Conducting a Serial Number (SN) inventory is an integral component of any dealer or manufacturing operation. Regardless of what industry you take part in, a vital aspect of selling anything means knowing what products you have, how many of each that you have, and where they can be located. In the firearms industry, this is additionally important because the transfer of firearms is regulated. Proving the existence of firearms listed as open dispositions in your Book of A&D isn’t just a good business practice; it’s a fundamental requirement. Despite your best efforts to process transactions accurately, something always sneaks through. Accidents happen and some small error could impact the accuracy of your record keeping. By conducting SN inventories, you reconcile these data errors, ensuring that your records properly reflect the status of acquired or disposed firearms.

The frequency with which organizations conduct inventories varies widely.  However, a best-in-class firearms compliance program might conduct their SN inventories on a quarterly basis. In addition, Orchid Advisors recommends that you conduct these inventories bi-directionally. How

Do bi-directional serial number inventories work?  Well, although the true extent of benefit would take quite some time to relate, the essence of the process is relatively simple.

It’s not too uncommon to find an FFL that conducts SN inventories unidirectionally. That means, employees are tracing firearms stored in the facility (retailer, distributor or manufacturer) to the A&D Book. Yes, you can quickly identify if any firearms were acquired without recording them as such, but what about the opposite? How do you identify those firearms stated as ‘in your possession’ per the A&D Book?

Orchid recommends a more efficient and reliable, bi-directional Inventory strategy. This strategy involves a reconciliation of inventory through both directions – Book to inventory and inventory to Book. You know how Book to inventory works. With inventory to Book, the inventory should be organized by segmented areas of your factory to enhance the systemization and efficiency of the process. By establishing “counting zones” throughout your facility, you can count all of the serial numbers in each zone and help isolate the same information in a slightly different and cross-checked fashion.

This process helps prevent mistakes in the inventory process, mistakes which can result in considerable expenditures of company time and resources down the road, not to mention ATF violation possibilities if you fail to identify firearms corresponding to open dispositions.

In our attempt to explain the essence of the process simply there is danger in over-simplifying it – there’s an art to an efficient inventory process. While we strongly encourage the use of a systemized, bi-directional serial number inventory, we recommend a discussion with an experienced Orchid team member prior to attempting this on your own.

P.S. – Don’t forget to inventory those open dispositions on ‘temporary assignment’ with employees for bonafide business reasons per Ruling 2010-1! They count too.