T161W is used to configure 1-step vs 2-step but all that flag actually does is decide which movement type field from the sales document schedule line should be used. I'm not suggesting any changes should be made to T161W.
Instead I'm suggesting Nick sets up a new outbound delivery item category for serial number managed items and links that to a new sales document schedule line category. Then he can modify the movement types assigned to that item category so serial number managed materials use a 2-step movement type even when a 1-step transfer is configured.