Pharmaceutical, medical and food distributors, amongst others, need to implement proper lot tracking in order to be able to deal with regulatory issues, such as product recalls. For many, that’s the main driver behind implementing a lot tracking system. I also see many smaller distributors (particularly in the food business) resist this, because ERP Software systems that facilitate lot tracking are more expensive than the entry-level accounting software they may be using. So its fair to say that for many, implementing lot tracking is seen as a net cost, incurred just to provide compliance with rules and regulations.
There is however a measurable benefit to a properly implemented lot tracking system: you can reduce obsolete and expired inventory, by ensuring that older products are shipped out first. Food, medical and pharmaceutical products all have expiry dates, yet many distributors rely on the pickers in the warehouse to hopefully pick older product first for shipping. It does not work out that way in practice, and many companies end up losing more in expired products every year than the investment in a system that would eliminate this. Once you realize this, then it should be a no-brainer – just implement a lot tracking and allocation system and away you go – right?
Well, there are two main obstacles for the small / medium-sized distributor to overcome here:
- Software that can pre-allocate lots: at the more affordable end of the ERP software spectrum, those system that do offer lot tracking frequently require users to manually enter the lots being shipped. It may be more difficult to find affordable lot tracking software that can pre-allocate lot numbers to be picked, based on FIFO or expiry date, and display those on picking slips or handheld devices, but they do exist.
- Warehouse pickers being able to find the pre-allocated lots: you’ll probably need to rethink your warehouse layout and flow. If you set up such that new shipments are loaded at the back of a shelf / row, and pickers pick from the front, with a procedure to shift products forward (for smaller items, perhaps flow racks), then your pickers should have little problem finding the pre-allocated lot numbers.
There are other building blocks which may help – such as barcode scanning and even RFID in certain cases. Yes, you will incur costs to implement this. But your measurable inventory savings on an ongoing basis should ensure a swift payback. Now compliance with regulations becomes a by-product of a wise investment, rather than a pain-in-the-neck cost.