Most companies will eventually reach a tipping point where it becomes impossible to keep track of every single product and SKU in their inventory. Once this happens, certain key information—such as expiration dates, defective items, and product recalls—can be difficult to monitor.
Batch tracking solves this challenge by grouping similar products together. By using an inventory management system that quickly identifies and locates any product across the supply chain, batch tracking helps companies stay on top of their inventory and ensures only high-quality products are delivered to customers.
What is batch tracking?
Batch tracking (also referred to as lot tracking) is a practice in inventory management that groups products with similar properties, such as expiration dates, manufacturing locations, and material composition, and the like.
For example, a batch of bread would include all loaves with the same expiration date baked in the same facility using the same ingredients.
Keeping individual products together in a batch makes it easier for companies to track inventory as it moves through the production and distribution chain and finally to the customer. For quality control purposes, batch tracking enables only the products in question to be recalled from the supply chain, which allows a business to get ahead of possible issues efficiently.
Why batch tracking is essential for efficient inventory management
A key function of inventory management is to oversee the flow of a company’s products from raw materials to finished goods. Batch tracking helps further improve the inventory management process with a more efficient and organized way of monitoring products.
With standard inventory management systems, every product or SKU is treated individually, which can consume a large chunk of resources. Certain tasks, such as moving products with specific materials or putting older releases on sale, require hours of manual work just to identify every product across locations. By grouping similar products, batch tracking systems allow companies to consolidate efforts and focus on smaller subsets of inventory.
For example, say a manufacturer receives a complaint that one of the products from its latest batch is defective. Instead of recalling every product from every retail location and losing all its sales orders, the manufacturer can employ batch numbers and pull out only the products from the same batch.
Products from the particular batch will be sent to quality control, with all defects removed from circulation. The manufacturer can then focus on preventing the issue from coming up in future production and purchase orders. Ultimately, batch tracking is a key practice that can streamline inventory management workflows and reduce the time and effort your operations team spends chasing down items
Most common batch tracking strategies
The most common inventory management strategies that employ batch tracking are FIFO, LIFO, and FEFO. These three strategies are popular among product-based operations, such as manufacturing and wholesale, and depend on the inventory types sold.
FIFO
FIFO stands for “first in, first out,” and is a strategy where the first products that arrive are the first to be sold. This is the standard inventory strategy in most companies, as it prevents products from sitting in the warehouse too long. FIFO is best used for selling fast-moving products, such as household goods or seasonal items.
LIFO
The LIFO or “last in, first out” method is where the products that arrived last are the ones to be sold first. LIFO is used when products don’t have a long shelf life and warehouse slotting layouts make it more difficult to access older products from storage. For example, large equipment stacked in boxes or heavy sacks of gravel stored in high piles.
FEFO
FEFO is the “first expired, first out” strategy, where products with the closest expiry date are sold first. FEFO is often preferred over FIFO for highly perishable items, like dairy products and fresh fruit to prevent spoilage. Companies considering this production tracking method should note that manufacturing dates and expiration dates often don’t align.
For example, one carton of milk produced three months ago expires in one month, while another carton produced one month ago expires in one week. In the FEFO strategy, the second carton of milk with the closer expiration date will be sold first, even if it was produced more recently.
Is batch tracking right for your business?
Tracking products in batches is recommended for companies that deal with large quantities of products, such as manufacturers, wholesalers, and retailers.
However, it’s even more beneficial for highly regulated industries that have to comply with additional regulations. In these instances, batch tracking can be critical to maintaining their products' safety and quality control.
Food and beverage
The food and beverage industry relies the most on batching products by ingredients and expiration dates. Not only does this optimize distribution and dictate which batch of products should be sold first, but it also helps ensure customer safety. The US Food and Drug Administration (FDA) mandates that food manufacturers list all included ingredients on the food label. Most products include a “best by” or “sell by” date.
Perishable goods naturally require more maintenance, and it’s common to read about products being pulled off shelves for contamination or other quality control reasons. This makes batch tracking the best inventory strategy for food products.
Health and wellness
Health and wellness products, such as supplements, cosmetics, and fitness gadgets, directly impact a customer’s well-being and are subject to strict rules. For example, the color additives used in makeup and ingredients in dietary supplements are closely regulated by the FDA.
Batch tracking keeps companies on top of every production run, allowing them to quickly trace and remove any products that have been contaminated or don’t meet the required standard.
Organic compounds and material
Organic materials are found in multiple household items, such as paint, detergents, and cleaning products. However, even organic products have a limited shelf life and end up as inventory waste. To prevent the sale of old stock that’s no longer as effective, batch tracking is used to identify expiration dates and move products to the appropriate channels.
For example, laundry detergents have a shelf life of six months to one year. While they can still be used past their expiry date, they will gradually lose their effectiveness and scent.
Oil-based paint, for example, contains high levels of organic compounds that limit its shelf-life to about two years.
Automotives and electronics
Automotives and electronics function by multiple components working together in unison. If any component fails, the product is considered defective or a safety hazard to customers. With the constant innovation in this sector, products are often recalled for software errors, faulty new materials, or features that don’t work.
Batch tracking enables the end-to-end traceability of products and can effectively pinpoint the specific part of the product that needs to be replaced. This is extremely helpful in the automotive and electronic industries, where production is typically done in mass quantities.
How QuickBooks Enterprise supports batch tracking
The simplest way to implement effective batch tracking in your company is by using inventory management software. QuickBooks Enterprise tracks the details of your products in real-time, including expiration dates, lot or serial numbers, and physical locations. Expiration dates and about-to-expire inventory items can be conveyed in customer communications or custom reports.
Both serial numbers and lot numbers can be assigned to any selection of inventory and traced using a barcode system, making it easy to perform searches and track the exact location of every product in real-time. Tracking features like multi-level inventory categorization allow you to assign as many as four levels of categories and monitor inventory batch information using three levels of location tracking.
This level of granularity enables any manufacturer or wholesaler to quickly take action to fix any defective products or issues in specific batches. )
Final Thoughts
Batch tracking is a beneficial strategy for any company that handles large amounts of inventory. Companies can streamline supply chain operations by grouping similar items into batches and managing them with appropriate inventory methods, such as FIFO, LIFO, and FEFO.
Batch tracking further facilitates quality control measures, resulting in better products, greater customer satisfaction, and increased profits.
