Do you find yourself holding onto a number of products that are similar, but you aren't selling as many as you like? Took advantage of too many bulk shipping rates and are sitting on lot of inventory? Before you try consignment inventory to increase sales, try kitting.
Kitting is one of the most commonly used services in ecommerce fulfillment. Retailers, manufacturers, and online subscription services make use of kitting to increase their profits and minimize costs.
Here’s what kitting is and why so many businesses are using it.
Kitting is a shipping and warehouse technique that has become popular with the rise in online stores. Product kitting is particularly popular with businesses like Amazon, large retail chains, and on a B2B marketplace.
What Is Kitting?
Kitting is an inventory technique where individual, but related, products are packaged and shipped together as a single bundle. For example, one form of kitting that has taken off in recent years is the idea of subscription boxes. Rather than seven different manufacturers selling their products individually, subscription box services kit them into one package to sell. For example, instead of seven roasters all trying to sell coffee, they work together to create the best coffee club that ships a single box monthly. This increases the value and increases sales for the individual items.
Kitting Meaning in Logistics
Kitting in logistics is the act of compiling multiple products into a single "kit" that is shipped to the customer. Businesses and logistics companies can streamline shipment processes, lower shipping costs, and fulfill orders more quickly by using kitting. This also makes tracking shipments easier and increases customer satisfaction.
For example, if you've ever ordered multiple products on Amazon from different vendors, you've likely seen logistics kitting in action. The products are all collected by the shipping team and assembled into as few packages as possible before shipping. In the traditional model, each product would be shipped separately, and both the cost to the customer and the logistics company increase.
Kitting Meaning in Warehouse
Kitting in a warehouse is the physical act of finding multiple SKUs, bundling them into a single package, and creating a new SKU for that package before shipping. This involves warehouse workers picking multiple products and bringing them to an assembly area where they are packed together and shipped.
Kitting Services Meaning
Kitting services refer to kitting that is performed by third-party fulfillment companies (3PL). Many businesses contract 3PL companies (see 3PL meaning) to use kitting to keep fulfillment costs low and ensure customers receive as few packages as needed. It is also used for manufacturing where the third party assembles the product for the customer. In-house assembly is often very cost-prohibitive for smaller businesses, so using kitting services keeps costs low and frees up the retailer to focus on selling products.
Kitting Operations Meaning
Kitting operations is the full scope of activities involved in the product kitting process. This includes receiving the order(s), picking the products, assembling the kit, packing the kit, and shipping. Kitting operations require special training and a streamlined warehouse layout. This ensures you save money while optimizing your fulfillment process.
Benefits Of Kitting
Kitting offers many benefits to businesses, 3PL companies, and consumers.
These are just a few benefits of kitting:
- Increased warehouse efficiency. One of the biggest benefits of kitting is that it streamlines the picking and packing process. All products that are sold in a kit together will be relocated to be stored near each other. This valuable time for your employees as they no longer need to walk all over the warehouse to find products.
- Lower labor costs. Unsurprisingly, a streamlined warehouse flow also means lower costs. Since time is saved with each order, you don't need as many people working to fulfill orders and overtime is less common.
- Increased product sales. Product kitting is a valuable tool for pushing products that are less in demand. It will help you sell products at risk of becoming dead stock and avoid any losses. It also incentivizes customers to make larger purchases since there is value added with product kitting and customers don't want to miss out.
- Faster shipping. Picking, packing, and shipping multiple products takes time. By kitting these products, each step is quicker and fewer errors are made, so customers can receive their orders faster. This, in turn, leads to happy customers who are more likely to purchase from you again.
Private Label Kitting
Private label kitting is when a group of products from different manufacturers are bundled, labeled, and shipped as one kit from another company. Private label products are very common in manufacturing and are made by one company to be sold under the name of another. This allows products to be sold at a much higher price as the labels add value to the market.
For example, the grocery stores are popular users of private label kitting. They often have “store brand” food including soda, soups, snacks, and more. However, they do not manufacture any of these products. They are created by a manufacturer, labelled with the store’s private label, then kitted and shipped to the stores in the chain. It provides value to both the B2B business (see what is a B2B company) and reseller.
The Kitting Process
The kitting process is very simple and requires assembling any number of products and assigning them a single SKU in your system for sale. This requires only a few steps.
- Determine what items will go into a kit. This can be done based on product use, theme, color, or any other shared quality you can think of.
- Assign this new bundle a unique SKU number in your system. Though individual products, once bundled they represent a single sellable product. Your inventory system should track this so you have better insight into sales trends and proper physical counts of inventory.
- Assemble the items. All items in the kit need to be relocated in your warehouse so that they can easily be bundled by your team. This increases efficiency and saves time and money.
- Sell and ship the kits. Now you can easily market and sell these bundles. Then watch your revenue and profits increase.
Kitting in Manufacturing
Kitting in manufacturing involves organizing and assembling parts used in manufacturing products into bundles to deliver to the point of use. This allows a manufacturer to reduce their warehouse cost, streamline packing and shipping, and better perform inventory tracking and control manufacturing inventory.
Utilizing kitting in a warehouse can be done alongside normal shipping operations and does not require any additional equipment or staff. However, it does require changing the way you pick product, use your staging area, and engage with workflows.
Warehouse Kitting Procedure
Kitting product in a warehouse only takes a few steps to be done properly.
- Receive an order for multiple products. When a customer orders more than one item, they can all be put into a single package. This saves on shipping and ensures each item is picked.
- Collect each individual item. Since various items are combined into a single SKU, they need to be gathered together before beginning packing for an optimal workflow. These should all be assembled at a staging area.
- Package all items. Individual items should be scanned and then put into the same shipping box or as few boxes as possible.
- Create a new SKU and ship. This box is then added to your inventory system as a single SKU, scanned, and shipped.
Kitting and Packaging
When utilizing kitting, packaging is very important to highlight brand identity and ensure items are not damaged in transit and to help lower costs. Third-party shippers often offer to use private labelling on assembled kits. This means they gather the individual components of an order then package them with brand labels to make them all appear as though they are one kit. Properly packaged kits will hold as many items as possible while containing enough branded packaging to highlight the company they ordered from. These packages must also contain enough bubble wrap or other packaging materials to ensure no products are damaged in transit.
Kitting and Fulfillment
Kitting is used by most e-commerce fulfillment companies to lower warehouse and packing costs. This can be seen with companies like Amazon. When multiple orders are placed are often held until all items are gathered together and then a single package is shopped out.
Here are a few ways kitting can improve fulfillment operations:
- Reduces fulfillment fees. Picking and packing cost both a business and a customer. By kitting products, these actions require less effort and take less time, saving both groups money.
- Expedites weighing and shipping. Speed is an important part of any fulfillment operation. Weighing and shipping individual products invariably takes more time than if the products are stored and sold together.
- Saves on shipping costs. Though weight is a large part of shipping costs, fewer packages always saves money. Kits cost less to send and less cost is passed on to customers.
Kitting and Assembly
Kitting individual components for shipping is often used when shipping furniture, entertainment systems, and other items that require assembly after shipping. Many third-party shipping companies offer this service. They receive individual components from manufacturers and arrange them into kits for shipping to the final location. These kits are stored separately from the individual components before shipping.
Kitting software is inventory management technology that can track individual components and create new SKUs for kits prior to shipping. There are many options on the market to help you automate and track your kitting processes.
Here are a few things to look for when purchasing kitting software:
- Work in process inventory tracking. A good kit software will monitor the levels of individual parts used in kit creation as well as the kits themselves. Many can apply ABC inventory analysis, too.
- Kit forecasting. Kits need accurate life cycle inventory (see inventory cycle count) like any other inventory technique. The software should know the individual components used in kit creation and calculate the number of kits that can be made with the components on-hand.
- Min/max tracking. The software should use sales levels to determine the maximum and minimum number of kits that should be in storage. This will let you maximize revenue and minimize cost as well as avoid issues like unintended backordered items.
Why Use Inventory Kitting Software?
Investing in software can help you track components, kits, and determine the best course of action to increase sales and lower costs. Inventory kitting software can further streamline your warehouse workflows and give you insight into product data. It is often sold as an add-on to existing inventory software, so you may be able to upgrade the technology you already use. The cost savings are enormous and can help you hit your target inventory KPI more easily.
That's The Whole Kit and Caboodle
Kitting is one of the best inventory management techniques to save companies time and money. While also giving customers the best bang for their buck. Merging separate items into one SKU allows retailers to increase sales of underperforming product. It also allows manufacturers to streamline their warehouse operations and lower costs.
If kitting isn't right for your business, you may want to look into dropshipping (see how does dropshipping work) or just in time inventory. Both options help lower costs and make inventory processes more efficient.