inventory management

Guide to Material Traceability for small manufacturers

We show you why it's important to trace your material stock from raw material purchase to sale.

Material traceability isn’t just a thing that only large manufacturers need to worry about: no matter your size, getting a process in place to handle your traceability is critical to ensure the quality and safety of your products.

In this article, we will explain what material traceability is, why it is important for small manufacturing situations, and how you can successfully implement a process that works for you and your business.

Want to jump to a particular section of our cycle count article? We’ve got you covered:

Need to get your material and product inventory under control?

Try Craftybase - the inventory and manufacturing solution for DTC sellers. Track raw materials and product stock levels (in real time!), lot and batch tracking, COGS, shop floor assignment and much more.
It's your new production central.

Start your 14 day free trial

What is Material Traceability?

Material traceability refers to the process of tracking and tracing raw materials and subassemblies throughout your entire production line.

Every step of the manufacturing process needs to be documented to achieve true traceability of your supply chain, from receiving your raw materials to shipping the finished product.

We’ll take a look at the reasons why you need a traceability system later in this article, however as a quick summary, traceability systems are essential as they allow you to know exactly how your materials flow from purchase to sale. This can assist with quality control, which involves looking into customer complaints and actioning recalls. Gaining this visibility is crucial to improving and scaling your manufacturing business.

How do I implement Material Traceability?

Now that you know about the reasons why you, as a small manufacturing business, should be making traceability a priority, let’s now move on to how you can start to implement processes into your business that will ensure you are capturing the right data at the correct part of your production process.

Your traceability documentation can take many different forms, from physical paperwork to digital records, but it is essential that every piece of material can be traced back to its source.

If this sounds daunting, you aren’t alone. We’ll take you through the steps to identify your processes and the data you’ll need to start collecting in order to implement your own traceability system.

Let’s begin with a high level view of things.

Understanding your production process

To begin your traceability journey, it’s important to have a firm idea of your production process: what materials are required for each product, how these materials are combined together, and in what order.

If you haven’t already created a Bill of Materials (BoM) for each of your products, this is an excellent place to start. BoMs will help you understand what raw materials are required for each product and in what amounts.

Next, it’s a good idea to create SOPs for each of your products. An SOP is a Standard Operating Procedure, and it outlines the steps that need to be taken to produce a product.

SOPs will help you understand the order in which materials are combined, any particular techniques that you employ and will act as a valuable reference point when things go wrong. They are also a great tool for consolidating your production process into a central place to share with staff members.

You’ll also want to think about how you purchase your materials and what process you take to include them in your inventory once they have been received. Creating a diagram showing all the flows from purchase to sale is also a great idea to help you visualize the process.

Once you have a firm understanding of your production process and what materials are required for each product, you can begin implementing a material traceability system.

The second phase of this process is to take a closer look at the three main parts of a typical production process: the raw materials purchasing, the manufacturing / assembly process and the finished product management process. Your process may differ in implementation, however these three steps are common to all manufacturing businesses.

Purchasing Step

One of the first steps in implementing a material traceability system is to put a process in place for tracking your purchasing of raw materials.

This process should include identifying the source of each raw material, documenting material specifications, and keeping track of material lot numbers.

To begin, you’ll want to assign a unique identifier to each batch of raw material you receive into your inventory.

The key part here is “batch of raw material” - tracking only at the material level will not give you the level of detail you will require to trace back a specific purchase of materials from an order.

This unique identifier is usually called a Lot Number or Batch Number. It can be the lot number that your material supplier has created and provided as part of your invoice, or you can create your own using any format you like. The only requirement is that your codes need to be able to pinpoint the batch and vendor you purchased from.

Why are lot numbers important? It’s essentially because they can be used to track material movements throughout the production process. By keeping track of lot numbers, manufacturers can quickly identify the source and affected specific batch(es) of any material issues that may arise.

Read more: Lot Numbers: The Complete Guide

When you receive your materials from your supplier, ensure you have a system to track:

  • The materials you purchased
  • How many you received in the batch,
  • The code (lot number) you have associated with this batch

Additionally, it is important to have a system for receiving and inspecting materials when they arrive at your facility. This process should include documenting any material shortages or damaged goods, and taking corrective action to prevent these issues from happening in the future.

Manufacturing Step

Now that you’ve tracked your materials at the point of purchase, it’s time to look at how to track them through your manufacturing process.

This process should include documenting material usage, keeping track of material location, and ensuring that only authorized personnel have access to material storage areas.

To achieve this, you’ll want to think about assigning unique identifiers to two key parts of your manufacturing process:

  1. Tracking a batch of product as it moves through your production line
  2. Tracking each sub-assembly that is created (as this will essentially create a new part, requiring a new code)

It’s important to have a traceability system that links the raw materials you use during the production process to the batch of finished products. This usually takes the form of a manufacture record which contains a list of each material used, their lot number and the quantity of the material used.

Tip: Creating Bill of Material (BoM) records (see above) will make this process much faster, as you’ll be able to copy your material and usage lists across to your production record and size up and down where necessary to match the quantity made.

The manufacture record itself should also have an identifier code to allow you to search for and look back on records of production. This code can be whatever you like, as long as it is unique.

Additionally, it is important to have a system in place for disposing of unused or damaged material. This process should include documenting material waste, and taking steps to prevent material from being used in future products.

Fulfillment Step

Finally, you’ll want to think about how you can trace your products through from completion to the point of sale.

The most important thing here is ensuring that each product has a unique identifier, allowing you to track it individually.

This identifier is usually called a serial number or unique product ID. It needs to be applied to each product before it leaves your premises so that you can track and trace it if necessary.

Once again, this code can be anything you like - the only requirement is that it is unique to that product.

To link the product sent to the customer with the raw materials used to produce it, it’s important to ensure that your traceability tracking system has a way of associating a manufacture production record with the sale.

Once you have these three steps tied together with unique numbers that can be used to trace your stock back to their origins, you’ll be on your way!

Additionally, it is important to have a system in place for disposing of damaged or defective products. This process should include documenting material waste, and taking steps to prevent material from being used in future products.

Using a technique such as value stream mapping for the above three processes can be useful because it will give you a high-level overview of your material movements, and help you identify any potential bottlenecks in your process.

Why is Material Traceability Important?

Quality Control

There are many reasons why traceability is important, but perhaps the most critical reason is quality control. In a small manufacturing environment, it is essential to maintain tight control over material usage and product quality.

Additionally, material traceability can help manufacturers avoid liability issues by providing a clear record of material usage and product quality.

Better inventory management

Material traceability can help manufacturers keep track of inventory levels and avoid production disruptions due to material shortages.

By documenting material usage, manufacturers can achieve real-time visibility of their stock levels, more accurately forecast future inventory needs and thus avoid costly production delays.

Industry Regulations

Another important reason to implement material traceability is to comply with industry regulations (otherwise known as “compliance”). Many industries have strict guidelines governing the use of materials and finished products, and material traceability can help manufacturers meet these requirements.

By tracking material movements, manufacturers can ensure that their products are made using approved materials and that they meet all regulatory standards.

Improved Customer Service

Material traceability can help improve customer satisfaction by ensuring that products meet a higher level of quality.

Situations where customers are shipped incorrect items, or products with missing parts can be a huge time sink for your customer service team and for your fulfilment team. Having a complete traceability system can make these situations occur far less due to the extra cross-checking that is built into the process.

It is a fact that even with a great system these situations may still occur from time-to-time, and material traceability can additionally help by to quickly identify the source of the problem

Using software to track your traceability processes

As a very small manufacturing operation, you might find that you can begin tracking your traceability requirements by wedging them into your material tracking spreadsheet.

As your business grows, you will most likely find that your spreadsheet has been adapted in so many directions that it becomes impossible to use.

This is where material requirements planning (MRP) software comes in. This type of software can help you track material usage, keep track of material location, and generate reports on material movement throughout the production process. Additionally, many MRP systems include features for managing quality control, such as identifying material shortages or damaged goods - all without a spreadsheet in sight!

Craftybase: traceability software for your small manufacturing business

If you are looking for an easier way to track your material traceability processes, consider using Craftybase.

Craftybase is a cloud-based MRP software featuring a dedicated suite of traceability and compliance features. Craftybase allows you to easily track material usage, real-time raw and finished product inventory, and account for your material waste.

In addition, Craftybase provides extensive reporting so that you can quickly identify and correct any issues that arise.

Learn more about how Craftybase can help you streamline your material traceability processes: sign up for a free trial of Craftybase today!

Nicole Pascoe Nicole Pascoe - Profile

Written by Nicole Pascoe

Nicole is the co-founder of Craftybase, inventory and manufacturing software designed for small manufacturers. She has been working with, and writing articles for, small manufacturing businesses for the last 12 years. Her passion is to help makers to become more successful with their online endeavors by empowering them with the knowledge they need to take their business to the next level.