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Why is serialization important in the retail industry?

28 Jun, 2022 | Uncategorized

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In the retail industry, we manage our inventory by giving a different SKU to each product to make it distinguishable in the warehouse. The practice works for many business owners, but there’s a catch. You need something more than just a SKU to properly keep track of each of your products.

For example, let’s say you’re a mobile seller and you receive a complaint from a customer that the cell phone you’ve sent to him/her is damaged or faulty and they would like a refund and return. What are your next steps?

Of course, you will apologize and arrange a return for him and notify your manufacturer. But there are a certain number of questions that arise:

  • How will you notify the manufacturer about which exact product was damaged/defective from an SKU?
  • How can you relay to your manufacturer that the faulty product was the one that was recently sent by them, and not from one of the previous stock?

The point being, there could be an “n” number of products in the SKU, to distinguish them from each other, serialization, which is essential.


What is inventory serialization?

A lot of giant retail firms stress serialization. In most inventory management cases, the total quantity on hand of each piece of inventory is the most critical piece of data to monitor. As long as you know how much inventory comes in through the back door and out through the front, inventory needs will be fulfilled. But what if it’s important to track individual units separately?


Most of the time, giving SKUs to inventory doesn’t fulfill the purpose of managing inventory. This is because a single SKU given to an inventory can contain multiple items of the same inventory.

Inventory serialization comes into play here as it involves tracking inventory on a granular level by giving each item an individual and distinguishable serial number.


When to use serial numbers

The short answer is that it depends on multiple factors. Implementing product serialization can be a massive challenge, both in terms of finances and management of the operation and dealing with serialized and non-serialized inventory. The first step is deciding if you need to do inventory serialization.

Product serialization is generally used when items are more valuable. For example, if you are dealing with designer garments, laptops, jewelry, electronics, and other high-ticket items. In these cases, you’ll want inventory management software that supports the functionality of serial number tracking.

If you are dealing with inexpensive products, serialization can still help in the long run. There are multiple advantages.


Advantages of serialization

Here are the top benefits of using inventory serialization for your retail business:

Theft protection

There’s a fancy term known as inventory shrinkage. What it signifies is the difference between the inventory shown in records to the actual inventory in your warehouse.

Inventory shrinkage is due to stealing/theft.

According to a survey conducted by the National Retail Security Survey (NRSS), retail thefts account for a loss of nearly $47 billion per year.

Granular level inventory serialization is the key to prevent inventory thefts. This is because individually serialized inventory gives you full transparency of your items throughout the supply chain.

Product life cycle

No product’s life is infinite. After the launch of the product, the life cycle of the product begins. It consists of four stages: Introduction, growth, maturity, and decline.

Giving individual inventory serialization helps you to track a product’s life cycle. This greatly helps in deciding when to get rid of the product in its decline stage before it becomes unsellable. It also allows you to decide whether or not to raise its price if a product is in high demand during the growth stage.

Getting to know the product life cycle of each item can give you a whole new level of analytical data that could be used innovatively to drive your business toward higher goals.


Discounts are the heart of any retail business. It not only helps in customer retention but in customer acquisition as well.

According to research, 57% of shoppers now expect regular sales, though 38% say that constant discounts make a brand seem cheap and unfashionable.

Product discounts are based on how long the product has been in the market. The longer the product is in the market, the higher the discount. As time goes by, a new product comes in stock, and customers don’t want to buy old products unless you give them an incentive such as a deal or discount.

To find out which items should be discounted from a SKU depends on that item’s product life cycle. Individual serialization is taken into consideration to figure out which item can be included in discounted sales based on its product life cycle.

Quality control/recall management

Imagine the colossal damage to your brand image when you find products are defective. You know that when you ordered the products from your supplier, they were top quality. So, it becomes apparent that your organization caused the damage. This is detrimental to your brand image.

Serialization comes in handy for quality control and helps prevent this issue.


If you are in retail electronics, you need to deal with product warranties. Different items often have different warranties. For the items of the same SKUs, warranties may differ based on the product’s life cycle.

Product ownership

If a customer comes to your store and returns the product claiming it’s not a quality product,  how can you make sure the specific item was purchased from you and not from somewhere else?

A SKU can’t tell you this information. It only measures the type of items and how many items of that type you have in store. It has nothing to do with if an item is authentic or a duplicate.

In order to safeguard yourself from such incidents, individual inventory serialization is key.


When should inventory serialization be avoided?

You should avoid inventory serialization for homogeneous products that are cheap. In such scenarios, there is no need to identify each and every unit of inventory.

If the item produced does not come with some underlying liability concerning its usage, then it’s not necessary to determine the ownership as well. In such cases, inventory serialization isn’t required.


DEAR Systems: Your ideal solution for serial success

Getting serialization support in your ERP can be a major advantage and this is one of the many benefits of choosing DEAR Systems. Our ERP suite can help you make sense of the serialization data to make real-time decisions and improve your operations significantly. Get in touch with the DEAR Systems sales team now.

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