A customer complaint comes in. There is an issue with a specific batch of the product. The question is clear: how many units of this batch were produced, and to whom were they sold?
In a business without lot tracking, there is no answer to this question. The only option is to reach out to every customer who purchased that product — which is both expensive and damaging to reputation.
In this article, we explain how to set up the lot structure, which industries require it, and how backward traceability works.
Table of Contents
What is a lot and batch?
A lot is a group of products produced or procured under the same conditions. Products made from the same raw material, during the same shift, and on the same machine constitute a single lot.
The lot number identifies this group. When an issue is detected, all products within the same lot are assumed to carry a similar risk.
The difference from a serial number lies in the scale. A serial number tracks a single product, while a lot tracks a group. Both can be used together; check out the serial number tracking article.
Who needs it?
In the food industry, lot tracking is a regulatory requirement. The supply chain is expected to be traceable from raw material to finished good and the customer.
In pharmaceuticals and medical products, traceability is even stricter. In the chemical and paint industries, batch-based color and formula differences are a commercial necessity.
Cosmetics, animal feed, and agricultural chemicals are also within scope. In these sectors, lot tracking is not a preference, but a condition of operation.
Even in non-mandatory sectors, there are benefits. Being able to tie supplier-origin quality issues to a specific batch shortens the return process.
Setting up the lot structure
A lot is set up as a sub-definition of the inventory card. There is a single product card; multiple lot records exist underneath it.
Each lot record maintains the lot number, production date, expiration date, and current quantity. For products coming from suppliers, the supplier's lot number is also recorded.
The critical point is this: lot information must be captured at the moment of entry. Lot information missed during goods receipt cannot be completed afterwards.
Therefore, the goods receipt process must require lot information as a mandatory field. In agricultural purchases, this is done when issuing the receipt; you can check out the e-producer receipt article.
Expiration date management
The most tangible benefit of lot tracking is expiration date management. It becomes visible which batch will expire and when.
The shipping rule is established accordingly: the batch with the closer date goes out first. When this rule is not suggested by the system, the warehouse team sends whatever is at hand.
Alerts should be set up for approaching expiration dates. A system that warns one month in advance provides the chance to sell at a discount or return; notifications carry this signal.
Products past their expiration date are recorded as waste. We covered the cost impact of waste tracking in the waste and spoilage tracking article.
Forward and backward tracking
Traceability works in two directions, and both are necessary.
Forward tracking answers the question: to whom did the products produced from this lot go? When an issue is detected, affected customers are found this way.
Backward tracking asks the opposite: which raw material lots were used in this product? This is necessary to find the source of the problem.
In manufacturing businesses, this chain is established via the bill of materials (recipe). The raw material lot and the finished product lot are linked in the production receipt; we detailed this in the lot traceability in food production article.
Recall scenario
A product recall is the ultimate test of lot tracking. Time is limited and the scope must be clear.
If lot tracking is in place, the process works as follows: the problematic lot is identified, all shipments made from that lot are listed, relevant customers are contacted, and remaining stock is blocked.
Without lot tracking, the scope cannot be determined and the entire product line is recalled. The cost difference is measured in multiples.
To be prepared, it is beneficial to conduct a drill once a year: pick a random lot and run the tracking report. System records are kept in the inventory module and customer communication can be managed via CRM.
Setup and operational cost
Lot tracking is not a free feature; every movement requires an additional recording step. Accepting this burden from the beginning is better than leaving it half-done later.
The biggest burden occurs at goods receipt. The number and date of every incoming batch must be recorded; when this step is skipped, the entire chain breaks.
The way to reduce this burden is barcode scanning. If the supplier label contains lot information, scanning is enough; otherwise, you need to print your own label.
On the shipping side, which lot goes out is also recorded. This also facilitates the implementation of the FIFO (First In, First Out) rule.
When making a decision, ask this question: if I experience a recall, what would be the cost without lot tracking? The answer is usually far above the setup cost. We covered label design in the barcode management article.
Audits and customer requests
Lot tracking comes up not only during crises, but also in routine audits. In the food and pharma industries, traceability is a standard audit topic.
The auditor usually selects a random product and asks about the chain: from which raw materials was this finished product produced, and from whom were those raw materials purchased? The answer is expected to be provided within minutes.
Corporate customers also make similar requests. Chain supermarkets and large buyers ask their suppliers for a traceability certificate; this has turned into a commercial prerequisite.
When these requests cannot be met, business is lost. In this sense, lot tracking is not a cost, but a prerequisite for market entry.
In manufacturing businesses, the chain is established through the recipe; we explained the end-to-end flow in the lot traceability in food production article.
Frequently asked questions
Who determines the lot number?
If you are manufacturing, you do; if you are procuring, the supplier's number is recorded. Both can also be kept together.
Does lot tracking make counting difficult?
When used alongside barcode scanning, it does not make it difficult; check out the warehouse counting article.
Should I keep lots for every product?
No. Lot tracking is enabled on a product card basis; it remains disabled for products where it is not needed.
Does lot information reflect on the invoice?
It can be added through document design; you can check out the document design article.
Lot tracking is a structure that remains invisible when nothing happens, but keeps the business afloat when a problem arises. Its setup cost is far below the cost of a single recall.
By consulting with the EQLEM team, you can configure your lot structure and traceability chain.