There is Lot Control and then there is Lot Control within Order Fulfillment… way different

We have a customer that sells yarn and related products. It is a nice business, a straightforward business. They sell direct in a B2B model and through an e-Commerce website.  As I said, it is a straightforward and common model.

The interesting thing about selling yarn and, as it turns out, a lot of other products is the tricky little process of order fulfillment.  The process is not the standard FIFO (first in/ first out) model. It is a little more complicated.

Here’s why: Let’s say you wanted to make a sweater and you wanted it to be French Blue.  When selecting the yarn to use, you couldn’t just pick any French Blue yarn. All French Blue yarn should be the same, but that isn’t the case. During the manufacturing process the yarn was made against a specific dye-lot. Each run of French Blue yarn is very close to the same, but not exactly the same.  So, if you make a French Blue sweater from different dye lots, it will have different shades of French Blue.

There are many products, and therefore businesses, that share this problem. Paint, wallpaper and textiles all come to mind.

Inventory systems have had lot control features in them for as long as I can remember and from a macro perspective they seem to solve this problem.  When the warehouse personnel pick the products they just need to make sure they pick from the same lot. Seems easy enough, right?  But let’s peel the onion on this problem a little.

Let’s start in sales, seeing as though that is where we see the problem first. A customer calls and wants a specific quantity of product, but it needs to be from the same lot because of color, date of manufacture, etc.  Do you have the quantity to fulfill the order within the same lot number?

Say you have the inventory all in one lot number.  Great… now how do you book the order? The first step is to ensure the inventory is properly allocated and the available-to-promise information is updated accurately. But you can’t allocate based on FIFO, you need to allocate by the lot number and the quantity to cover the order.  Then you need to pick the customer’s order by lot number and then, of course, relieve the inventory exactly the way you picked it.

Sounds like there are a lot of people dependent processes required to get everything perfect. The order fulfillment process has to be perfect for customer satisfaction, to ensure the accuracy of your inventory and for the accounting of cost of goods sold.  Makes you nervous doesn’t it?

In other words, you are overriding a typical FIFO rule with an Allocate by Lot Number rule. ABLN? Ok, let’s not create another acronym but if ABLN catches on it started here.  For fun I Google’d ABLN… turns out to be a Brazilian consulting company. So this may not get legs and run.

In our quest to simplify supply chain operations we have added the ABLN ( Allocate by Lot Number) functionality across the entire application, to ensure perfect allocation, picking, inventory relief and cost of goods sold. We have even added that lot number to the invoice.  Our customers are using this and their customers now have perfectly colored French Blue sweaters.

-MF