Lot and Serial Tracking: How Traceability Works in an ERP

On 14 October a supplier emails a distributor: batch KC-8841 of its adhesive may not cure properly. The distributor has shipped this item to four customers and has 510 cartridges on the shelf. How much of that is affected? With an item code alone, all of it. With lot tracking the answer is smaller and exact: 290 cartridges at three customers and 210 on the shelf. The other 300 keep selling.

What is lot and serial tracking?

Lot tracking records the batch each unit belongs to on every document that batch passes through. Serial tracking does the same for a single unit with its own number. Together they make inventory traceability possible: from any unit you can get back to the supplier, and from any supplier batch you can get forward to the customer. A lot is also called a batch, and most teams use the two words for the same thing.

The item code says what something is. The lot says which batch it came from. The serial number says which exact unit it is. Stock counts and valuation can run on the item code alone, which is why many companies only miss the other two when the first recall or warranty claim arrives.

Lot vs serial tracking

Use lot tracking when a problem is likely to hit a whole batch. Use serial tracking when each unit has its own history. Some goods need both: a pump has a serial number, and the seals inside it came from a lot. Some goods need neither. If a bad batch would cost little and nobody would ever ask, the scanning costs more than the answer is worth.

How a lot moves through the documents

Traceability is not a report you add at the end. It is one field captured on every document that moves the goods, and the trace stops at the first document that left it out.

The goods receipt starts the chain, and goods receipt accounting covers the posting it makes at the same moment. The supplier lot number matters as much as your own. When a supplier calls, it quotes its number, not yours.

Forward and backward traceability

Forward traceability starts from a lot and asks where it went: which orders, which customers, how much is left. A recall asks this question. Backward traceability starts from a unit and asks where it came from: which lot, which receipt, which supplier. A complaint asks this question. A usable trace answers both from the same documents.

Our example: one supplier warning

A distributor buys AD-220, a structural adhesive sold in cartridges, from supplier S-118 and sells it at €11.00. Each receipt gets its own lot, with the supplier lot number recorded next to it.

Together they add €5,600 to inventory. Four shipments follow, and every shipment line names the lot it took:

By 14 October, 390 cartridges have shipped and 510 are on hand: 210 from L-2609 and 300 from L-2610. Then supplier S-118, which provides the adhesive, sends a warning about its lot KC-8841.

Tracing the lot forward

1. Find the lot. Search by the supplier lot number. KC-8841 is your L-2609.
2. List the shipments. Norvik Assembly received 120, Tessel Furniture 90 and Halden Marine 80. Orlo Panels is not on the list, because it only received L-2610.
3. Count what is left. A physical count of L-2609 finds 210 cartridges.
4. Check the balance. Everything received must be explained.
5. Block the lot. Set its status so nobody can pick, ship or issue it while the supplier investigates.

Received = shipped + on hand + scrapped or adjusted
500      = 290     + 210     + 0

This check is called a mass balance. If the two sides do not match, some units moved without the lot on the document, and the customer list cannot be trusted yet. Here they match, so the trace is complete.

Halden Marine is the detail to notice. It received both lots on one shipment, so the recall covers 80 of its 140 cartridges. The lot on the shipment line says how many, and the lot printed on the cartridge tells its warehouse which ones.

Lot size sets the recall size

A recall can never be smaller than the lot. If the warehouse had booked both receipts under one lot to save a label, that lot would hold 900 cartridges and all four customers would be on the list. Three habits keep the number small:

• One lot per supplier lot. Never merge two supplier batches under one number.
• Keep lots apart on the shelf. Two lots in one bin means the document says one lot while the picker takes the other.
• Treat a blend as one lot. If a suspect lot goes into a mixed batch, the whole batch is suspect, however small the share was.

What a recall does to the books

Blocking a lot is a status change, not a posting. No journal entry is made, and the 210 blocked cartridges stay in inventory at €1,260, inside a total of €3,210. Blocked does not mean written off. The entries come later, when the goods move or the decision is made.

If a month end arrives before the supplier decides, the €1,260 stays only if you still expect to recover it. If you do not, the inventory write-down test applies to the blocked units.

Customers return 290 cartridges

Each customer gets a credit note at the selling price, 290 × €11.00:

The cartridges come back at the cost they left at, 290 × €6.00, and join the blocked lot:

Defective goods belong back at full cost only while you expect the supplier to pay for them. L-2609 now holds all 500 cartridges at €3,000.

The supplier takes the lot back

The adhesive supplier, S-118, accepts the claim and takes all 500 cartridges back. This is a return to vendor, and the goods leave at the receipt cost:

The debit memo clears it against what the distributor owes:

If the supplier refuses

The cartridges cannot be sold and nobody will pay for them, so the loss is recognized as an inventory write-off:

Either way, inventory ends in the same place:

The €1,950 is exactly the 300 cartridges of L-2610 at €6.50. VAT is left out to keep the amounts plain.

A lot is not a cost

A lot says which goods. The costing method says what they cost. The two are separate, and they meet at the shipment. Under FIFO, an ERP that ties cost layers to lots takes the cost from the lot named on the shipment line. SH-1052 shows the difference:

Cost by lot:  80 × €6.00 (L-2609) + 60 × €6.50 (L-2610) = €870
Strict FIFO: 140 × €6.00 (oldest layer first)           = €840

The €30 is not an error. Naming the lot moves the cost with the goods. Under moving average cost, lots share one cost, (€3,000 + €2,600) ÷ 900 = €6.22 after both receipts. The lot still tells you which goods, but not what they cost.

Serial number tracking: one pump, one history

The AD-220 adhesive cartridges are cheap and arrive by the hundreds, so a lot number is enough to follow them. The same distributor also sells DP-40, a dosing pump its customers use to apply the adhesive. A pump costs far more than a cartridge, can fail on its own and carries its own warranty, so each one gets a serial number. When 20 pumps arrive, the receipt lists 20 serial numbers, one per pump, and it is not complete until the count matches. A shipment line carries one pump and its serial number, because a serial number has no quantity to split.

Months later a customer calls about pump SN-40017. The serial number answers the backward questions at once: which receipt it came on, which supplier sold it, when it shipped and to whom, and so whether the warranty is still running.

Capture the serial number at the receipt, not the first time the unit ships. Numbers added at shipment prove where a unit went, but not where it came from.

Traceability through production

In manufacturing the chain has more links: component lot, production order, finished lot, customer. A suspect component is traced through the orders that consumed it, then the finished lots those orders produced, then the shipments of those lots.

The documents usually record which lots an order consumed and which lots it produced, not which component went into which piece. If one order produces two finished lots, both link to the same component lots. Smaller orders give smaller recalls.

How to test your traceability

A recall drill shows whether the chain holds before a real call does:

1. Pick a lot received at least three months ago.
2. Find it by the supplier lot number alone.
3. List every customer that received it, with quantities.
4. Count what is still on hand.
5. Check the mass balance.
6. Write down how long it took and what was missing.

Every difference is a document that moved goods without the lot. Fix the step that lost it, not only the number. Counting by lot in your cycle counts finds these gaps between drills.

Common lot tracking mistakes

1. Recording the lot only at the receipt. The trace then ends at the shelf, which is the part a recall needs most.
2. Skipping the supplier lot number. The supplier quotes KC-8841 and nobody can say that it is L-2609.
3. Reusing one lot number across receipts. The recall grows to everything booked under that number.
4. Moving stock without the lot. Transfers and inventory adjustments that leave it out break the mass balance.
5. Mixing lots in one bin. The document and the box tell different stories.
6. Blocking on a spreadsheet. A list does not stop a picker. The system has to refuse the shipment.
7. Treating blocked stock as written off. It stays in inventory at cost until someone decides, so somebody has to decide.
8. Adding serial numbers only at the shipment. The unit can no longer be traced back to its receipt.

How Gruvero approaches lot and serial tracking

In Gruvero each item is set to no tracking, lot or serial. A lot-tracked goods receipt needs a lot, and a serial-tracked receipt needs one serial number per unit. The lot record keeps your lot number, the supplier lot number, the manufacture, expiry and retest dates and a status of Active, Blocked or Expired. Shipments, production issues and transfers refuse a lot that is not Active.

The lot screen in the inventory ERP shows where the lot came from, each stock movement and each posted shipment with its customer, including lots that were bought and sold with no production in between. In production the trace runs from component lot through the order to finished lot and customer, at the level of the production order. FIFO cost layers carry the lot, so shipping a lot consumes that lot's cost.

FAQ

What is lot tracking?

Lot tracking records the batch each unit belongs to on every document it passes through, from the goods receipt to the shipment. It lets you find every unit of a batch and every customer that received it.

What is serial number tracking?

Serial number tracking gives each unit its own number and records it on every document. One number always means one unit, so it answers questions about that unit, such as its warranty or repair history.

Is a lot number the same as a batch number?

In practice yes. Most companies and systems use lot and batch for the same thing, a group of units received or made together.

What is the difference between a lot number and a serial number?

A lot number covers many units, and a serial number covers exactly one. In the example, lot L-2609 covers 500 cartridges, while SN-40017 covers one pump.

What is forward and backward traceability?

Forward traceability follows a lot to where it went, which is the recall question. Backward traceability follows a unit to where it came from, which is the complaint question.

What is a mass balance in traceability?

It is the check that everything received is explained: received equals shipped plus on hand plus scrapped or adjusted. In the example, 500 = 290 + 210 + 0. A gap means some units moved without the lot on the document.

Does blocking a lot change inventory value?

No. Blocking changes what the warehouse may do with the lot and posts nothing. The 210 blocked cartridges stay in inventory at €1,260 until they are returned, written down or written off.

Does lot tracking replace FIFO?

No. Lot tracking says which goods, and FIFO says what they cost. When the shipment names a lot, the cost can follow that lot instead of the oldest layer, as the €870 and €840 in the example show.

When do you need lot tracking?

When a problem is likely to affect a whole batch: goods with a shelf life, goods with a quality risk from the supplier or goods your customers require you to trace. For low-value goods with none of these risks, the scanning rarely pays for itself.

Conclusion

Lot and serial tracking are worth exactly what they save on the day something goes wrong. In the example, the lot on each document turns a warning about one supplier batch into 290 cartridges at three customers and 210 on the shelf, with 300 still for sale. Blocking costs nothing in the ledger. The entries come when the goods move, and inventory ends at €1,950, the value of the lot nobody had to touch.