical to ensure safe operations.

Improve Supply Chain Visibility

When dealing with multiple users and raw materials, lot numbers enable end-to-end inventory cycle visibility. In case of damaged product returns, where it is difficult to find the supplier, you can use lot number tracing to track the defective batch. And take necessary steps to minimize returns and increase customer satisfaction.

Streamline Inventory Operations

Improve your inventory operations by using lot numbers to prioritize first in, first out (FIFO) inventory rotation to eliminate waste and avoid costly returns. Use lot numbers to conduct expiration date management and prioritize items closer to expiration.

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How To Create Lot Numbers

While it is possible to generate lot numbers manually, it is a challenging affair. Instead, invest in a material requirements planning (MRP) platform that automates these processes.

To create effective lot numbers, one must remember these key points:

• Unique: Create unique identifiers to avoid confusion with other product batches.
• Readable: Make identifiers easy to read and interpret to eliminate unnecessary human errors.
• Consistent: Maintain consistency in numbering and formatting to maintain the sequence.

The lot numbers can vary based on a company’s specific requirements and workflows. But certain information remains the same — manufacturing date, batch number of raw materials and the product’s sequence number.

For example, your lot number may look something like this 2022-07-05-010. Here, the product’s manufacturing date is 2022-07-05, while the sequence number within the lot is 010. The code remains unique with the changing sequence numbers, which increases with every new product.

Inclusion of expiration dates is also an important aspect of lot number traceability. You can do this within the lot manufacturing date or in a separate field in the form of a barcode, QR code or RFID tag.

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Usage

Now that we have the basics down, let us learn how to use lot numbers. Combined with other tracking systems like barcodes, RFID tags and QR codes, lot numbers help automate the tracking process.

With the use of lot numbers, you can keep track of a few important things like:

• Received raw materials
• Products manufactured with those materials
• Product shipment date and shipping destination

Suppose you are in an industry where you acquire raw materials from other vendors. In that case, product recalls are common, and quality assurance errors can potentially harm your customer base, so investing in a lot number tracking system is exactly what you need.

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Final Thoughts

Incorporating lot numbers in your workflow allows easy item tracking throughout the production process and enhanced inventory visibility along with stock management. Irrespective of your business size, lot number tracking is an excellent way of record-keeping while maintaining quality control.

If you’re considering purchasing new software or upgrading your current setup to incorporate lot numbers, check out our inventory management comparison matrix to filter through the top solutions on the market.

You can also use our Decision Platform to build comprehensive requirements and match software products with your needs.

Have you used lot numbers in your manufacturing business before? Let us know in the comments below!