How is batch management applied in ERP systems? In ERP, there is one management function that runs through the entire process, from upstream procurement to inbound storage, production, sales, and accounting. That function is batch management. Especially in manufacturing, where there are various raw materials, components, and finished goods, identical materials often need to be managed separately because of different characteristics. So how is batch management applied in ERP systems?

Let us first look at the scenarios in which batch management is used:

First, appearance differences.

This means that the same material shows different visual effects. A typical example is a tile factory, where tiles of the same type may develop different patterns during firing because of differences in heating area and duration. In this case, they can be divided into different batches according to certain standards.

Second, production shelf life.

This is especially common in the food and beverage industry. If one batch is produced every day, then products made on different days will have different production dates and expiration dates. At that time, management must distinguish them by batch, and shipment can also follow the first in, first out principle according to production batch.

Third, manufacturing process.

In mechanical manufacturing, if one step in producing a component can be done either by machine or manually, the resulting parts will differ in characteristics. In that case, they can be managed as two separate batches for later distinction.

After looking at the scenarios where batch management appears, it becomes clear that these scenarios are actually meant to achieve two common goals.

The first goal is value differentiation. Different batch characteristics of the same material may create different value. For example, in a winery project, the same type of liquor may have vintages of 5. years, 10 years, or 20 years, and their values differ greatly. With batch management, inventory accounting can be carried out using the specific identification method during receipt, issue, and storage.

The second goal is batch traceability. In some high-end manufacturing fields, components are subject to strict management requirements. For example, if an automaker later discovers quality problems in a certain batch of parts, it may recall cars that have already been sold on the market. To enable this kind of component traceability, batch management must be used so that parts are strictly bound to batch numbers and the entire chain can be tracked.

Since batch management is so important, how is it applied in ERP?

1. First, establish batch rules

1. Batch composition methods: There are generally two types, a simple batch number, or a batch number plus production date plus expiration date, which is often used in shelf-life-sensitive industries.

Example: S0001 for a simple batch number, or S0001-20240523-20280524 to indicate a shelf life of four years.

2. Batch generation methods: There are also two methods, manual generation through manual entry, or system generation by setting rules, such as automatic recognition based on certain characteristics and then generating the batch in a defined format.

Example: Region-ItemNumber-Year, such as South-S0001-2024.

2. Then determine the batch scope

Especially in group enterprises, controlling the uniqueness of batch numbers is very important because it involves many internal transaction issues. It is generally divided into several control levels.

Group level: Group plus batch. The same batch is unique within the group, and one batch number can only be assigned to one material.

Material level: Material plus batch. The same material with the same batch has the same characteristics across different subsidiaries. Different materials may use the same batch number, but their characteristics differ.

Subsidiary level: Subsidiary plus material plus batch. The same material with the same batch may have different characteristics in different subsidiaries.

There is one detail here. Once the batch control level is set, it generally should not be modified casually. The principle for changes is that it can be changed from a lower level to a higher level, but not from a higher level to a lower level. This is because the higher the level, the more generalized batch management becomes, while the lower the level, the more specific it becomes. It is easier to move from specific to generalized than from generalized to specific.

3. Batch application

After batch rules and levels have been established, the enterprise follows those rules to assign batches in procurement, production, sales, and other business activities, and performs inbound and outbound movements in both the books and the warehouse to realize batch management.

4. Inventory accounting

With the support of batch management, inventory accounting can realize both the first in, first out method and the specific identification method. Examples are given below.

The first method, first in, first out

Suppose a warehouse has 1,000 tons of a certain material. The composition is 500 tons of opening inventory at a unit price of 6, 200 tons purchased on the 2nd at a unit price of 7, 100 tons purchased on the 4th at a unit price of 8, and 200 tons purchased on the 15th at a unit price of 9. On the 23rd, 750 tons are to be issued. When calculating cost, the issued inventory cost should be determined from the inventory subsidiary ledger according to the batch unit price of each purchase: 500*6+200*7+50*8.

The second method, specific identification

For example, among 200 units of inventory issued on May 11, 100 units are opening inventory with a unit cost of 10, and 100 units were purchased on May 5. with a unit cost of 12. The 100 units issued on May 20 were purchased on May 16 with a unit cost of 14. Then the total issued cost in May is calculated as follows: 100*10+100*12+100*14.

For batch management and other systematic ERP knowledge, you can consult Soonfor Software. The Soonfor ERP system centers on enterprise management and uses information technology to automate management, supply chain, production, sales, and related activities. It builds a management system that integrates upstream and downstream business processes, helping enterprises simplify complexity, achieve digital management, promote industrial upgrading, reduce costs, and win more business opportunities and profits.
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