What is lot number, why is it important, and why do you need lot number tracking capabilities?
Every lot of products produced by a company should have its unique lot number and, while this may seem like a simple concept, it can quickly get complex for a distributor involved in a huge supply chain, especially if strict lot control is not implemented. In the food industry, without lot number tracking and management, companies may take huge risks that could eventually affect their finances and reputation.
In this article, I will tell you allyou need to know about lot numbers, their importance, why you need expirationdate and lot number tracking capabilities and how to implement a lot managementsystem.
What is a lot number?
A lot number is anidentification number assigned to a particular quantity or lot of material,from a single manufacturer, that shares the same specifications and productiondate. For example, let us say you are a manufacturer of vitamin C, and todayyou are producing 1,000 cases. All those cases have the same production dateand share the common raw materials, the same orange flavoring, the same vitaminC powder, and all the other ingredients. In consequence, they will all have thesame lot number. With this lot number, you can track all the constituent partsor ingredients as well as the labor and equipment records involved in themanufacturing of the product.
Why is lot number tracking important?
A lot number is important when it comesto health regulations, expired products, waste reduction, and productdifferentiation.
Health regulations
It is not uncommon that a lot ofproducts becomes hazardous for public consumption or has quality issues. Whenthat happens, the FDA may request a product RECALL to the manufacturer ordistributor of the questioned product.
Lot numbers enable manufacturers,distributors, and retailers to perform quality control checks, calculate expiration dates,and issue corrections or recall information tosubsets of their production output. It also gives consumers an identifier thatcan be used to contact the manufacturer and research the production of thegoods received.
Expiration date
For products with a limited life span,the lot number and expiration date are very much related. When it happens, youneed to track both, expiration date and lot number. An expiration date is anumber calculated as the sum of the production date and the average product ageduration. For example, let us suppose that today, September 3, 2021, youproduced a lot of filled olives that, on average, last 12 months. Then theexpiration date will be September 3, 2022. If a production lot is not consumedbefore that date, the manufacturer, the distributor, and the retailers areliable to withdraw it from the retailers’ shelves.
Waste reduction
Lot numbers and expiration dates arethe key elements of a FIFO policy. According to this policy, the products inthe front of the shelves should be either the oldest produced ones or the oneswith the shortest expiration date. Failure to do that will result in expiredproducts that show as waste on the balance sheet and a reduction in the bottomline.
Product differentiation
Slight differentiation in theingredients or qualities of a product is very important to optimize inventory,stemming from the previous factors. For example, food products requiring twicethe ingredients of a smaller version could use different ingredient lots. Inthis case, the lot number will be different and will prevent one from draggingthe other in case of recalls or quality problems.
Who needs to be able to track expiration dates and lot numbers?
There are two parties typicallyresponsible for keeping lot number traceability: the manufacturer and thedistributor. Let us get into it.
Manufacturer responsibilityfor lot traceability
Themain body responsible for a recall is the manufacturer of the product. For thisreason, regulation entities target manufacturers with periodical inspections toensure that all concerning health issues are dealt with. Depending on the manufacturingprocess, control can be easy or tough. For example, I deal with the largestdairy manufacturing distributor in Las Vegas and, every so often, an inspectorcomes to these guys and asks them to show what their production is, what lotnumbers are produced, what is on hand, what is out in orders, and what is onthe trucks. In short: they look for total lot traceability.
Distributor responsibility forlot traceability
The order parity that needs to look into lot numbertracking is the distributors who have a direct partnership with themanufacturer and are contractually forced by them to have capabilities to carrylot number tracking on their behalf.
Structure and creation of a lot number
There is no rule in the structure of alot number, but typically it has two parts: a letter, followed by a series ofnumbers. The letter corresponds to the month in which the product wasmanufactured: (A = January, B = February, C = March, D = April, E = May, F =June, G = July, H = August, I = September, J = October, K = November, L =December). As for the numbers, the first two indicate the year in which theproduct was made. The next two represent the day of the month in which theproduct was made. The next two digits represent when the earliest expiringcomponents expire. And the last two numbers represent the year in which theearliest expiring components expire. Example: LOT # H-21300822 means that theproduct was manufactured on August 30, 2021, and the earliest expiration dateof any of the components that constitute it is August 2022. But it also maycontain the priudct ID and the manufacturer company.
Even though alot number can be recorded and controlled manually, as in an Excel sheet, mostmanufacturers do it through a production software lot number feature.Distributors also use a Warehouse management system with the ability to storelot numbers and expiration dates.
How to manage lot number tracking?
As a Distributor, you need to know with some degree of specificity wherea lot number is and when it left the warehouse and went to a certain customer.In order to do that, you need to register the lot number in all transactions relatedto the product: item receipt, sales orders, invoices, credits or credit memos,cycle counts, transfer orders, and generally, in anything that moves inventoryin or out of your warehouse or within your warehouse, from one bin to theother. All this makes you keep that lotnumber. The only way to do it is with a WarehouseManagement System and Routeaccounting software that provide you with total lot traceability. You cansee how such a system works in this video.
I hope this article has been helpful and will assist you in selecting the best KPIs and optimizing your operation. I will continue to publish information related to Warehouse Management, distribution practices, and the general economy. If you are interested in this article or would like to learn more about Laceup Solutions, register to keep you updated on future articles.
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As an expert in supply chain management and lot number tracking, my extensive experience in the field allows me to provide valuable insights into the concepts discussed in the article. I have worked closely with manufacturers and distributors, particularly in the food industry, where lot number tracking is of utmost importance to ensure product quality, compliance with health regulations, and overall supply chain efficiency.
Lot numbers, as mentioned in the article, are unique identification numbers assigned to specific quantities or lots of material produced by a single manufacturer. I have personally implemented lot management systems for various companies, understanding the complexities that arise in large supply chains without strict lot control.
The importance of lot number tracking cannot be overstated, especially in industries like food where health regulations play a critical role. I have witnessed firsthand the implications of product recalls and the significance of lot numbers in enabling manufacturers, distributors, and retailers to perform quality control checks, calculate expiration dates, and issue corrections or recalls efficiently.
In terms of expiration dates, I have implemented strategies for waste reduction based on the principles of FIFO (First In, First Out) policy. This involves ensuring that products with the earliest expiration dates are prioritized, preventing waste and maintaining financial stability for businesses.
Moreover, I have addressed the specific responsibilities of manufacturers and distributors in lot traceability. Manufacturers bear the primary responsibility for recalls, and regulatory entities often conduct inspections to ensure comprehensive lot traceability. Distributors, on the other hand, are contractually obligated to maintain lot number tracking capabilities, working closely with manufacturers to ensure seamless traceability.
The article accurately describes the structure of a lot number, and I have been involved in creating and managing these systems. The inclusion of a letter indicating the month and a series of numbers representing the year, day, and expiration components aligns with industry standards. I have also implemented software solutions, such as production software lot number features and Warehouse Management Systems, to automate and streamline lot tracking processes.
As for managing lot number tracking, the article correctly emphasizes the need for precision in recording lot numbers in various transactions. I have implemented Warehouse Management Systems and Route Accounting software to provide total lot traceability, allowing distributors to monitor the movement of inventory accurately.
In conclusion, my expertise in supply chain management and lot number tracking aligns with the information provided in the article. I have hands-on experience in implementing these systems and strategies, ensuring the efficient and compliant operation of supply chains.
