Batch and Lot Management in Business Central — A Guide for Regulated Manufacturers

Lot and batch traceability is a regulatory requirement for manufacturers operating under GxP, and it is one of the first things an inspector will test in an ERP audit. Business Central provides a configurable item tracking system that can meet GxP traceability requirements when properly set up. This guide explains how BC's item tracking works, where it is sufficient, and where additional configuration or extension is needed for regulated environments.

How Business Central handles item tracking

BC's item tracking system assigns tracking codes to items at the item card level. A tracking code defines whether an item requires lot tracking, serial number tracking, or both, and at which points in the supply chain the tracking number must be recorded — inbound receipt, outbound shipment, production consumption, or all of the above.

For regulated manufacturers, the most common configuration is mandatory lot tracking on all warehouse movements: goods receipt, production consumption, finished goods entry, and sales shipment. This configuration ensures that every unit of GxP-relevant material can be traced from supplier receipt through internal production to customer delivery.

Forward and backward traceability

Traceability has two directions. Forward traceability starts from a raw material lot and traces all downstream uses: which production batches consumed it, which finished goods batches contain it, and which customers received those batches. Backward traceability starts from a finished goods batch and traces all upstream components: which raw material lots were used, from which suppliers, on which dates.

Business Central supports both directions through the Item Tracking Summary and the Navigate function. The Item Tracking Summary shows all transactions associated with a specific lot number. Navigate shows the document chain for a specific transaction. Together, these provide the traceability evidence required for a recall investigation or a regulatory audit.

For a complete traceability demonstration to satisfy a GxP inspection, the lot tracking configuration must be consistent: every material that could affect product quality must have mandatory lot tracking enabled, and lot numbers must be recorded at every movement. Gaps in the configuration — items where lot tracking is optional rather than mandatory, or movements where lot recording is not required — create holes in the traceability chain.

Expiry date management

BC's item tracking supports expiry dates at the lot level. When an expiry date is assigned to a lot at goods receipt, BC can be configured to: warn or block pick operations for lots past their expiry date; apply FEFO (First Expired, First Out) logic in warehouse picks to prefer lots with earlier expiry dates; and filter available inventory to exclude expired lots from available quantity calculations.

For pharmaceutical and cosmetics manufacturers, expiry date management must be validated as part of the system validation. The validation should confirm that the FEFO and expiry blocking configurations behave as specified under all relevant scenarios, including partial lot consumption and cross-warehouse movements.

Batch manufacturing record extensions

Standard BC's item tracking provides traceability at the lot level, but it does not produce an electronic batch manufacturing record (BMR). The BMR — the document that captures the complete production history of a pharmaceutical batch — is not a native BC concept and requires a separate AppSource extension.

Several validated AppSource extensions are available that add electronic BMR functionality to BC production orders, including in-process control recording, batch classification, yield calculation, and GxP-aligned audit trails. Validated extensions come with product documentation suitable for inclusion in a validation package. Organisations implementing BC for pharmaceutical batch production should evaluate the available AppSource extensions as part of their system and validation scope assessment.

QC inspection integration

Standard BC does not currently include a native QC inspection module with the release/hold decision workflow required by GxP. Organisations typically address this in one of three ways: using BC's approval workflow engine to create a manual QC approval step before lot release; integrating a dedicated QMS or LIMS that manages QC results and communicates release decisions to BC via API; or using a specialised AppSource extension that adds QC functionality to the BC item record.

Upcoming in BC 2026 Wave 1 (BC 28.0, general availability April 2026): Microsoft is introducing a native quality management capability covering quality checks on purchase receipts, production output, and assembly output, with configurable quality test plans, quarantine procedures, and quality certificates. The extension installs automatically on newly deployed environments and is available on AppSource for upgraded environments. Organisations planning new BC implementations for regulated environments should factor this upcoming native capability into their extension assessment and validation scope.

The chosen QC approach must be included in the validation scope. If the QC release decision is managed in an external system, the interface between that system and BC must be validated as an integration.

Configuring lot tracking for GxP compliance

A GxP-compliant lot tracking configuration in BC requires: mandatory lot tracking codes on all GxP-relevant items; lot tracking required on all warehouse movement types (receipt, shipment, production consumption, production output); Change Log monitoring enabled for the item ledger entry and item tracking entry tables; permission sets that prevent manual modification of posted lot entries; and a documented configuration specification that maps each setting to its GxP justification.

The validation of the lot tracking configuration includes IQ evidence (configuration settings documented and confirmed), OQ evidence (test protocols verifying that lot tracking is enforced on all required movement types), and PQ evidence (business users demonstrating end-to-end lot traceability in realistic scenarios).

What an auditor expects in a lot traceability test

During a GxP inspection, the auditor will typically ask for a forward or backward traceability demonstration for a specific lot. The expectation is that the system user can, starting from a lot number, produce a complete chain of custody showing all movements and transactions associated with that lot, with timestamps and user attribution for each entry. The demonstration must be completable within a reasonable timeframe — auditors interpret a slow or incomplete traceability demonstration as a system capability concern.

Preparing for this test requires that lot tracking is consistently configured, that all relevant transactions are posted correctly, and that the personnel responsible for the demonstration are trained and familiar with the navigation.

Download the batch and lot management guide for Business Central as a PDF using the link below.