This post is number two in a series of posts discussing commonly misunderstood ERP software terms.
Lot tracking can be an important concept to understand, and for some businesses, it’s an integral component of distribution inventory software. So what exactly does lot tracking mean? If you guessed a system that ensures Bob the accountant stops stealing your parking spot at work – you’re incorrect (although a system like that would be nice). No, lot tracking refers to a system that has the ability to properly track product lots (as in manufactured lots or batches) along the entire supply chain – a requirement for businesses that deal with perishable or potentially harmful products.
The inability to track products along the supply chain can break a company when faced with a product recall. According to the U.S. Food and Drug Administration, Q4 of 2012 saw the highest amount of food recall activity in the past 2 years. Over 552 recalls were announced, involving 18.4 million food and beverage products – so don’t think a recall can’t affect your business. Recalls are not just a concern for those in the food industry, however. Virtually any industry can be affected, such as consumer products (think children’s products especially), automotive, and especially food, medical and pharmaceutical products.
Lot tracking or batch tracking allows product to be traced, end-to-end, from manufacturer through supplier to customer. The process is used to keep track of which customers received specific lots (or shipments) of product and when they were received. The date these items were purchased and then shipped is tracked, allowing managers to account for product movement via various auto-generated reports. A lot or batch number can be assigned to one or many units of product that are produced or purchased on various dates, and can tie into an expiry date (if applicable). An advanced lot tracking system is automated and allow users to track product movement, create lot reports and facilitate recalls when necessary. Not only is lot tracking a core component in achieving FDA/ISO/CFIA compliance for many businesses, it also enables a company to perform lot costing and significantly minimizes the costs associated with a product recall.