Lot Tracking Guide

There are several ways to organise and track inventory, and one the most common ways is to use lot tracking.

In this article, you will learn how lot tracking works, which products require it, and how to implement a lot tracking system using industry best practices.

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What is lot tracking?

Lot tracking is a system used to trace parts or ingredients associated with a group of products back to a manufacturer or supplier. Lot tracking is also used to organise inventory by production or expiration date. 

Which products need lot tracking numbers?

Many products can benefit from a lot tracking system, though it is more expensive to do so as each lot needs its own storage space and can’t be stored with similar batches of the same product. 

Of course, there are some products that lot tracking becomes an essential. The US Food and Drug Administration (FDA) is a government agency responsible for the safety of the following products sold or manufactured in the United States. 

Any product that requires FDA-approval (due to expiration date or contains ingredients that require regulation) must use a lot tracking system. Here are some examples of product types regulated by the FDA:

Lot tracking is a warehouse management best practice that helps to organise and store ecommerce inventory to ensure quality control, traceability, and proper fulfilment. 

For instance, if you’re worried about your finished products surpassing their expiration dates, you can use lot tracking system to ensure that the items that first entered the FDA-approved warehouse are also the first to be fulfiled.

This type of inventory valuation method is known as “FIFO” (first in, first out), which helps to dramatically reduce instances of products going bad before they’re delivered to customers.

Why is lot tracking important to inventory management?

Lot tracking is an important inventory management process that helps businesses trace products, most commonly by expiration date, manufacturer, or production date, to comply with regulations and to act promptly in case of a recall. Lot tracking also helps ecommerce businesses keep inventory organised to make sure a certain batch of products are being fulfiled first.

Here are some other ways lot tracking helps businesses manage inventory.

1. Get specific data of product lots

Have you noticed a series of products being returned from the same batch? With lot tracking you can secure customised batch-specific reports from your warehouse to identify which group of products is not meeting customers’ needs. For example, this can help with returns management so you can identify what batch of inventory is causing a high volume of returns quickly. 

2. Have full supply chain overview

Lot tracking can help you optimise the supply chain by keeping track of your inventory in real-time. With lot tracking, you can store inventory based on a shared attribute, so you know where batches of products are stored and which products are being fulfiled first.

3. Eliminate human error

Lot tracking also helps with improving order accuracy. Lot tracking eliminates the need to manually track inventory, so you can avoid common picking mistakes, such as sending out an item that’s expired. Implementing software that allows you to set up lot tracking can also help you manage moving inventory much easier, including the ability to conduct inventory audits and warehouse audits more efficiently.

4. Help with recalls

In case of a product recall, you need to be able to act quickly. By reliably tracking products based on a certain attribute, you can trace which products or lots are being recalled, when they were produced, and where they are currently being stored. This way, you can quickly remove faulty batches from one or more distribution centres before more items are fulfiled and shipped. 

3 inventory lot tracking best practices

Lot tracking has the ability to improve both your order fulfilment and inventory management processes. Here is an overview of lot tracking best practices to consider and that you can easily incorporate into your logistics operations

1. Fulfiling at the lot level

Lot tracking can improve your fulfilment process, especially when it comes to products that have an expiration date. By implementing inventory management software, you can assign lot numbers to a group of products based on expiration date to make sure the oldest items are being shipped first.

2. Use a barcode scanning system

One of the best ways to reduce manual work is by tagging each lot with a barcode using an inventory scanner system. By scanning barcodes, you also avoid wasting time physically inputting data for every lot. This functionality can help save on labour costs and reduce human error, while speeding up the retail fulfilment process.

3. Use fulfilment distribution centres

With lot tracking, you can split inventory across multiple fulfilment distribution centres and still be able to comply with FDA regulations. For instance, if you partner with a third-party logistics (3PL) company like ShipBob, you can assign a number to a batch of inventory so that they are stored separately. This helps to ensure that right items are being stored properly, fulfiled correctly, and easily traceable.

3 ways ShipBob uses lot tracking within their supply chain system

1. Choose which SKUs need lot numbers for greater traceability 

ShipBob uses lot tracking to help ensure product quality during the fulfilment process. From ShipBob’s dashboard, you have the option to assign a lot number to specific items stored in our fulfilment centres.

2. Organised storage with lot tracking 

After we receive your warehouse receiving order (WRO), we will store the items in separate locations, according to their lot number. You can learn more about our lot tracking process here.

Our lot feature allows you to separate items based on their lot numbers. When you send us a lot item, we will not store it with other non-lot items, or other lots of the same item.

3. Rely on the FIFO inventory method

ShipBob also uses the first in, first out (FIFO) inventory allocation logic designed to identify shelves that contain items with an expiry date first and always ship the nearest expiring lot date first. If you have items stored in different bins — one with no lot date and one with a lot date — we will always ship the one updated with a lot date.

“A thoughtful fulfilment partner is really important for a company like ours. The ShipBob team has done a wonderful job of checking in on our inventory because we have batch codes and expiration dates to worry about. 

Our product batches are deliberately small to ensure quality control. We’re very careful about maintaining the highest quality possible because our products are ingested by our pets. Lot management through ShipBob helps us maintain organisation and inventory accuracy.”

Stephanie Lee, COO at PetLab Co.

“ShipBob was the exact solution I was looking for. We have easy ways to manage subscription orders as well as expiration dates and lot numbers, so inventory goes in First In, First Out (FIFO).” 

Leonie Lynch, Founder & CEO of Juspy

What’s more, ShipBob’s Inventory Status page gives you a clear view of your inventory data, including lot and expiration date, per fulfilment centre. This allows you full visibility into what items are on hand, fulfilable, backordered, and more. 

“With ShipBob, we are able to mark any combination of SKUs as a unique bundle and select the component SKUs right through the dashboard. Each time that bundle is fulfiled by ShipBob, we can see the individual components that are physically picked, and we know that the order went out as expected.

ShipBob also allows us to make changes to bundles on the fly with complete control and visibility, which is important in monthly subscription boxes, holiday bundles, and many more scenarios.”

Gerard Ecker, Founder & CEO of Ocean & Co.

Lot tracking FAQs

Here are answers to some of the most commonly asked questions about lot tracking.

What is lot tracking?

Lot tracking refers to when a batch, set quantity of goods, or raw materials from a single manufacturer is assigned a a lot number. This system allows you to keep a record of inventory and logistics details such as expiration date, product ingredients, manufacturer or supplier, and production date.

How do I lot track with ecommerce?

Online stores can track shelf life of perishable goods and the origin of each damaged or recalled goods with a batch number. Lot traceability, from warehouse to customer, may be enabled by using technology such as an inventory management system to easily track where batches of products are stored. 

What are the benefits of lot tracking?

Lot or batch tracking can be used to ensure that returned, recalled, missing, or damaged products are traced back to their batch. What’s more, with lot tracking, you can organise inventory and fulfil orders by expiration date — thus ensuring perishable products are shipped before they go bad.

How does lot tracking software work?

Lot tracking software can be a standalone tool, a built-in feature to a 3PL’s software (like ShipBob), or part of an inventory management system or warehouse management system (or even available in other systems). This helps with proper inventory management for batches of the same product that can’t risk being mixed (i.e., foods or beverages that might be recalled in the event of a contamination scare). Lot tracking software helps you see where and how many units of the same SKU are stored so you can easily retrieve them, know which product was sent where, and help you send out the oldest product first (with the most-nearing expiration date).