Kitting is a critical function in your company’s order fulfillment process. It can be especially beneficial if your customers tend to consistently order the same combination of individual items together. By bundling those products together into one unique SKU, you can sell the combination by itself.
Typically when fulfilling an order for individual products the item is located through the SKU code in the warehouse management system. With kitting, items that are usually ordered together get bundled together to create one single unit that is stored in your fulfillment center. The upside of this is that you can quickly and easily locate the items as a bundle and don’t have to worry about assembling the various products after an order has been placed.
If you outsource fulfillment to a third-party logistics provider (3PL) kitting is often considered a value added service, which means it won’t be automatically included in a standard pick, pack, and ship contract.
What many companies don’t realize is that kitting can help them save significant costs in the long run. By working with a 3PL who has expertise in kitting, you will better be able to fulfill orders on time and in a cost-effective way. 3PL companies have developed kitting operations that can minimize material costs, warehouse and labor costs, plus shipping costs. Ultimately this service can optimize your supply chain management and make your fulfillment process more efficient.
Faster Shipping
In today’s Amazon-dominated sales environment, ecommerce businesses are constantly trying to meet customer expectations by looking for ways to offer faster and more reliable shipping options. One way to improve shipping time is by doing kitting in bulk on your most popular product combinations instead of waiting until an order is placed. Taking the bulk approach allows you to streamline your operations and improve the productivity of your warehouse staff.
If you choose to outsource order fulfillment to a 3PL, you’ll be able to complete kitting of your orders in a much more cost-effective way. Partnering with a 3PL with expertise in picking and packing ensures that this process will be done in an efficient and cost effective manner, and in the shortest amount of time possible so as soon as an order comes through your products will be ready to ship.
Reduce Overhead Costs
If you are fulfilling orders in-house there are many overhead expenses that are part of your overall fulfillment costs. These costs may include purchasing and integrating IT management systems, hiring staff, renting additional storage space, and buying specialized equipment. And if you expand to handle your own kitting operation these costs are only going to increase as you need to add more staff and space. These additional overhead costs can make it difficult to keep your business profitable, especially if kitting is necessary for your products. By having a 3PL handle your kitting and assembly operations, you’ll be able to see a significant reduction in your overhead costs. Because fulfillment companies have expertise in handling kitting and assembly and likely have the infrastructure in place it will likely be less expensive to have them handle your kitting instead of trying to set it up yourself.
Managing Upgrades & Software Updates
An often overlooked kitting process, especially in the consumer electronics space is handling upgrades and software updates that need to be made before a product is shipped. Newly released electronics often require last minute bug-fixes, upgrades, or revisions. If they are already at your fulfillment center, then they might have to be shipped back to you to perform the upgrades if you are handling the kitting yourself. A 3PL with the ability to handle these updates on their own can be a critical partner to have since they can eliminate or at least minimize delays in performing the updates and getting the products turned around and ready to ship. A 3PL handling your kitting can also ensure the latest instruction manuals are included in the new packaging.
“November 2017 we realized we needed to do some software updates to our products before they shipped out to customers. We were onsite, at the DCL warehouse, for two days or so, going through our inventory, updating software and re-packaging them. That was helpful to have DCL’s flexibility to work with a tight timeline like that.”
Scalability
Ecommerce businesses experience fluctuations in product demand throughout the year, depending on seasonality, promotions or other sales spikes or declines that they might experience. This forces them to look for ways to optimize their warehouse space, staff, and equipment and inventory management. Hiring staff and acquiring storage space whenever demand goes up is not a realistic way to handle changes in demand for your products. If you were to experience a decline in sales you would be left with unused warehousing capacity and too much staff on the payroll.
Your focus should be on growing your business and implementing scalable solutions that can adapt to your changing requirements and enable you to stay flexible as product demand fluctuates. 3PLs typically work with multiple businesses at a time and therefore have the ability to scale up or down depending on changes in the marketplace, be they positive or negative. By working with a 3PL you will be able to successfully meet sudden surges in customer orders and turn the risks associated with seasonality into an opportunity.
Kitting Material Costs
One of the most cost-effective benefits of outsourcing kitting and assembly services to a 3PL is that they have the ability to procure and manage materials for kitting and packaging at a fraction of the cost of doing so in-house. Since they perform kitting for a large number of clients they already have a network of vendors, and can usually obtain materials in bulk, thus lowering the cost. This can be especially beneficial if you offer subscription boxes or use branded packaging. This cost savings is then passed along to you which helps to increase your overall profit margin.
Bottom Line
Kitting and assembly can play an integral role in your order fulfillment process. A 3PL order fulfillment company gives you access to its skilled staff who have expertise in offering kitting solutions and other fulfillment services in a cost effective and efficient manner. Additionally, they have the tools to track your orders in real-time as well as the infrastructure and streamlined processes to ensure your order fulfillment goes smoothly. By knowing the benefits they bring to your ecommerce business, you will be in a better position to decide to handle these operations in-house or outsource them to a 3PL service provider.
At DCL Logistics we offer customized fulfillment solutions for high-growth brands. Value added services is something we’re great at, including kitting, assembly, and postponement work. If you’re looking for a modern 3PL to help improve your fulfillment strategy, to include any of our services, reach out and send us a note. We’d love to hear from you.
Tags: Articles About Value Added Services
