February 23, 2024

Product serial numbers are useful in various ways, like helping manufacturers track output and retailers manage sales. Since each serial number is unique, you can also use them in an inventory management process known as serialized inventory.

Here is what you need to know about serialized inventory management and how to use it in your business.

What is serialized inventory?

Serialized inventory management uses a unique identification number, or serial number, to record critical information about each item in stock. The number shows where a particular product was manufactured, shipped, and sold to a customer. The serial number also allows companies to track a product after purchase for things such as warranty claims and product recalls.

Serialized inventory tracking is used in many industries, particularly those with high-value products. This includes cars and trucks, auto parts, appliances, consumer electronics, aerospace and defense systems, medical equipment and pharmaceuticals, and luxury goods such as jewelry, watches, and designer handbags. Some products such as firearms and pharmaceuticals require serial identification to meet government regulations. Other products, like luxury goods, are serialized for the protection of buyer and seller—to authenticate the goods and prevent counterfeiting.

Serialized vs. non-serialized inventory

The main difference between serialized and non-serialized inventory is serialized products are uniquely identified, allowing manufacturers, distributors, and retailers to track individual units separately through the supply chain to the end customers. Some serialized products also contain serialized parts—for instance, the microchip, battery, and camera in a smartphone each have their own serial numbers.

Non-serialized inventory generally consists of lower-value goods made and sold in bulk, such as clothing, household products, processed foods, and raw materials. For example, say an online seller of casual wear orders 500 men’s navy blue hooded sweatshirts, size medium. One is as good as another; the retailer, or the manufacturer typically don’t have the time and money to spend creating serial numbers for each sweatshirt. Nor is it economical to do so. A SKU (stock keeping unit) bar code containing information on size, color, and style for all 500 items is usually sufficient to track the inventory and prevent theft.

Advantages of serialized inventory

Serializing can help your business in various ways, increasing your accuracy and insight into your inventory. Some advantages include:

Product ownership verification

A serial number can confirm a product’s purchase history and prove ownership. If you’re a retailer and someone brings a product back with a complaint or warranty claim, for example, the serial number ensures the buyer purchased the specific product from you.

Inventory tracking

Serialized inventory tracking refers to knowing where a product is located and its status. The serial number could tell whether the product is still in a factory, in a warehouse, or on store shelves, or if it’s been sold, to which customer, and where.

Warranty, recall tracking, quality control

Many products include a warranty that the product meets specified standards to ensure quality control. A serial number can help verify whether a product is covered under warranty if the purchaser seeks a repair or replacement. It is also used by manufacturers and distributors to track owners of items in a product recall. An automaker, for example, might recall cars with a specific make, model, and year if it discovers a defect, using serial numbers to contact owners.

Regulatory compliance

Some industries must serialize their products for tracking to comply with regulations for proper use and storage. In the US, serial numbers are used to track medical devices and pharmaceuticals, which are regulated by the Food and Drug Administration, as well as firearms, which are overseen by the Bureau of Alcohol, Tobacco, Firearms and Explosives, a part of the Treasury Department.

Theft and fraud protection

Serial numbers can help track stolen or missing products from a store, warehouse, home, or office. Serializing also can help deter shoplifting and employee theft. A serial number also certifies a product’s authenticity and helps thwart counterfeit items from being passed off as genuine. This is critical for buyers and sellers of luxury goods, which typically command premium prices based on their limited supply and brand value.

Control of pricing and discounting

Detailed data from serialized inventory allows retailers and distributors to see how long a product has been sitting in storage, and can influence pricing strategies. High-demand items might spur a price increase, while older items might get discounted to clear them out of storage.

Demand forecasting

Data collected from serialized inventory tracking can lead to greater accuracy. Analyzing this data using inventory management software can, in turn, improve demand forecasting. For example, an electronics retailer might use serialized historical sales for flat-panel TVs to see which size outsells other sizes, influencing future orders.

Disadvantages of serialized inventory

Businesses must also consider the potential challenges in serializing their inventory, including:

High cost

Serializing inventory requires coordination with suppliers so they are all capable of reading and recording the same inventory information—from a bar code or QR code, for example. It also means a significant investment of time and money, including in inventory management software. It may take longer than expected to recoup this upfront investment—serialized inventory increases efficiency in the long run, but doesn’t directly contribute to the bottom line.

More data to manage

Serialization produces more detailed information about each item, including any embedded parts with their own serial numbers, and their movement from manufacturer to customers. You will need a robust inventory management system to handle the greater data load.

Lack of interchangeability

Unlike a sweatshirt, which can easily be substituted for another sweatshirt, each serialized item is unique with its own factory-to-customer history and can’t always be readily substituted. In other words, serialized inventory items often are not fully interchangeable in the same way bulk inventory items are. This means a customer seeking to exchange a serialized product may not receive an exact duplicate of their initial purchase.

Advantages of non-serialized inventory

Depending on the type of goods and the size of the company, serialization isn’t always necessary. Non-serialized inventory has a few advantages, including:

Simplicity

For a smaller business, inventory management may require only manual counting, or checking a physical spreadsheet. These companies probably don’t need serialized inventory and extensive supply-chain integration.

Lower cost

Serializing costs money to implement and maintain. A simpler, non-serialized inventory is usually less expensive to manage.

Sufficient for low-value bulk items

Products in a non-serialized inventory usually are of lower value in contrast to a laptop or a piece of jewelry. If your business sells sweatshirts at $40 each, for example, it’s probably not worth the cost and effort to create a serial number for each one.

How to manage serialized inventory

Inventory serialization entails some big considerations about a business’s supply chain and setting up an inventory management system.

Serialization tends to work best if it’s applied throughout the supply chain, from product designer to manufacturer to distributor and, finally, to retailer. This is known as supply-chain integration. Everyone in the chain relies on the same serial numbers, allowing consistent tracking of a product’s journey, all the way to the customer.

Another way to think of this is that serialization starts upstream in the supply chain, with manufacturers creating and attaching the serial numbers. Retailers, shippers and warehousers and others downstream in the supply chain simply record the serial numbers and use them to track and manage the flow of products.

If you’re using serialized inventory, inventory management software is essential because serialization produces more data, with more complexity, about each numbered product. Although it’s possible to set up a serialized inventory manually or with a spreadsheet, the work would be tedious, error prone, and time consuming. There are many providers of cloud-based inventory management that can handle serial-number goods.

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Serialized inventory FAQ

What is an example of a serialized item?

Serialized items are all around us: cars, smartphones, medical devices, home appliances, and many luxury goods such as watches have serial numbers.

What is the difference between lot-numbered and serialized inventory?

Lot-numbered inventory assigns an identification number to a batch of the same or similar product items, such as a 100 count of large size men’s casual striped shirts, or a pallet of bottled pain relievers. Each item—a shirt or bottle of pills—is indistinguishable from the others in the lot. Serialized inventory, in contrast, distinguishes each individual item with a unique serial number.

What industries commonly use serialized inventory tracking?

Industries that make or sell high-value goods typically use serialized inventory tracking. These include automakers, aerospace companies, computer and smartphone makers, pharmaceutical and medical-device manufacturers, and luxury-goods makers.

What are the advantages of tracking serialized inventory?

Serializing your inventory provides two key advantages: greater accuracy and more insight into the status and condition of your stock. These advantages mean you’ll know how much inventory you hold, where it is (store shelves, warehouse, or factory), how old it is, who bought which products, and when each product may have a warranty claim or recall.

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