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What is a Lot Number?

Originally published on October 22, 2020 by Logiwa Marketing, Updated on May 24, 2023

What is a Lot Number? What are the Advantages of Lot Batch Number Tracking?

A lot number is a unique identifier assigned to a batch of products or finished goods, allowing for traceability and separate management within inventory systems.

A lot is a batch of products or finished goods, harvested, or collected together into a single group. The entire batch of goods is identified by a single lot number. Every item in the lot carries the same lot, and each lot is managed separately in the inventory. All the items in a lot usually have the same production date, production issue, packaging date, or expiration date for the purpose of lot traceability.

A lot number can be created based on a specific date and time. For example, lot numbers can indicate a purchase order time, shipping time, or time of receipt.

The timestamp associated with the lot allows for the lot tracking of perishable items, medical supplies, or anything else with a limited shelf life. While timestamps may or may not appear on the packaging, they should be recorded somewhere, such as in a supply chain solution.

What finished goods and products use lot numbers?

Lot numbers are frequently associated with:

    • Foods, including fresh and packaged foods
    • Medications, vitamins, supplements
    • Hygiene products (toothpaste, shampoo, etc.)
    • Batteries
    • Fire extinguishers
    • Household cleaning products and detergents
    • Smartphones, computers, electronics
    • Medical supplies
    • Aerosol sprays
    • Insecticides, pest control products
    • Toys and baby products
    • Building materials
    • Fireworks
    • Fabric, paints, dyes, etc.

Why is lot tracking used?

In some sectors, such as the medical supply and pharmaceutical industry, the use of lot batch tracking is required by regulatory agencies. This could facilitate any recall made due to food safety issues. In other cases, lots are used to streamline warehouse efficiency, and inventory management.

It keeps track of sell-by dates and enables detailed reporting of on-shelf life. Plus, lot tracking makes first-in-first-out (FIFO) warehousing easier.

How are lot numbers used?

They are used to track a group of items throughout the entire supply chain, end-to-end. For example, in the auto industry, a lot batch number could identify a batch of red paint used to paint a group of automobiles. Plus, a specific shipment of spark plugs might all carry the same number.

If the need for a parts recalls appears, the lot batch can quickly identify which cars are carrying the recalled part. Recalled parts can occur in any kind of manufacturing, and this could be related to safety or performance issues. For food or medical products, contamination or errors in production might be the reason for the recall.

What is the difference between lot no vs. SKUs?

Both are used for item identification, tracking, and tracing purposes. However, an SKU identifies a distinct type of item which includes attributes that distinguish the item from others. Product attributes might include the manufacturer, description, material, size, options, version, color, packaging, and warranty terms. Typically, when a warehouse or business takes inventory, it counts the quantity per product.

Using a hand scanner or similar barcoding technology, product codes are retailer-specific codes that can be used to calculate stock and identify items on an ecommerce store. Meanwhile, a lot can be applied to track any inventory batch at a specific time.

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What’s the difference between lot batch numbers vs. serial numbers?

Both lot batch numbers and serial numbers can be used to identify and track products. However, many items can have the exact same lot no, but each SN is unique to a single product. It’s like all the siblings in a family may have the same last name, but everyone has a different first name.

We can use laptop computers as an example to show how these identification numbers differ. A batch of laptops may all have the same lot indicating a finished manufacturing or shipping date. Next, each laptop has its own unique serial number. Finally, laptops can be assigned a product code that might identify all laptops of the same color, model, and make.

The main distinguishing characteristic of a lot is the element of time.

What are the benefits of lot tracking?

Lot tracking has several important advantages. With lot tracking you can:

    • Track down problem sources – Lot numbers can help companies determine if and why many order returns come from the same place. For example, one particular supplier may be delivering products of lower quality.
    • Map out inventory trends – Certain products might be in higher demand than others at certain times. Lot batch tracking software can provide data insight to make adjustments to purchasing and warehousing layout plans.
    • Respond rapidly to recalls – The ability to respond to a recall includes generating a list of affected products, customers, and suppliers. Regulators require a quick response to protect consumers.
    • Remain compliant with regulations – The Food and Drug Administration (FDA) and the International Organization of Standardization (ISO) enforce specific regulations and certification requirements related to inventory management. ISO certification increases brand trust and opens the door to other business opportunities. Meanwhile, the Drug Supply Chain Security Act (DSCSA) requires pharmacies to maintain and keep track of drug lot information.
    • Minimize warehouse waste – Especially for items with best-before dates, lot batch analysis can help optimize inventory movement by shipping items closer to expiration first (FEFO).
    • Eliminate human error – With automated lot tracking, lot management errors can be essentially eliminated. Plus, everything gets archived for easy data access.
    • Understanding cost in relation to time – Lot number tracking provides more accurate cost insight. Inflationary and seasonal fluctuations can be detected since lots correspond to a specific date.

Lot number tracking best practices

To get the full benefit of lot tracking, here are some best practices to implement in your inventory management.

Lot adherence

This means keeping track of inventory by lot no, not just by stock keeping unit. Lot batch numbers should be visible on the packaging, as a scannable barcode, or both. Inventory systems should be able to read lot barcodes. Incorporate this data into your overall inventory management strategy.

Fulfillment by lot

When orders are processed, fulfillment at the lot level is important to keep inventory data up to date. This includes correctly identifying and matching inventory items to be fulfilled from the correct lot. This methodology makes sure things like best-by dates are respected. Order Fulfillment software or services can automate this process.

First In, First Out strategy

First In, First Out (FIFO) means the items you receive first get shipped out first. This is especially important for products with a use-by date. Plus, the chances of an item becoming obsolete or out of fashion increase with time. This applies to both warehouse management and accounting where it can be used in inventory valuation. When inventory valuation methods are improved, your financial statements are more accurate. Lot no tracking is essential for successful this methodology.

Quick expiration date strategy

Lot no tracking helps identify items that have a short on-shelf life or that are about to expire soon. Since you want to ship these items as soon as possible, you may offer discounts on items close to becoming expired.

How does inventory management software help?

All of the lot tracking methods mentioned so far can be facilitated by inventory management software. This not only improves inventory accuracy, but it also enables you to get more out of your lot number tracking.

For instance, your warehouse may choose from periodic or cycle inventory counting. The periodic approach means that inventory counts are made at defined intervals. Meanwhile, the cycled approach occurs continuously in real-time.

As you can imagine, depending on the product, real-time counting offers significant advantages especially for items with sell-by dates. However, a cycle counting approach requires specialized software to work. In this manner, lot tracking is highly accurate and can improve your accounting valuation accuracy as well.

How does lot tracking fit in with overall inventory management?

If you consider lot tracking supported methodologies, plus smart warehousing practices, other inventory management benefits become apparent, such as:

    • Minimizes material handling: Once workers load pallets, for example, they don’t touch them again until unloading. This reduces employee work and equipment use since items don’t need to be continuously re-arranged.
    • Streamlines warehouse operations: When lots are properly tracked, operations can be automated and optimized for better resource management. For instance, pick and pack strategy can help improve efficiency.
    • Maximize warehouse space: Pallet flow rack systems allow warehouse managers to pack goods more densely to free up warehouse space. Accurate lot numbering assists in this process.
    • Minimize equipment maintenance & damage: Forklifts are used less frequently with pallet flow rack systems. This cuts down on warehouse equipment wear and tear.

Lot number tracking makes a huge difference

Whether it’s inventory management efficiency, better compliance, or improved accounting metrics, streamlined and accurate lot number tracking is an essential part of any business that manages inventory. When you follow the best practices and utilize effective lot tracking tools, your operations get a significant upgrade to improve business outcomes.

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Lot Number: FAQs

What is a lot number?

A lot number is a unique identifier assigned to a batch of products or finished goods that are grouped together. It helps in tracking and managing the items within the lot separately in inventory. All the items in a lot typically share the same production date, production issue, packaging date, or expiration date.

What are the advantages of lot batch number tracking?

    • Ability to track down problem sources and identify low-quality suppliers.
    • Mapping out inventory trends to optimize purchasing and warehousing.
    • Rapid response to recalls by generating lists of affected products, customers, and suppliers.
    • Compliance with regulatory requirements in industries such as medical supply and pharmaceuticals.
    • Minimization of warehouse waste by implementing first-in-first-out (FIFO) warehousing.
    • Elimination of human errors through automated lot tracking.
    • Understanding cost variations over time due to inflation and seasonal fluctuations.

What finished goods and products use lot numbers?

    • Foods, both fresh and packaged
    • Medications, vitamins, and supplements
    • Hygiene products (toothpaste, shampoo, etc.)
    • Batteries
    • Fire extinguishers
    • Household cleaning products and detergents
    • Smartphones, computers, and electronics
    • Medical supplies
    • Aerosol sprays
    • Insecticides and pest control products
    • Toys and baby products
    • Building materials
    • Fireworks
    • Fabric, paints, dyes, etc.

Why is lot tracking used?

    • Regulatory compliance, especially in industries like medical supply and pharmaceuticals.
    • Streamlining warehouse efficiency and inventory management.
    • Ensuring product traceability and recall management.
    • Facilitating first-in-first-out (FIFO) warehousing.
    • Monitoring sell-by dates and on-shelf life reporting.

How are lot numbers used?

Lot numbers are used to track a group of items throughout the supply chain. They allow for the identification and traceability of specific batches of products. Lot numbers can be used to track production, shipping, receipt times, or any other timestamp associated with the batch. Lot numbers help in identifying and managing inventory based on specific attributes like production dates, expiration dates, or purchase order times.

What is the difference between lot number and SKU?

A lot number identifies a specific batch of items, whereas an SKU (Stock Keeping Unit) identifies a distinct type of item with unique attributes. SKUs include details like manufacturer, description, material, size, color, packaging, and warranty terms. Lot numbers focus on tracking inventory batches at a specific time, while SKUs differentiate between different types of items.

What’s the difference between lot batch numbers and serial numbers?

Lot batch numbers identify and track a group of items within a specific batch or production run. Many items can have the same lot number, and it is primarily used for batch traceability and management.

Serial numbers, on the other hand, are unique to each individual item. They provide a distinct identifier for a specific product and are often used for individual item tracking, warranty management, or product authenticity verification.

What are the benefits of lot tracking?

    • Tracking down problem sources and identifying low-quality suppliers.
    • Mapping inventory trends and optimizing purchasing and warehousing.
    • Rapid response to recalls and compliance

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