Federal Firearm Licensees have an obligation to know which firearms they possess, receive or transfer – a process that continues throughout the industry’s supply chain until it becomes “owned” by its end user. The ability to accurately track serial number transaction activity is at the heart of our third of four sub-process discussions of Serial Number Management (Reservation, Application, Tracking and Recording). You can read about Reservation or Application best practices in our prior to posts.
The primary reason that firearms bear an engraved serial number is to aid law enforcement’s efforts to identify and curtail suspect transaction activity. Thus, validating the accuracy of records used to track serial number manufacture, distribution and sale is a core principle of the ATF inspection program. In the event that a firearm is used for purposes other than which it was designed (e.g., sporting, hunting, protection), law enforcement can use serial numbers and the associated FFL records to trace product origination and movement in the commercial sector. We would be remiss to not mention that some types of firearms (e.g., NFA) and some states require transaction traceability in the secondary market, but that is not the focus of this post.
Additionally, traceability is not only an ATF “mandated” process. As you will read below, modern licensees use a number of methods to increase the accuracy of on-hand serialized inventory and to speed logistical efforts to locate a firearm within the four corners of their facilities or off-site with employees (ref: ATF Ruling 2010-1 for more information).
Notwithstanding 4473 transactions or related NFA transfer filings, the following are five key concepts related to serial number tracking. Check back soon to read more about best practices related to 4473 transaction and NFA transfer controls.
1. Tracking Inside Your Facility and Reducing Theft/Loss
The methods used by a company to track a firearm inside their facility depends upon the size and complexity of the business. A small company doesn’t need significant investments in technology to locate product within a 2,000 square foot building. On the contrary, today’s large FFLs operate across multiple floors, offices and departments that can span 1,000,000 square feet. Tracking the whereabouts of a compact pistol inside the confines of such a building necessitates a more robust environment.
Lets describe two different environments and the methods deployed therein.
Finished Goods: Finished goods inventory located inside of a manufacturing, distribution or retail warehouse can include hundreds of thousands of firearms. It is common for FFLs to use a Warehouse Management System (or WMS) to indicate the exact warehouse aisle, row and virtual bin location. Advanced environments rely heavily on the scanning of product and virtual location barcodes for clear storage or extraction of the firearm. The result: at a moment’s notice employees deemed appropriate to do so can locate the exact whereabouts of a serialized product.
Work in Process (WIP): Serialized components primarily exist in the manufacturing environment, although many FFLs offer such products for retail sale to the end consumer. Modern manufacturers issue serialized frames and receivers from sub-assembly stock to a production order which “consume” the device. If done properly, the serial number can then be tracked to each manufacturing routing, operation or machine during its short tenure in WIP status.
A best practice control for ensuring that WIP doesn’t get lost (and result in an ATF filing) is to age the movement of inventory across the operation. For example, if the average production cycle time is six hours, then you might consider aging serialized firearm movements and aging those products that didn’t reach the final operation by the next day. Now that is high-end Theft/Loss control.
2. During the Receiving Function
You might ask: if this post is about firearm serial number tracking, then why isn’t there a discussion on A&D book technology? Because, the A&D book is merely a report. It captures information based on what is processed through a human or RF scanner input. And therefore, A&D accuracy is really achieved through the creation of robust data input controls that reside in the areas discussed below.
Regardless of a licensee role in the supply chain, it will ultimately receive serialized firearms. And, it’s incumbent on the licensee to properly record the serial number, the firearm characteristics and other markings, the date of physical receipt (notwithstanding alternate import record keeping requirements) and specific information about the transferor. Regardless, the attribute requiring the greatest data input control is the firearm serial number.
One of the legacy methods for controlling serial number receipt is through the use of a paper shipping manifest. In this model, a receiving clerk reads a number on the side of the gun and highlights that same number on the paper manifest. The highlighted paper document is then used as the source for acquisition activity. The practice requires significant eye-ball concentration, memory of SNs and accurate hand-key entry. While this method may work in small, low volume environments it can lead to extensive record keeping errors in a high production shop.
Note the following best practices:
- By design receiving functions should be “blind” and such is the case in most industries. That is, a receiving clerk should only have knowledge of a Purchase Order, a Receiving Date and a Part Number. Upon opening a package the clerk would approach the receiving module and enter the Purchase Order number, identify the Part Number and PO line item and begin receiving the quantity of goods. System controls would then advise the clerk if they received more or less than the tolerable difference to the expected volume. The advantage to this method is that it ensures the most independent validation of the actual part quantity received. The same practice can be, and has been deployed in the firearms industry with slight modification. In our case, the quantity is known, but the expected serial numbers is blind to the operator. It is incumbent upon the shipping party to submit an electronic manifest of serial numbers to an FTP site, per se, that electronically assigns those serial numbers to the Purchase Order behind the scenes. Upon receipt of the product, the operator enters the Purchase Order number, the part number and serial numbers via dual hand key or hand-key scan entry methods. The system will independently validate the expected serial numbers sent by the transferor to those transacted by the clerk.
- As mentioned in the process above, the serial number data entry process should include field-level validation controls. This would be similar to your entering a new password twice into an online banking account to ensure accuracy. There are several ways to accomplish this, including dual blind entry, as mentioned above; a combination of two people matching numbers—which isn’t the most efficient; a scan plus hand key, where a barcode scan should match the hand keyed serial number; and optical character recognition, in which a camera can match serial numbers to the serial number manifest.
3. During the Shipping Function
There are two primary areas of risk within the serialized receiving function: WGIB and false dispositions.
- A potential source of error in the packing process is referred to as Wrong Gun In Box (or WGIB). The primary driver of WGIB is the batch processing of label application (e.g., the lack of one-piece flow). Have you ever seen an employee with five boxes in front of them and a label on each fingertip ready to apply? The second driver of potential error is that of label reprints. Best practices require that an independent employee be required, through system user access controls, to limit access and control the use of label reprints.
- In shipping, there is a risk that the wrong serial number can be transacted and subsequently recorded as such in the A&D book. When high volumes of serial numbers are being processed, the likelihood of occurrence can go up (naturally). Similar to the receiving function, this generally occurs when system controls lack independent validation over serial number entry for which there are two forms in the modern environment. The first of which is the multiple variations of dual-blind entry mentioned above and the second requires internal serial number location tracking. Best-in-class systems won’t permit the shipment of a serial number that has not been “picked” and allocated to an order. This effectively limits the pool of available serial numbers which can be scanned out and disposed, significantly reducing the risk that an errant SN will be chosen.
4. Scrapping or Destruction of a Firearm
Scrapping controls serve a duplicate purpose – both the accurate tracking of serialized activity and to reduce the inherent risks of theft that exist in every industry. Lets start with best practices related to the latter. No individual who has physical control over inventory should also have the ability to negatively adjust its balance and create a disposition (or at least not without some form of a monitoring control). Best practices provide that those individuals with inventory control (typically operations and engineering/R&D functions) should only be permitted through system control to identify a potential, to-be-scrapped item and to allocate it to blocked stock or an MRB evaluation status. Similarly, an independent resource in compliance, for example, should have the only system control to dispose of an item from blocked stock. Both parties should be involved in the destruction process and sign-off on the completed exercise.
Much like in shipping and receiving, data entry controls over the serial number to-be-scrapped and ultimately disposed should be a key consideration to drive accuracy.
5. Internal Employee Use and Employee “Loans”
When a firearm is removed from its intended (or expected) location inside a facility to another area inside the facility, it is best tracked through employee or department assignment. This method assigns the serial number to an employee’s name, badge or number. An internal report can then indicate who has which serial number, allowing for easier tracking. And an aging report can also track how long the firearm has been in the possession of the employee.
Secondly, ATF regulation 2010-1 allows a licensee to temporarily assign a firearm to an employee for off-premise use for a bona fide business reason, only. For example, if an engineer needs to take a firearm to a holster manufacturer, it is not necessary to execute a shipping transaction (i.e., a disposition) or a receiving transaction on the way back in (i.e., an acquisition). Provided that the conditions of Ruling 2010-1 are met, employees become an extension of the license, so to speak. If the serialized good remains in their control, it does not require traditional recording as a transfer.
But take note: despite the lack of an Acquisition or Disposition requirement it is strongly recommended that serial number tracking controls be implemented. Best practice methods include, much like the internal movement described above, that 2010-1 temporary assignments be allocated to an employee name, badge or number, and that the time of use be aged and monitored. Furthermore, it is recommended that licensees validate the existence of the inventory on a periodic basis in the event that it is off-premise for some time. A recommended practice is to require off-site employees to submit a photograph of firearms in their possession alongside a dated newspaper. This information can independently be validated against your internal logs to increase traceability and to decrease the risk of loss.
This concludes our discussion on best-practice methods for serial number tracking used throughout the industry. Check back next week for our final piece in this series, which will be dedicated to serial number “Recording” controls.
Take your understanding one step further.
Online Course: Marking Requirements and ATF Trace
This online course is broken down into the following modules:
- Firearm Marking Requirements and Process Controls
- ATF Trace Requests
- Enhancing Internal Traceability – Part I
- Enhancing Internal Traceability – Part II
Estimated time of Completion: 90 minutes
By Jon Rydberg
CEO, Orchid Advisors
Orchid Advisors assists firearms manufacturers, distributors and retailers in achieving compliance and operational excellence through education, technology, software and consulting solutions that reduce risk, cut costs, and provide expert guidance to make our client’s business more successful and efficient.