How Serialized Inventory Tracking Improves Operations

Imagine an auto manufacturer that produces high-performance electric vehicles. A customer reports a strange noise coming from their new car’s motor. In the past, diagnosing this issue would have required a manual review of service history, identification of potential causes, and escalation to engineering. If the problem proved to be widespread, a broad recall might be necessary, inconveniencing customers and incurring significant costs.

With serialized inventory tracking, however, the manufacturer assigns a unique identifier to each component and vehicle, tracking them throughout the supply chain. The service technician can quickly access the detailed history of the motor, from manufacturing to shipping. If an issue is identified, it can be traced to its source, whether a faulty batch of components or a specific assembly line problem. Corrective actions and precise recalls can then be implemented, minimizing customer impact and cost.

This level of visibility and control over inventory is valuable for any industry. Amid complex global supply chains, stringent regulatory requirements, and rising customer expectations, the ability to track and trace products at the individual level is becoming increasingly important for businesses and their bottom lines.

What Is Serialized Inventory Tracking?

Serialized inventory tracking is a method businesses use to track individual components and products throughout their lifecycles. The process involves tagging each item with a unique identification or serial number, typically a barcode. This number captures important details, such as the item’s manufacturer, the date of manufacture, its warehouse location (or who bought it, if the item has been sold) and, if applicable, the time frame of the item’s warranty.

Serialized inventory tracking can be performed manually but is best handled with sophisticated software to manage and analyze the abundant data generated as the item moves through the ordering, storage, distribution, and sales processes. Such data can fuel important decisions about inventory, assist in more accurate demand forecasts, and inform pricing strategies.

Key Takeaways

• Serialized inventory tracking follows an individual item throughout its lifecycle, even after it has been sold.
• High-value and government-regulated products are leading use cases for serialized tracking.
• Serialized tracking offers several advantages over tracking products in bulk, including stronger fraud prevention and improved quality control.
• Serialized tracking enhances multiple facets of warehouse and retail operations, including inventory management, picking and shipping, customer service, and data analysis.
• Implementing serialized tracking raises several challenges that can be overcome through careful planning and execution.

Serialized Tracking Explained

The essence of serialized tracking lies in the unique serial number assigned to each item. The term “serial number” is a slight misnomer because it typically includes letters and special characters, as well as numerals. The resulting identifier is intended to set each item apart from every other item on order, in stock, or previously sold.

Most people are already familiar with serial numbers. For example, smartphones have a unique 15-digit International Mobile Equipment Identity (IMEI) number carriers use to activate service. Cars have a vehicle identification number (VIN) used to link maintenance records, warranty terms, recall notices, and insurance coverage. In these examples, the serial numbers serve different, yet specific, purposes. That should be true any time serialized tracking is used. Such purposes might include regulatory compliance, warranty tracking, or theft and fraud protection.

Serial numbers are often assigned by the manufacturer during the manufacturing process and are embedded in the product. But sometimes a business may want to assign its own serial number. For example, if a business decides to extend the manufacturer’s warranty for certain products—details that are baked into the serial code—it can generate a second number to track the goods that are eligible for the extra coverage.

Despite its many advantages (more on those soon), serialized tracking is not necessarily worth the investment for all types of products—particularly inexpensive, essentially identical items often bought in bulk, such as screwdrivers, measuring cups, socks, books, and so on. Tracking these items can exceed their actual value, with significant upfront costs for hardware, such as barcode scanners or RFID readers; dedicated inventory management software; and integration with other systems. Ongoing costs include staff training, equipment maintenance, data security, and management.

Serialized inventory tracking is best-suited to two broad categories:

• High-value products, such as cars, auto parts, appliances, computers, cameras, aerospace and defense systems, jewelry and other luxury items.
• Products subject to regulatory compliance, including medical devices and weapons.

Serialized vs. Non-Serialized Inventory

While serialized inventory tracking is used by businesses to track single items, non-serialized tracking is a broader process that monitors items sold in bulk and is usually best suited for lower-priced items. For example, imagine a home improvement retailer that sells screwdrivers. One of the models offered is a 1/4-inch-by-4-inch slotted screwdriver, priced at less than $2. In this instance, tagging each screwdriver with its own serial number would be time- and cost-prohibitive and, because the tools are easily interchangeable, would provide no benefit from individually tracking the items.

Instead, if the retailer receives a shipment of 500 screwdrivers, a single stock keeping unit (SKU) barcode can be applied to every one of those products. Each time a screwdriver is sold, the total inventory count gets updated, but no one knows whichexact screwdriver was sold. There’s no need; the aggregate data suffices. With it, the retailer can track how many screwdrivers have been sent to each of its stores, which stores sell the greatest quantity, how well the screwdriver sells in comparison to other models, how many were sold in its stores versus online, etc. The retailer can also use this information to trigger a reorder when the quantity of screwdrivers on hand drops to a preset target or to update its website so customers don’t place an order only to find out that the item is out of stock.

Serialized Tracking vs. Lot Tracking

As far as inventory goes, tracking screwdrivers and similar items is as straightforward as it gets. Not only are the items inexpensive and interchangeable, but a screwdriver that has been in the stockroom for nine months typically has the same value as one that was received yesterday.

That reality changes for regulated products. The Food and Drug Administration (FDA), for example, has strict rules governing products that have a finite window in which they are safe to eat or drink; dairy products and fresh fruit juices are examples. The FDA also has rules for products, such as household cleaners and cosmetics, that include regulated ingredients.

In those cases, complying with the rules requires lot tracking. Lot tracking is a middle ground between serialized and non-serialized tracking: Individual items are still not tracked, but those with the same expiration date or produced at the same location at the same time are tracked as a group, or lot. For example, all of one maker’s cherry yogurt with an expiration date of August 9 is a single lot; the same maker’s cherry yogurt with an August 16 expiration date is another.

Each lot is stored separately to prevent stockers from mistakenly putting expired food on the shelves. Lot tracking offers other advantages, too. Storing and stocking by lot makes it easier to put the oldest product out first, so that it sells before it expires. Lot tracking also makes it easier to trace any returned, recalled, spoiled, or damaged products to their batch. Maintaining quality control for perishable products would be very difficult without lot tracking.

9 Advantages of Serialized Inventory Tracking

Serialized tracking isn’t appropriate for all inventory. The added time and costs of tracking individual ballpoint pens or pet collars will never pay off on the bottom line. But when the inventory in question is expensive, such as pianos or high-end telescopes, or regulated, such as pacemakers or handguns, serialized tracking offers nine distinct advantages:

1. Ensured regulatory compliance: Serialized inventory tracking helps prove compliance with detailed records of product movements, inspections, and certifications. In aerospace, for example, the Federal Aviation Administration requires that all aircraft parts are traceable to their origins to ensure they meet safety and performance standards. In pharmaceuticals, the Drug Quality and Security Act (DQSA) requires serialized identifiers so that stakeholders, such as pharmacies and hospitals, can confirm a product’s authenticity and help prevent counterfeit drugs from entering the supply chain. Serialized tracking has also become crucial for ESG compliance, allowing companies to validate sustainability claims by tracing components and materials to certified sustainable and ethical suppliers throughout their supply chains.
2. Fraud prevention: As billions of dollars’ worth of counterfeit goods continue to flood the market, consumers want assurances that the premium they’re paying for Rolex or Gucci is netting them the real product. A unique serial number verified by the brand guarantees authenticity. Serial numbers also protect businesses from various types of fraud. For example, when a product is being returned, scanning the serial number confirms whether it was purchased from that store and whether it’s the same unit listed on the receipt. This verification also helps identify stolen merchandise being returned for cash and prevents warranty claims on unauthorized products. For brands, this system protects both their reputation and revenue by making it harder for counterfeiters to successfully distribute fake products.
3. Improved quality control: Serialized tracking allows businesses to monitor items through every step of the supply chain. When quality issues arise, they can analyze the serial numbers of defective products to identify patterns and commonalities, such as whether the items used the same batch of raw materials or were handled by specific equipment or operators, making it possible to spot systemic quality issues. Serialized tracking also creates an auditable timeline of each product’s journey, which can help a manufacturer protect itself from unwarranted claims of defects by proving whether an item was damaged during shipping or after reaching a warehouse. For instance, if similar products from the same production batch perform normally, that is a likely indicator that the issue occurred after manufacturing.
4. Enhanced traceability: Serialized tracking creates a complete history of each product’s components, production process, and trek through the supply chain so that businesses can quickly identify and resolve quality or safety issues by connecting specific products to their production details. For example, if customers report that a batch of daytime cold medicine is causing drowsiness, manufacturers can use serial numbers to link affected products to specific production runs and determine other products that could also be impacted. Rather than initiating a broad recall, companies can pinpoint and address the affected items only, saving time and resources and better protecting consumers.
5. Precise stock monitoring: Serialized tracking provides a much deeper level of visibility than just a basic inventory system. For example, a car dealership will know more than it has 50 vehicles of a particular model on its lot—it can also access each vehicle’s specific options, engine type, custom features, current warranty status, and service history. If a customer wants a red SUV with heated leather seats and the latest safety features, the dealership can easily locate matching vehicles anywhere in its network and find out their histories, such as factory specifications and warranty status. This depth of information also helps improve decisions about inventory management, inventory forecasts, maintenance scheduling, and customer service.

6. Streamlined returns: Serialized tracking in the returns process ensures that the correct item is being returned, prevents warranty fraud, and simplifies reverse logistics by automatically routing returns to the appropriate facility based on the item’s condition and characteristics. For example, when an electronics retailer receives a returned laptop, scanning its serial number shows whether it was purchased at its store or online, whether the product is still under warranty, its complete service history, and whether the laptop should go back to stock, to refurbishment, or to the manufacturer. Serialized tracking also facilitates returns at self-service kiosks, authorizing instant refunds and providing instructions about where the laptop should go next.

   In either scenario, integrating serialized tracking with customer relationship management (CRM) and enterprise resource planning (ERP) systems reduces the cost of processing returns by automatically pulling together purchase data, warranty information, and return eligibility across all systems. Integration also improves the customer experience by eliminating manual verification steps and enabling consistent return policies across all sales platforms.

7. Verified product ownership: Serial numbers are a product’s digital identity. When a service provider visits a customer for an in-home appliance repair, for instance, scanning the serial number will reveal the appliance’s complete history—from original purchase to ownership transfers—to confirm product ownership. It’s also important for confirming warranty coverage, protecting the manufacturer from fraudulent claims and legitimate customers from unknowingly purchasing products that are no longer covered. Serial numbers also provide proof of ownership for insurance claims and help law enforcement identify and recover stolen items.
8. Effective product recall: When a company has to recall its products, serialized tracking makes it possible to avoid a blanket recall and focus on only the defective items, as in the previous cold medicine example involving traceability. Depending on the timing of the recall, a business may also be able to identify on-hand stock with the same defect and correct the problem, thus preempting a future recall.
9. Simplified warranty management: By linking items with their manufacturing dates, serial numbers make it a snap for businesses to manage warranties, compared to the paper-heavy tedium of tracking dates manually. It also is easier to verify the applicable warranty terms. For customers, serial numbers negate the need to save receipts, register products manually, or provide detailed purchase information when making warranty claims; all of that information is already linked to the serial number.

How Serialized Inventory Tracking Improves Operations

Aside from making it easier to track specific items through their lifecycles, serialized inventory tracking yields benefits that can improve a business’s overall operations—ultimately reflected in its bottom line. These benefits include:

• Enhanced accuracy and control:

  Serialized inventory tracking eliminates common sources of human error in inventory management. When receiving shipments, scanning serial numbers verifies that the correct items arrived in the right quantities, preventing manual counting errors. In the warehouse, each scan creates a record of item movement and location, reducing the risk of misplaced inventory or incorrect stock counts. It also prevents double-counting or miscounting items during inventory audits. For example, if a warehouse worker accidentally scans the same item twice, the system will flag the duplicate entry because each serial number can only be counted once.

• Improved inventory management:

  Greater visibility into inventory shapes overall inventory management and decision-making. Rather than just knowing total quantities on hand, companies can see the exact composition of their inventory—which items are selling quickly, which are aging in the warehouse, and which ones need maintenance. This information helps businesses optimize stock levels, reduce holding costs, and prevent stockouts. For example, a retailer that sells power tools can track how specific models with certain features—such as battery voltage or tool-free blade changes—move through inventory, allowing them to stock more of the fast-selling configurations and fewer of those that sit on shelves.

• Streamlined operations:

  By monitoring each product’s movement through the supply chain, serialized tracking can uncover costly operational inefficiencies. For example, if scanning shows items consistently delayed at a particular warehouse, that location’s processes can be investigated. If serial numbers reveal that products from a specific supplier regularly arrive late or damaged, businesses can take it up with that vendor. Serialized tracking also automates traditionally manual, time-consuming tasks. For instance, during the returns process, scanning the serial number initiates the correct return protocol and updates inventory counts automatically. During product recalls, businesses can identify affected units specifically by their serial numbers and remove them. In addition, serialized tracking helps businesses quickly identify missing items and document losses, reducing the required labor.

• Better customer service:

  Serialized tracking helps businesses resolve customer support issues faster and in a more personalized way by providing direct access to each product’s specific history. When a business customer calls about a malfunctioning MRI machine, for example, service representatives can immediately access that unit’s maintenance history, warranty status, and common issues for that specific model—all without requiring the customer to dig through paperwork or explain their purchase details. Additionally, businesses can monitor individual items to proactively notify customers about shipping updates, maintenance schedules, software updates, product recalls, or expiring warranties, which customers are sure to appreciate.

• Enhanced data analytics:

  Serialized tracking generates unit-level data that reveals patterns traditional inventory systems miss. By analyzing individual product histories, businesses can track key performance indicators, such as return rates for specific configurations, failure rates of particular components, inventory turnover rates for specific models and variations, lead times from different suppliers, and actual performance against warranty expectations. This analysis informs targeted improvements, from modifying product designs to adjusting quality control processes at specific points in production. It is also valuable for predicting future demand patterns.

Implementing Serialized Inventory

Serialized tracking enhances inventory accuracy, traceability, and operational efficiency. But businesses must be deliberate about implementing the technology and processes required if they are to realize those benefits. Here are five steps for doing exactly that.

1. Select an Optimal Inventory Management System (IMS)

To be effective, an IMS must integrate well with existing product-related technology, such as a point-of-sale system or warehouse management system (WMS). These systems must be able to exchange data to facilitate receiving and stocking, synchronizing inventory, fulfilling orders, shipping products, and managing returns.

Suppose a retailer receives a shipment of high-end cameras. As each camera is scanned, the WMS automatically records its receipt, updates inventory counts, and captures each unit’s specific details, such as model number, features, and warranty terms. The IMS immediately updates the retailer’s website with this information, so that customers can see the exact specifications of each camera and whether they are in stock. As orders come in, the WMS directs warehouse staff (or robots) to pick, pack, and ship the specific cameras, while the IMS automatically updates general inventory levels and product-specific tracking information so that customers can follow their exact camera from warehouse to delivery.

Beyond integration, businesses should look for an IMS that can assign unique numbers to each item, track the movement of those items, and generate resulting reports. Notably, not all systems provide the same level of support for serialized tracking. Businesses should determine the type of support they’re likely to need and then be sure they can get it.

2. Establish Serialization Guidelines

Given that serialized tracking is all about precision, it stands to reason that businesses should have precise guidelines for how serial numbers are assigned, tracked, and used to control inventory. For example, businesses may choose to use serial numbers created by the manufacturer, create their own serial numbers, or use a combination of the two, such as when offering an extended warranty beyond the manufacturer’s original coverage. When creating their own, businesses should decide whether the numbers will be based on the date an item is received, on the supplier that provided the item, or some other factor, and then apply the guidelines consistently.

When creating their own serial numbers, businesses should also devise a standard numbering convention for the serial number itself. If a business is using a 10-digit serial number, for example, it might use the first two digits to represent the year of manufacture, the next two digits to represent the product category, and the remaining six digits to represent the serial number. The goal is to create unique identifiers that are easy to read and interpret.

3. Implement Barcoding or RFID Technology

Even a perfect serial number won’t be useful if the IMS can’t capture and trace it. Commonly, that’s done using barcoding or radio frequency identification (RFID) technology. Barcodes are scannable images that communicate product information; standard barcodes identify the type of product, while serialized barcodes include details about specific units. For example, a serialized barcode on a smartphone communicates the model and specifications, as well as that specific unit’s IMEI number, manufacturing date, and warranty status. RFID technology serves a similar purpose, but instead of sharing data through a visual representation, a wireless communication tool uses radio frequencies to share data. Such a system must be in place before serialized tracking can be introduced.

4. Provide Comprehensive Team Training

Simplicity is usually a goal for any serial inventory tracking system, but no system will succeed if employees don’t know how to use it effectively. Experts advocate training everyone who uses the system on how to:

• Assign serial numbers
• Update records
• Use the IMS effectively
• Scan and track items
• Update databases
• Analyze data

Experts caution that training should not be a one-and-done endeavor. Rather, ongoing training and support ensure that the system will be used consistently and correctly.

5. Conduct Regular Audits and Quality Checks

Consistent inventory audits are critical to establish that a serialized tracking system is working properly. These audits should verify that each item has a distinct serial number, that the serial number format is correct, and that the data entered into the system is accurate.

Audits also help flag issues, prompting corrective action before they become bigger problems. Businesses can conduct audits manually or by using a barcode or RFID system and serial number management software. Businesses can use different audit methods, such as cycle counting, physical counting, or sampling; the best method depends on the size and complexity of the inventory being audited.

Overcoming Common Serialized Tracking Challenges

Serialized inventory tracking isn’t without a few “gotchas” likely to be encountered before, during, or after implementation. Awareness and proper planning can help overcome these challenges, which include:

• Data security and privacy: Although some inventory data, such as the manufacturer’s location, may not be especially sensitive, any data linked to consumers is. To activate their warranty coverage, for example, consumers are often required to register their purchases online. If that website is ever hacked, its data is vulnerable. Additionally, RFID tag data can be read by any compatible reader—even after an item is no longer in the store or anywhere in the supply chain. If a tag includes a unique serial number, it can be linked to the buyer. To protect this data, experts call for strong security measures, such as encryption and access controls. It may also be advisable to consult cybersecurity experts.
• Initial implementation costs: Businesses incur both direct and indirect costs when introducing serialized inventory tracking. If a business doesn’t already have barcode or RFID technology, getting the proper hardware and software must be the first investment. Once serialized tracking is launched, businesses can expect it to generate a huge volume of data. Businesses may need to invest in specialized data management and business intelligence software to realize the benefits of that data. Indirect costs include the time and labor involved in performing a needs analysis, reviewing proposals, creating and delivering training, and so on. Over time, the benefits of serialized tracking, such as improved inventory control and reduced losses, can outweigh the costs, but businesses should carefully weigh the costs to determine whether it’s appropriate for their products.
• System integration: To fully realize the advantages of serialized tracking, the software must integrate seamlessly with other business systems, such as accounting, order processing, CRM, and ERP. Serialized inventory tracking also requires that the business and its suppliers all be able to read and record the same information, such as a barcode. Experts suggest identifying all potential integration points, determining what’s needed to integrate them, and resolving any issues before activating serialized tracking.
• Supply chain disruptions: When implementing serialized tracking, most businesses assume that their existing supply chains will continue to flow smoothly. But as we’ve seen in recent years, natural disasters, pandemics, geopolitical conflicts, and other events can disrupt the supply chain. To avoid such upheavals, experts suggest that businesses develop contingency plans. These plans might include working with a mix of suppliers, establishing alternative delivery routes, and using technologies, such as blockchain, to improve supply chain visibility.

Maximize Serialized Tracking Efficiency With NetSuite Inventory Management

The potential benefits of serialized tracking are legion, but to fully realize them, businesses need a robust system that combines powerful data management, real-time tracking capabilities, seamless integration with existing systems, user-friendly interfaces, and strong reporting and analytics features. NetSuite Inventory Management incorporates those features into a unified platform that provides a real-time view of inventory across multiple locations and sales channels—including warehouses, retail stores, pop-up shops, drop shippers, and third-party logistics providers—and throughout products’ entire lifecycles, from supplier to end customer. This helps support what more buyers want today: a seamless, buy-anywhere, fulfill-anywhere experience.

NetSuite Inventory Management automatically assigns serial numbers for tracking individual products. It also incorporates tools to improve the efficiency of replenishment, cycle counting, traceability, and item visibility. For example, when a customer wants an item that’s out of stock, the NetSuite system can avoid a lost sale by allowing salespeople to transfer, hold, or ship items directly to the customer. The NetSuite solution also offers flexibility, allowing businesses to meet the business needs of internal systems, from ecommerce to fulfillment to customer service.

Serialized inventory tracking allows businesses to track and manage individual stock items. This approach provides greater visibility, control, and accountability throughout the supply chain, making it a strategic investment in today’s competitive marketplace. Serialized inventory tracking helps ensure regulatory compliance and boosts customer satisfaction, despite the initial challenges of implementation. In the era of digital transformation, serialized inventory tracking is the cornerstone of modern supply chain management.

Serialized Tracking FAQs

What is serial-number tracking?

Serial-number tracking is a method of product inventory in which each item is assigned a unique identification number, allowing for precise monitoring and control throughout its lifecycle. Serial-number tracking is particularly useful in high-value and regulated product sectors, such as electronics, automotive, pharmaceuticals, and luxury goods.

What is serialized asset tracking?

Serialized asset tracking is a method of monitoring and managing individual corporate assets—such as IT and office equipment, construction equipment, and vehicles—by assigning each a unique identifier. This allows for precise tracking of the item throughout its lifecycle, from purchase to disposal. Serialized asset tracking prevents loss, ensures regular maintenance, and supports asset optimization and regulatory compliance.

What is an example of a serialized item?

A smartphone is an example of a serialized item. Every smartphone is assigned a distinct serial number, typically by the manufacturer. The serial number is used to track and manage the individual device throughout its lifecycle and is vital for connecting the smartphone to the consumer’s service provider.

What is the best way to serialize inventory?

The best way to serialize inventory is through a systematic approach that combines the right technology (like barcode scanners or RFID readers) with robust inventory management software that can handle serialized data. Success requires establishing consistent serial number formats, integrating with existing business systems, and creating clear processes for handling serialized items throughout their lifecycle. Staff training and system audits help ensure the accuracy and value of collected data.

Why is serialized inventory tracking important?

Serialized inventory tracking offers numerous benefits that improve inventory management. They include enhanced traceability, greater accuracy, regulatory compliance, operational efficiency, loss prevention, customer satisfaction, analytics and insights, and scalability.

When shouldn’t businesses use serialized inventory management?

Serialized inventory management offers many benefits, but it might not be suitable for every business or situation. Scenarios in which businesses should consider not using serialized inventory management include:

• Low-value or high-volume items: For these items, such as basic office supplies or bulk raw materials, simple quantity-based tracking may be more efficient.
• Uniform products: If products are highly standardized (such as screwdrivers) and there is no need to track individual units, serialized tracking adds unnecessary complexity and expense.
• Limited regulatory requirements: In product categories that have minimal or nonexistent government regulations, the necessity for serialized tracking is also minimal.
• Operational complexity: Implementing serialized tracking can delay existing processes, especially if the business lacks the necessary infrastructure or technology.
• Product lifecycle: For products with a short shelf life, such as perishable goods, the benefits of serialized tracking don’t justify the investment.