Lot Tracking System: How To Improve Your Inventory Management Strategy

  lot tracking

How does having a lot tracking system help you in your business? Let us take a look at a business scenario to illustrate how it can benefit your company. Imagine you are the General Manager of a jam and preserves company. Your company sells thousands of jars of strawberry jam each month to over 2000 wholesale customers nationwide.

One day, in the middle of the night, you receive a phone call. To your horror, you realize that it is from the US Food and Drug Administration (FDA). They have called to inform you that a number of customers who ingested your jam got sick and the FDA confirmed that the jam was the reason why. An unknown substance had contaminated the jars that the customers purchased. The FDA then asks you to identify the product batches that have been affected and to send them a report within the next hour. Also, they ask you to recall those affected goods immediately.

Faced with this situation, how would you identify all of the affected products? Which of your customers would you need to notify first so they can quickly take it off their shelves or menus? How would you minimize the financial and reputation loss for both your customer and you, and eliminate any further damages?

The solution: use an inventory lot tracking system.

In this article, we will answer the following questions:

What is lot tracking?

Why is a lot tracking system important for your business?

Does my business need lot tracking?

How can you get started?

What is Lot Tracking

In simple terms, lot tracking is a business methodology, which allows you to trace each unit of inventory moving in and out of your warehouse. This typically includes tracking each raw material unit you purchase from your suppliers, the raw material units used to produce finished goods, and the finished good units you deliver to your customers.

Most manufacturing businesses, small or large, implement a lot tracking system as part of their inventory management strategy. Lot tracking enables each company to track product batches across an entire supply chain. A lot tracking process typically starts with the manufacturer and involves distributors, retailers, and other companies involved in the supply chain. It continues until the product eventually reaches the individual customers. Moreover, while retailers are not always able to track which customers have purchased a specific product, they can easily track a returned product back to a purchase order and manufacturer invoice.

Why is A Lot Tracking System Important For Your Business?

Returning to our earlier situation at the start of this article, there are two possible endings to this scenario.

  1. You are able to quickly identify and recall the affected lot because you have implemented a lot tracking system for your business.

With a lot tracking system in place, you can identify the original batch of the product in question. Your system is able to instantly determine which of your customers have received items from the same batch. You immediately call your customers to take the affected jam off the shelves. From your system, you generate and send the product recall report requested by FDA. The entire process took you less than thirty minutes to complete. While the recall may have impacted your business, you can at least sleep soundly knowing that you were able to contain the problem quickly.

  1. You are unable to accurately identify the specific lot because you have not implemented a lot tracking system for your business.

Without any lot number tracking in place, you are hard-pressed to identify which of your customers are selling the affected jam products. You have no choice but to inform all of your customers to take down your jams from the shelves and to warn their consumers of the contamination. You are also unable to give FDA the specific batches of products that have been affected. As a result, you expect to pay a large fine to the FDA. You try to go back to sleep but are unable to do so with the expected huge loss in revenue and reputation loss this product-wide recall will cost your business.

It’s obvious which one is the happier ending and highlights why you should use a lot tracking system.

Let’s explore each of the reasons we cover above in more detail.

 Manage Product Recalls

In 2016, there were 760 consumer products recall and 764 food recalls in the United States and Canada. Product recalls happen for a variety of reasons. They can occur when a company discovers a problem and proactively pull a product off the shelves on their own. Other times, a business might have to recall its product after government authorities, e.g. the FDA, raise concerns. For example, in September 2017, the FDA took steps to recall a biomedical device due to concerns over its lack of cybersecurity.

In a product recall situation, having a lot tracking system is critical. A good lot tracking system allows you to quickly identify the batch in question, along with the customers who received products from that batch. With that information, you can immediately contact your customers and let them know to remove the items from the shelves. Doing an immediate recall will help prevent further damages to both the consumer’s safety and your reputation.

In addition, if you have the lot information of your suppliers, you may be able to track down what raw materials were used to produce the contaminated product. You can then track if the problem arose as a result of use in your production processes.

 Track Product Expiration Dates

It is obviously important for your company to sell as much product as possible, in hopes of maximizing profits. If you produce products with short shelf lives, this task gets more difficult and lot tracking becomes much more critical. Using a robust lot tracking system, you should easily be able to identify which products are nearing their sell-by or expiration dates. You can then ship or discount those products to ensure a sale. A First-In-First-Out (FIFO) shipping method is the first step, but it also may not always be possible. Customers sometimes have different policies regarding their acceptance range of sell-by and expiration dates. For example, a big-box retailer might only accept products with a minimum two months product shelf life left. On the other hand, a discount store might take products with a minimum one-month of product shelf life remaining. With a robust inventory management and batch tracking solution, you can easily plan and identify which product batch should go to which set of customers.

A lot tracking system will also remind you of your stock reaching its sell-by, or expiry dates as well as quantify and highlight stock lost to expiration. That way, if your product is reaching its sell-by date, you can quickly identify which batch contain expired products. You can then take action to sell or, at worst write off the stock and gain back valuable warehouse space. More importantly, your lot tracking system should allow you to analyze your monthly waste due to stock expiring or reaching its sell-by dates. Then you can work to reduce your monthly waste as well as compare it to industry best practices.

 Adhere to Legal Regulations

In the past few years, the US FDA has increased regulation, for manufacturing, distribution, and retail companies. The FDA has specific guidelines and requirements that all business must adopt and follow, one that includes product recall procedures. Having a lot tracking system in place helps to address any product recall complication in the future. In addition, evidence of a lot tracking system is a legal requirement to operating in certain specific industries.For example, the Drug Supply Chain Security Act (DSCSA) made it a law that pharmacies have to maintain and keep track of the drugs lot’s information that they are selling. As a result, most pharmacies reject suppliers who are unable to provide lot tracking information.

If you are in the food business, you should be taking special notice. With the signing of Food Safety Modernization Act( FSMA) by President Obama in 2011, the FDA now has more sweeping powers to take actions against any business whose food products might pose a safety threat to consumers. Having a lot tracking system allows you to take swift action against any food safety complication you might encounter. Doing so will allow you to avoid being penalized by FDA and put out of business.


Lot tracking is not just important for regulatory purposes. It is also important to gaining industry certifications. For example, one highly regarded certification is the International Organization for Standardization (ISO) compliance certification. To get this certification, having a lot tracking system in place is a mandatory requirement. Once you obtain this, or any other, industry certification, you can more easily convey to your consumers that yours is a brand which can be trusted. A brand whose products are well made and of high quality.

Does My Business Need Lot Tracking?

Whether you are a small or large business, food or industrial business, lot traceability is probably relevant for you. While the type and format of information might vary across industries, the ability to keep track of stock by lot tracking as part of your inventory control strategy is a mandated business requirement for your company to be successful. Here are some examples of how different industries utilize lot tracking.

  • Food Business/Restaurants: Track expiry dates associated with food products
  • Pharmaceutical Companies: Analogous tracking requirements for medication and drugs
  • Manufacturing companies: Track production batches in case the need for a product recall arises

Not to mention, lot tracking software automates the assignment of lots and alert notifications of sell-by/expiration dates, resulting in a number of cost-saving opportunities, i.e.,

  • Reduced manual labor costs
  • Reduced cost associated with manually managing a recall
  • Minimized cost when dealing with lot tracking compliance

How Can You Get Started?

As the old saying goes, “an ounce of prevention is worth a pound of cure.” So how can you protect your business from future disasters using a lot tracking system?

If you are just starting out or produce a select number of products, you can probably get by with a manual, or spreadsheet-based, lot tracking system. However, this can be cumbersome to manage and prone to human errors. As your company grows, manually tracking lots gets more and more time-consuming. Relying on spreadsheets to monitor products sold to customers is not easy. Furthermore, it will only get more complicated when you are selling your products from different warehouses. A lot tracking software can help solve all the problems mentioned above.

If you are looking for an automated lot tracking system, we have the solution just for you. Sweet, an inventory and order management system, has an automated lot tracking feature.

Here is how Sweet can help you manage your lot tracking system.

  • Manage product lots
  • Auto-assign lots to orders
  • Track expired / past sell-by inventory

Lot tracking is just one of the many features offered by Sweet as an inventory management software. Other features include:

Try Sweet now with a 14 Day Free Trial. Unsure how Sweet can help you manage your inventory better, you can set up a demo with our inventory experts to find out how Sweet can help your business.