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 all you need to know about lot numbers, their importance, why you need expiration date and lot number tracking capabilities and how to implement a lot management system.
What is a lot number?
A lot number is an identification number assigned to a particular quantity or lot of material, from a single manufacturer, that shares the same specifications and production date. For example, let us say you are a manufacturer of vitamin C, and today you are producing 1,000 cases. All those cases have the same production date and share the common raw materials, the same orange flavoring, the same vitamin C powder, and all the other ingredients. In consequence, they will all have the same lot number. With this lot number, you can track all the constituent parts or ingredients as well as the labor and equipment records involved in the manufacturing of the product.
Why is lot number tracking important?
A lot number is important when it comes to health regulations, expired products, waste reduction, and product differentiation.
It is not uncommon that a lot of products becomes hazardous for public consumption or has quality issues. When that happens, the FDA may request a product RECALL to the manufacturer or distributor 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 to subsets of their production output. It also gives consumers an identifier that can be used to contact the manufacturer and research the production of the goods received.
For products with a limited life span, the lot number and expiration date are very much related. When it happens, you need to track both, expiration date and lot number. An expiration date is a number calculated as the sum of the production date and the average product age duration. For example, let us suppose that today, September 3, 2021, you produced a lot of filled olives that, on average, last 12 months. Then the expiration date will be September 3, 2022. If a production lot is not consumed before that date, the manufacturer, the distributor, and the retailers are liable to withdraw it from the retailers’ shelves.
Lot numbers and expiration dates are the key elements of a FIFO policy. According to this policy, the products in the front of the shelves should be either the oldest produced ones or the ones with the shortest expiration date. Failure to do that will result in expired products that show as waste on the balance sheet and a reduction in the bottom line.
Slight differentiation in the ingredients or qualities of a product is very important to optimize inventory, stemming from the previous factors. For example, food products requiring twice the ingredients of a smaller version could use different ingredient lots. In this case, the lot number will be different and will prevent one from dragging the other in case of recalls or quality problems.
Who needs to be able to track expiration dates and lot numbers?
There are two parties typically responsible for keeping lot number traceability: the manufacturer and the distributor. Let us get into it.
Manufacturer responsibility for lot traceability
The main body responsible for a recall is the manufacturer of the product. For this reason, regulation entities target manufacturers with periodical inspections to ensure that all concerning health issues are dealt with. Depending on the manufacturing process, control can be easy or tough. For example, I deal with the largest dairy manufacturing distributor in Las Vegas and, every so often, an inspector comes to these guys and asks them to show what their production is, what lot numbers are produced, what is on hand, what is out in orders, and what is on the trucks. In short: they look for total lot traceability.
Distributor responsibility for lot traceability
The order parity that needs to look into lot number tracking is the distributors who have a direct partnership with the manufacturer and are contractually forced by them to have capabilities to carry lot number tracking on their behalf.
Structure and creation of a lot number
There is no rule in the structure of a lot number, but typically it has two parts: a letter, followed by a series of numbers. The letter corresponds to the month in which the product was manufactured: (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 the product was made. The next two represent the day of the month in which the product was made. The next two digits represent when the earliest expiring components expire. And the last two numbers represent the year in which the earliest expiring components expire. Example: LOT # H-21300822 means that the product was manufactured on August 30, 2021, and the earliest expiration date of any of the components that constitute it is August 2022. But it also may contain the priudct ID and the manufacturer company.
Even though a lot number can be recorded and controlled manually, as in an Excel sheet, most manufacturers do it through a production software lot number feature. Distributors also use a Warehouse management system with the ability to store lot numbers and expiration dates.
How to manage lot number tracking?
As a Distributor, you need to know with some degree of specificity where a 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 related to the product: item receipt, sales orders, invoices, credits or credit memos, cycle counts, transfer orders, and generally, in anything that moves inventory in or out of your warehouse or within your warehouse, from one bin to the other. All this makes you keep that lot number. The only way to do it is with a Warehouse Management System and Route accounting software that provide you with total lot traceability. You can see 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.