The time-consuming process of order fulfillment can be handled more efficiently with kitting. Since fulfillment represents a major portion of an eCommerce business’s operational costs, the ability to streamline the warehousing and shipping process indicates opportunities for savings in one of your business’s most costly expenses.
An optimized inventory management system that employs kitting saves space, time, labor, and costs in your warehouses. In this guide to kitting, we discuss:
- The definition of kitting and how it applies to eCommerce warehouses
- The benefits of kitting in a modern eCommerce business
- Strategies to optimize kitting in 2021 and beyond
What is Kitting in Warehouse Settings?
Efficient fulfillment promotes growth in your eCommerce business. However, warehousing for an optimized fulfillment procedure becomes more complicated at each stage of your business’s development. As available storage becomes limited, it is vital to prop up your fulfillment process with a more efficient packing and shipping strategy. Kitting provides one such strategy that combines marketing and fulfillment to give your business more promotional options and save time in the process.
Kitting presents an alternative to packing each SKU separately for a promotional order, subscription box, an item with multiple components, or other multi-item orders. Instead, your warehouse personnel can group these items into “kits” based on the item’s use or your promotional strategy. This saves time and space in the fulfillment process while providing unique promotional opportunities.
Optimized kits can be used to quickly prepare items for shipment. Warehouse personnel only have to retrieve a single group of items when fulfilling the whole order, rather than searching for each SKU separately. They can pack them before they are ordered to reduce your fulfillment time and keep your customers happy.
What is Assembly?
The assembly process refers to how the kits are created. Assembly stations manned by your warehouse’s fulfillment staff can streamline the process by creating kits of items and storing them together.
Assembly should not be confused with bundling, which refers to groupings of items that commonly ship together but are not inherently related to each other. Kitting refers to items that must be packed together in a certain order like a subscription box or an item with multiple parts. Bundling merely refers to grouping separate items in one order.
How Kitting Works
The process of kitting items and converting them to a single SKU for easier packing and shipping requires simple but effective kitting logistics. Here are the basic steps to kitting in an eCommerce setting:
- Plan your kit – Based on the uses of the products, your current promotions, or anything the items share in common, you can begin strategically planning your kits for the packing process.
- SKU assignment – Once the kits are planned out, your inventory system should assign them a single SKU since this kit will now be treated as a single product. Use data-driven insights from your inventory software to track the sales of kits to keep track of the physical inventory of its separate contents.
- Kit assembly – To make the kitting process efficient, move the items in each kit closer together in your warehouse. Proactively managing item location based on your kits will help your warehouse personnel save time, which saves your business money on operational costs.
- Ship the kits – Once the packing infrastructure is in place, you can begin selling and shipping your kits.
Types of Kitting
Kitting can be used most effectively for a few types of item shipments. Consider adding kitting to your packing process if you plan on using these.
Products with Assembly Required
Products that have multiple components and require assembly in a specific order can be packed much more easily with kitting. eCommerce stores can offer far more options to customers in terms of the available models and variety of merchandise by using product kits that are built to order.
For example, rather than sell office chairs with separate SKUs for different backrests or armrests, a business could offer options in terms of the product’s assembly and pack each kit variation beforehand. The result is that customers have more buying options, and your warehouse personnel save time.
Subscription boxes were made to be kitted. Customers try products from subscription products before customizing them for their preferences. Each available option can be kitted so that warehouse personnel can pack them as one SKU, rather than search for each item for each order. If your business does not offer subscription boxes partly due to fulfillment costs, consider how kitting can make this lucrative promotional system more viable.
Orders can be packed together when they come from your store in the quantities and distribution that the customer prefers. Kitting allows your business model to include packed-to-order merchandise, which is convenient for the customer and gives them more options.
Benefits of Kitting
For eCommerce enterprises, kitting offers numerous advantages. Your eCommerce business should consider kitting as a viable fulfillment strategy for these reasons:
Optimized inventory management – This is the most evident benefit when using kitting. With fewer SKUs to manage for your promotional or multi-component items, you can organize your inventory more effectively. This gives you more warehouse space as well as boosts productivity in your shipping centers. Optimized inventory management can present a huge competitive advantage in a modern eCommerce industry.
Improved shipping process – Packing and shipping become easier using kitting logistics, both in the time it takes to fulfill an order as well as the efficiency of your warehouse workforce. Using kitting, items can be grouped, packed, and labeled before they are ordered, saving you time in the fulfillment process and delivering products to your customers sooner.
This also saves you money in the shipping process since you can use customized boxes for the kits rather than separate standard packaging for each item individually. Businesses that employ kitting discover that their packaging costs go down even as their delivery times go down as well.
Reduced costs – In addition to saving money on the shipping process, kitting also reduces your warehouse’s labor costs. The increase in efficiency and reduction in required space means that the same line of products can be managed by fewer people. With a more efficient storing, packing, and shipping process, you can hire fewer people to handle a more optimized inventory.
Strategic sales – Kitting allows you to run promotions, including subscription boxes, that help you make better use of your inventory and give your customers exclusive deals. Kitting items that you haven’t been able to sell into a discounted pack can help you achieve every benefit on this list by saving space, making money, and creating new promotions.
Drawbacks to the Kitting Process
Despite these benefits, the kitting process also comes with a few drawbacks.
Kitting may save your business time and money on warehouse management and labor costs, but kitting can be costly on its own. Logistically, kitting items together and packing them properly requires labor.
Additionally, kitting can make managing returns more complicated since partial returns of kits can be confusing. With more items involved, the potential for customer service issues increases the more complicated the kit.
Since kitting creates new logistical responsibilities, kitting software can help manage and automate your fulfillment process. Kitting software allows managers to track inventory levels of the individual parts of each kit as well as forecast inventory needs based on your current stock.
The ability to track and manage the kitting process can reduce labor costs as well as improve your fulfillment efficiency. Product and sales data should be ammunition for your workflow effectiveness, allowing you to hit your target KPI as well as maximize profits on your kits. Kitting software provides the resources to retrieve and analyze this data.
However, kitting software can be complicated to manage and cannot single-handedly run your fulfillment process even at the highest subscription tiers. Consider how third-party fulfillment services can manage both the software and kitting process to make sure the benefits outweigh the drawbacks in your logistics operations.
How a 3PL Can Help
A 3PL can help an eCommerce business manage its kitting process effectively. Rather than place the full strain of fulfillment on your warehouse workers and resources, incurring logistics costs in the process, a 3PL service can run your kitting and assembly procedures for you.
This includes bundling the items, helping you create profitable promotions, prioritizing inventory management procedures that are kitting-friendly, changing the logistics of your fulfillment centers, and more. Returns and exchanges may be more complicated but 3PL companies know how to divert resources to customer service to handle the strain.
Rather than allow your logistics infrastructure to buckle under the unknowns that kitting creates, a 3PL company can provide the fulfillment services and facilities that make sure your warehouses, shipping procedures, and fulfillment process are managed efficiently.