This comprehensive article takes you on a deep dive into the concept of lot numbers and their significance in inventory management. As you read, you’ll learn about how lot numbers work, why they’re used, the different products they’re applied to, and the distinct differences between lot numbers, SKUs, and serial numbers. Moreover, you’ll understand the many benefits of lot tracking and some best practices for optimal inventory management.

Key Takeaways:

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.

In this article, we’ll take an in-depth look at lot numbers, lot tracking, and how they can be used to improve your inventory management.

Lot numbers are frequently associated with:

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.

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.

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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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.

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

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.

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.