Why You Need Serialized Inventory for Resales

Tuomo: At the end of the day I think this is where it becomes even more important for anyone doing these kind of business models to have a software setup that follows their inventory quite closely. So you need to know each one of your items individually. I don’t think it’s even enough to have let’s say four SKUs for grade A, grade B, grade C, grade E. You need to know each one of those items. You need to, once you’ve done the heavy lifting of checking the declaration, inspecting it, doing the grading and conditioning, pricing the value of that, you need to kind of follow your inventory on a single article level, have some assumption on the shelf value in order to know like what kind of campaigns to push to the market. Because the granularity and individuality of your inventory becomes complex, but not impossible. Like modern software, for modern software, it should be quite easy job to help you out there, but you need to do it anyhow. It’s kind of following everything individually, their value and condition. And then if you take it to extreme, you can even figure out like, okay, what’s the value of the spare parts that I could get out of this. So I think there’s in YouTube, publicly available, the channels Mordr every day, did an episode of a Finnish company called Kamerasdore. And they buy analog cameras, and then they kind of refurbish them. And in that video, you can see their warehouse, and they have hundreds of thousands of small spare parts, because they know that the value of those spare parts is also quite high, because, you know, the company’s not anymore even manufactured these models. So it’s this kind of thing that you have the foresight of going kind of deeper than the actual product going to the spare part level, and maybe valuing and following your inventory even on that level.

Karri: That’s interesting. Interesting topic, topic on how the software layer helps there. And maybe quick word about also the like the inventory you mentioned that it’s not enough if you have like SKU per grade. But is there any time when you see that that you have maybe identified like different categories, then you have like the grading, so you might have like the performance, the battery life, and if there is any scratches on if you were talking about iPhones, is it good, good idea to kind of combine those into SKUs or what’s the benefit if you actually have every single item as like individual? Is it that there is like, basically there is no two same similar used items?

Tuomo: Well, yeah, I think and someone, if there’s someone listening from the retail like with a lot more experience than I do, then correct me. But one of the things that I think that SKU helps and how it’s used in many times is that I have a catalog as a as a as a merchant or a retailer. And then I say that for this item, I need something from my inventory. And then I’ve mapped my inventory with SKU, so stock keeping units. And then that works super well if all of my items are new and comparable to each other. So it’s a nice way of connecting your inventory tracking. Now, in the examples where what we discussed, it might be that these three individual items that are all a bit different in condition or value can fulfill a similar promise. So I might still kind of do my catalog in in terms of like, let’s say that this is a grade A, product grade B, product grade C, grade D. But then in my inventory side of things, I can say that grade A for grade A product, I need a product that is graded in between this thing or whose value is between this thing. So that the linkage between the catalog and inventory can become a bit more complex. But then that frees you from the kind of trouble of having to somehow forcefully say that your inventory follows some kind of a SKU structure. All of a sudden, you can kind of have an extremely flexible relationship between these two things. So your inventory tracking, you can do granularly understand the value of everything. You could still attach SKU codes to each one of those articles as a way of referencing. So that’s kind of, I think, the main difference is that you need individual tracking. But then you can have these codes or categorizations that you use relationally to other product information systems or similar, that then kind of cascade to storefronts as a product page with some selection that makes sense for your customer type.

Karri: And I guess that also kind of brings in the flexibility, like if you are having the item and you kind of have to force it into these categories, like changing that, it actually you probably have to go through the whole inventory again. But if you have like the specifics there, then you can kind of change the logic and test different ones.

Tuomo: And it can even, I think it can, like the more flexible the relationship, you can even have a lot more fun in productization, because then you can kind of productize, like point to the same items from five different kind of ways and somehow kind of eat the inventory from different value propositions. So I think that’s the interesting part that it breezes up a little bit. And you have this slight separation of concerns that, hey, this is how I try to commercialize. This is how I track my inventory and maximize the profits out of it. And then this relational logic here is often quite connected to my efficiency and all of that. And that’s where software companies like us should aim to help the merchants that they can focus on, just like keeping track of inventory, making sure that the value of that is increasing over time, and then the catalog flexibility, and then helping them automate and do the kind of linkage between these two.

Karri: And I assume there is also quite different, like the purchase price might be actually also different than if there is some refurbishment done per item and unable to kind of track that as well. So it’s on the other side of maybe on the inventory calculation, like how much this item that I’m selling might be the same price for the end consumer, but the actual history might be that I purchased different price, there might be some might change the some part of it.

Tuomo: So it is really like getting into like the more you start to scale your operation, the more important it becomes to have visibility or kind of a continuous audit record to the life cycle of that individual item, that how much did a person spend time inspecting it, how much did a person spend time refurbishing in what spare parts they put in, like getting that trail, because it’s rarely like it’s you can start to try to standardize it as much as you can, but the source of improving your standardization of the process depends on getting that feedback that how is it going right now. So having that, having either a software or having a way of storing that into the inventory information assumption of the efficiency there is a way for you to kind of continuously develop your operation because that’s that’s kind of I believe a big part of businesses is trying to figure out how to be more efficiently and absolutely mean.

Karri: And I guess the results so maybe some valuable insights there that are not available if you don’t actually track it. So there might be that these parts that are maybe broken more often than that, but you might actually have like a really cheap way to solve that. And then you might actually like specialized in purchasing items that are actually in like bad condition. Like I think one once again, just thinking about iPhones, iPhones as an example. So if you have like a broken screen, it’s a huge deal for the user. But if you have like operation that is actually very cheap and efficient to replace it, that might be that hey, I’m actually just trying to find all the phones that have broken screens in the in the whole world.

Tuomo: Yeah, definitely. And it’s a lot of insights that you can get there also for if we just look into, for example, product returns. And all of these examples apply, I think even more if you are a brand or retailer or manufacturers, their goods themselves or kind of our enclosed loop of that. So let’s say that you get product returns, and then you do this kind of recording of what was the condition and where was the damage and whatnot. All of that data can then be used in your product manufacturing and product design to figure out how do we improve our product. Because that should be kind of the source of revenue in the in the first place that you have a well performing product again, well, against the standards that you consider to be well performing. Now, that one is super important. And then like the the other aspects that you mentioned that, like, once you get the information on like, how is it broken, you can well optimize other parts. And then it might be even if you’re, let’s say you’re just a general retailer that you buy all of your stuff. If if you’ve made the job of tracking every item and making sure that you also track like, not what brand this was, but from who did I buy it, or if in best case, you can even the traceability can go to the place that which manufacturing plant actually has manufactured this goods. So there might be a plant in country A, country B, country C, all manufacturing against the same spec. So they should be comparable. But they probably aren’t. So then if you start to get product returns, and you can kind of start tracking that all of the plant C, manufacturing C products have a fault here, it might be the source of kind of improving that operation. Of course, that is assuming that you’re kind of quite vertically integrated to have the power to do that. Maybe we can maybe direct it, direct it, we are purchasing all of that. But just as an example, like if you zoom out even more and look into the total supply chain, the more trackability you have on an individual level, rather than an aggregated skew, the more you have, again, ways of optimizing for end user quality.

Karri: And it kind of sounds like data that usually companies don’t actually have. Like once they sell it and it leaves their store, they probably don’t actually like have any data on that afterwards. So I think buyback programs, trading programs are actually opening this type of new data.

Tuomo: Definitely. I think, yeah, or if they’ve had the data they’ve have, I think in many cases, they have like secondary information, they have like product ratings. So then from there, they might get a signal that hey, the customers aren’t really happy with the product. So it’s breaking down or whatever. Or then if they have some data, they’ve aggregated it to too big of a chunk. So instead of following things on an individual level, they have like a quite big blob of like something’s wrong here. But the actionability can stay quite low.

Karri: That’s very interesting. And probably something that a lot of retailers or manufacturers actually would appreciate quite a lot to get that data in.

Tuomo: I would imagine so. Yeah.