Lot Numbers: Why Less Might Be More in Food & Beverage Traceability

[00:00:00.000] All right, Ben.

[00:00:00.730] Hi, Jeff.

[00:00:01.790] How are you doing?

[00:00:02.620] Pretty good.

[00:00:03.050] How are you? I’m great. Good. I wanted to talk to you about something that’s near and dear to our hearts we deal with every day. Of course, I’m talking about lots. Lots of lots. In food and beverage, you deal with lots because you have items that may need to be recalled, and you need to make sure that you can trace them. The standard for that is to use a lot number. Sometimes Lots are for lots and lots of stuff. Lots are for lots and lots of stuff, and sometimes lots are for a very small amount of stuff in a warehouse. We thought it’d be interesting to talk about the trade offs between one or the other because on the one hand, You may have a lot for a truckload or for an entire production run of an item for a given week or a given day. And on the other hand, you may have a lot for every pallet produced of a SKU. And we’re not always privy to why we decided to create a lot for X amount of a certain product, but we deal with the downstream impacts of it. And so I’d like to understand from you, where have you seen this or what do you think?

[00:01:15.530] What’s your experience with this thing?

[00:01:18.820] Yeah. And the reason this conversation came about was just I think that you and I had both, from a different angle, come to the same conclusion that, Hey, some company are maybe not perfectly weighing all the trade offs of trying to get overly granular with their lot sizing and with their lots. I think that the One company I worked at, we were portioning produce in-house, and every single time we determined we needed to make another run of bags of two ounces of salentro, every time that When that product came out of the portioning room, it got a new lot assigned. Sometimes we’d run it in the morning, we’d get some more orders, we’d have to run it again. Even though those were the same raw material lot, they were the same expiration date, same everything, we’d get another lot. Every time you have a lot, that inventory detail of the lot is another thing that could go wrong or there could be some a discrepancy. I think what you and I talked about was There are mission critical and fundamental aspects that you absolutely have to have lots for. Being able to trace backward or forward from a lot that got shipped to a customer or a lot that got purchased from a vendor, you need to know where those things went, and you need to know for your inventory on hand what its remaining shelf life is, what its expiration date is.

[00:02:56.700] I think that beyond that, it gets into the gray area of food safety and quality assurance team would like to be as granular as possible to get down to the pellet level. Or I was talking to one co-manufacturer that was serializing cases, and that’s how they wanted to be able to track it, leaving their plant and getting over to the third-party logistics provider. So you can get all the way down to the serialized case level or pellet level. But everything else is a gray area, I think. I think one of the things that across the consulting practice, across technology practices, we’ve talked about how much do you recall? What’s Lid’s take on what really happens in the real world when you have a recall situation.

[00:03:47.150] Exactly. Yeah. So just on that, because I was curious coming to this discussion, just some really high-level research. When we think about, Okay, what does recall actually look like? We’re talking about really every year, hundreds of recalls. And order of magnitude, like 50,000 pounds is an average. So are there going to be some less than that? Yeah, maybe 10,000 pounds. But a lot of those are going to be hundreds of thousands of pounds tracing back to a raw material that is bad. And if you apply one of those real-world examples to one of our hypothetical customers, maybe they transform that raw material into 10 different lots, and they’re recalling all 10. The question is, did they need to create 10? Did they create 10 because they have 10 production lines? Or did they create 10 because they had 10 different expiration dates? Or did they create 10 just because they decided that that was the right amount? Really, it could have been two lots. And some of the downstream consequences of this that you see day to day that impacts your business more than this hypothetical recall that hasn’t happened yet is Well, now, instead of having one pallet to pick because I have multiple lots, my system is telling me to pick the next two, and I have two half pallets to pick.

[00:05:11.780] And when we’re doing that, it’s the difference between just going up and grabbing a pallet and bringing it down or having to find two bins with the inventory, pick it by case. And so if you apply that over many, many weeks and many, many years, it’s a huge degradation of productivity, all for a Maybe we’re unsure if it’s worth the trade-off.

[00:05:33.820] Yeah. And the situation that I saw involved also when you’re going to pick the last unit of a lot, that is where your most likely inventory discrepancy shows itself. And so the more times you’re switching from one lot to another when you’re picking, the more opportunities there are for your picker to go and tell the system the truth of what lot he’s picking, scanning the case, scanning whatever. And the system says, No, you didn’t. No, you’re not. You’re not picking that because it doesn’t exist anymore. And so the fewer times you’re switching from one lot to the next, the few are opportunities to have that operational inefficiency and disruption from a system that is probably was slightly off telling the the real-world worker that they’re wrong, that they didn’t scan what they just scanned.

[00:06:37.170] I think what I’ve noticed in talking to customers, there’s often no real path or history or set of, Oh, here are the business rules that we applied to come up with our lot logic. The theme of, Well, how did you decide on the sizes of your lots? That wasn’t a conversation. It just they ended up where they were, and And maybe quality production maybe came up with some things that made sense at the time for the company. And now the warehouse can’t keep up with all of the rules that have been created. And when we go back and look at those rules, no one’s really sure if they’re needed or why they exist.

[00:07:16.860] Yeah. And I’ve also seen where you might have a lot that, generally speaking, let’s say you are running production, you produce 40 lots, and there are various checks that might be happening throughout the process that are timestamped. And so they may later on determine that, Hey, these were produced from 6: 00 AM to 2: 00 PM. And we realized, though, that from 9: 00 AM to 11: 00 AM, such and such temperature was out of spec. And so now you’re in a situation where you have to decide to either reject that whole lot or you’re now trying to get close enough to say, Okay, well, which of those lots came off at 9: 00 to 11: 00? And so I’ve seen instances where manufacturers will want to pretend they’re doing lot tracking, but really it’s license plating. They’re just getting… They want to know exact pallet IDs. And so I think that that’s where if you zoomed out and you said, Okay, well, how often does that happen? And is it worth tracking every single pallet all of the time, or do we make two lots per shift, or instead of trying to serial or trying to license plate every single one of those 40 pallets.

[00:08:43.350] That thing.

[00:08:44.100] Yeah. I think if we’re talking to somebody who might hear lot and might hear license plate and not really understand the difference, the lot is really like, we need to know the lot because in the event of a recall, it’s required by law.

[00:09:00.380] But we don’t- For shelf life, remaining shelf life.

[00:09:04.480] Ultimately, the customer cares, is it meeting my expiration date requirements? As long as that is adhered to, we’re okay. Whereas for your example, with license plating, Yes, we still advise that you’re able to track every pallet within your warehouse. But once we ship it out the door, we’re not applying that level of granularity to every single thing that we’re shipping to every single customer unless it’s their requirement. We don’t want to overengineer the requirements and make it more difficult for us to be productive, maybe because one customer needs it or because that’s what we had to do in another industry, right?

[00:09:39.620] Yeah. Because I think in terms of so what, I think what we would advocate is have a meaningful conversation between your food safety quality assurance production team and the rest of your supply chain inventory control and order fulfillment and whatever the rest of that supply chain team is and have a meaningful and maybe ongoing meaningful conversations about, are a lot sizes too granular and causing more headache than they’re worth operationally? Or just make sure that those are right-sized and the proper trade-offs. I think one of the things that Lid finds, and maybe you said this, but is If the recall comes back from this lot that was shipped to this customer, but it was shipped on a date where you also had 10 other lots of that same product on hand, you’re always going to recall more versus less. And so whatever size of the recall you’re going to realistically do, there’s an argument that aside from shelf life and remain expiration date and things like that, maybe anything smaller than that minimum recall size is overkill.

[00:11:03.660] Yeah, exactly. And the last thing that I’ll say is just why I always try to say to customers that every added level of granularity adds complexity. And so there has to be value added for each of those steps. So when you’re thinking about the decision to say one production line, one lot might seem like a really trivial decision at the time, but you have to that that does have ramifications to do that. Instead of just doing it by day, it’s going to have a big impact downstream. And so really thinking about every time we get more complicated or more granular here, it’s going to be harder. So what value are we extracting at each step before just saying, Yeah, let’s track everything down to the last serial number?

[00:11:50.510] Yeah. Part of another reason that this came up, it was FSMA, the Food Safety Modernization Act, that up until last week was going to be effective in January, 2026. They postponed it, as we know, by 30…

[00:12:10.930] I think it was 30 months? Months, yeah.

[00:12:12.150] Not 30 days. If you’re serious, if you’re going to push something back, you’re really going to get it back. You’re going to give it enough time. Two and a half years. And so on the one hand, up until recently, a lot of our conversations with food manufacturers that are maybe playing catch up on their systems where, Oh, we got to We need FSMA compliant by January. We got to be compliant. While that pressure is off, there is still just the customer level pressure toward their suppliers on modernization and traceability and everything else. I think from a federal compliance standpoint, yes, there’s a little bit of pressure off, but I think that’s where we’re continuing to work with our clients that are needing to upgrade their systems and make sure it’s still as soon as possible, and there’s still risk that postponing that is going to give competitors time to get ahead. And you may end up losing some of that business as a result of not taking seriously that traceability and your customers’ expectations.

[00:13:23.440] Cool. Well, thank you, Ben. No.

[00:13:26.630] Thank you.