When Inventory Becomes Unique

Welcome back to our series on essential concepts in third-party logistics (3PL) fulfillment! Today, we're delving into the concept of serialization and its critical role in effective inventory management. Most e-commerce sellers never need serialization, and because of this, many 3PLs cannot handle serialized inventory. It’s complicated for reasons that we’ll get into later.

Understanding Serialization

Serialization refers to the process of assigning unique identifiers to individual items within a group of products. When inventory becomes serialized, it ceases to be fungible, meaning that each item is distinct and cannot simply be interchanged with another item of the same kind. This allows for more precise tracking and management of inventory throughout the supply chain, which is crucial for maintaining quality control and streamlining operations.

Examples of Serialization in Action

Here are a few examples of how inventory becomes serialized:

1. Serial numbers: Many manufacturers assign unique serial numbers to products like electronics, appliances, or automotive parts. This allows for better tracking and management, especially when it comes to warranty claims or product recalls.

2. Lot numbers: In industries like pharmaceuticals, food, and cosmetics, products are often produced in batches or lots. Each lot receives a unique identifier, enabling tracking throughout the supply chain. This is essential for maintaining quality control, and managing recalls if any issues arise with a specific batch.

3. Expiry dates: Perishable goods, such as food and medicines, typically have an expiration date. Tracking individual items with their specific expiry dates ensures proper stock rotation and reduces the risk of selling expired products.

4. Unique product variations: Some products may have slight variations, such as custom designs, limited-edition releases, or signed merchandise. Assigning unique identifiers to these items allows sellers to manage and track them more effectively.

5. On-Demand inventory: Whenever inventory is produced “on demand,” such as with direct-to-garment printing or a laser-engraved gift, it is transformed from a fungible product “blank” into a completely unique item.

Orders of Magnitude

Making the implicit explicit takes on a whole new meaning when each product is unique. Serialized inventory requires an order of magnitude more granularity in order and warehouse management processes. Supporting traditional inventory is hard enough, but supporting serialized goods is a comparitive superpower:

1. Enhanced traceability: Since each serialized item has a unique identifier, tracking the movement and status of every individual item becomes necessary. This requires a more sophisticated warehouse management system (WMS) that can handle and store detailed information on each item.

2. Complex data management: Serialized inventory generates a larger volume of data that needs to be managed and maintained accurately. This includes information about the item's unique identifier, manufacturing details, expiration dates, and more. The increased data complexity requires more advanced data management systems and processes.

3. Detailed record-keeping: With serialized inventory, businesses need to maintain detailed records for each individual item, including its location within the warehouse, its movement history, and any associated transactions. This demands more granular record-keeping and a higher level of organization.

4. Compliance and regulatory requirements: Certain industries, such as pharmaceuticals, medical devices, and food, are subject to strict regulations that require serialized inventory management. These regulations mandate maintaining detailed records and providing accurate traceability throughout the supply chain. To comply with these requirements, businesses need to adopt more sophisticated processes and systems.

5. Error reduction: Serialized inventory management necessitates a higher level of accuracy to avoid errors like duplicate entries, mislabeling, or misplaced items. As a result, warehouse management processes must be more meticulous and thorough to ensure the correct handling and tracking of serialized items.

6. Customer service and returns management: Handling customer returns, warranty claims, and other service issues becomes more complex with serialized inventory, as businesses need to identify and track the specific item in question. Sometimes, serialized inventory isn’t eligible for RMAs. Those who sell print-on-demand products like custom apparel goods often refuse to accept returns because they’re not worth ongoing management because demand is low.

The Benefits of Serialization

Serialization isn’t for everyone. Yet certain sellers simply can’t live without it through their entire supply chain process. If your business requires it, make sure your prospective 3PL partners aren’t going to “fake it until they make it” at your expense.