Warehouse kitting can be a great way for ecommerce businesses to save time and money as well as optimize their inventory management. Kitting is a value added service, but can be just as essential in your ecommerce fulfillment as picking, packing and shipping. Kitting is especially great if you have products that are often bought together, since you can put together a bundle ahead of time, before an order is placed. This guide will explain what warehouse kitting is and how it can benefit your company, including outsourcing the process to a third-party logistics (3PL) provider.
What is Kitting?
Kitting involves taking different individual products and pairing them together to create a new SKU that includes multiple products but is sold as a single item. By pre-assembling individual items into bundles you have the option to ship them together quickly, rather than picking and packing them individually which can be more time consuming.
Typically when fulfilling an order for individual products the item is located through the SKU code in the warehouse management system. With kitting you bundle items that are usually ordered 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.
What is the Difference Between Kitting and Bundling?
Often incorrectly used interchangeably, kitting and bundling are not always the same thing.
Bundling items together is a more generic term used when multiple SKUs (or ASINs when selling on Amazon) are included to be sent together within a single package. Bundling is often used for special projects for the holiday season, or a short-run promotional deal. For example, a retailer might incentivize their consumers to buy up to three of one item and get flat rate shipping.
Kitting is slightly more specific. Used in tandem with assembly, kitting happens when a group of products requires a sequential order of packing or preparation before shipment. Kitting is often done with products like subscription boxes, assembled products, or built-to-order items.
What do they have in common? Both product bundling and kitting take multiple individual SKUs and combine them to create one new SKU.
What are the Benefits of Kitting?
Kitting offers a number of great benefits for companies including time and cost savings. It is an extremely useful tool in ecommerce because it enables retailers the ability to offer more SKUs by combining individual ones into larger orders. When you offer the option to buy a kit, your customer is encouraged to make a larger purchase. Sometimes you can create a discounted price as an incentive to purchase more items at once.
You benefit from the potential of larger sales while at the same time lowering your average shipping costs. Since kitting can be done ahead time at a greater scale it enables warehouses to get ahead of the order fulfillment process.
When product bundles are pre-assembled, fulfilling orders for these kitted products becomes far quicker and more efficient. They can also enhance the customer experience since the most popular products are combined and your customers won’t have to search and add them to their shopping cart individually.
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Organization & Efficiency
Kitting is a great way to make your order fulfillment process more streamlined and efficient.
When you use kitting, you have the ability to generate fewer high selling SKUs, making it easier for you to organize the inventory in your distribution center. This might sound counter intuitive, but if you have products that are frequently bought in combination with each other, then kitting them into a bundle will actually lead to a lower SKU count. This optimizes warehouse space and makes it much more efficient overall. If you don’t kit your products and have to assemble an order on demand it will wind up taking much longer to go through the fulfillment process, potentially creating shipping delays. Kitting makes it simpler to locate what is needed for your most popular product combinations, boosting the efficiency and productivity of your entire fulfillment process.
“What we are having DCL do, the pack-out and kitting, is unique. As we iterate our design, what we want to ship to customers has evolved and changed, DCL has been flexible with that. Their flexibility is rare, absolutely rare. Having the confidence that DCL is flexible, that they will help us figure things out, in person, on site, is really important to us.”
Simplify Your Shipping Process
Kitting your products into bundles can also make your shipping process simpler and much more efficient. Automating the process will help limit the risk of human error and lower your average fulfillment time. By printing shipping labels and weighing the assembled products beforehand instead of when the order comes can offer considerable time and cost savings.
Improve Packaging
Kitting is also a great way to lower the cost of packaging. Instead of packing each individual SKU separately into standard-sized boxes that might be too large, you can pack your items together in a custom-sized box. This can reduce the size and dimensional weight of your parcels. It also saves on materials cost like package fillers and packing tape, which add up if your shipping volume is high enough. The savings that occur from reducing your packaging is one of the ways that kitting can boost your profit margin. By outsourcing assembly and kitting services to a 3PL provider, you can benefit from their customized packaging options. Products can be specially packaged for events such as the holiday season or special promotions, which is a significant advantage for ecommerce retailers. This presents added opportunities for revenue and increased sales, while maximizing efficiency by packaging and kitting the product bundles ahead of time so they are ready before peak fulfillment times for your company.
Reduce Warehousing Cost
Warehousing and distribution services base a portion of their costs (in part) on how much storage space your items take up. Your kitting SKUs (with combined items) will take up less storage space than items stored separately.
Kitting processes in warehousing provide a level of standardization into the supply chain that helps simplify cost modeling. Since the contents of each kit are predetermined, predicting costs becomes much simpler than if the components had to be picked, packed and shipped separately. By lowering the footprint your products take up in a warehouse you can save on storage fees.
Increase Sales
Finally, kitting can also be leveraged as a great sales strategy.
Consider similar items like phone chargers and power strips sitting in your inventory. You would like to sell off your current products because you need to make room for new inventory to be ordered. If you kit them together and offer them as a bundle at a discount you could potentially move your excess inventory out more quickly than if you tried to sell the products individually. If you operate via Amazon FBA or SFP you can increase your online store’s exposure by offering all the individual items by themselves plus the kitted items, giving you more SKUs.
Fulfilling this way can not only boost sales, but also optimize your inventory turnover.
Bottom Line
Kitting is a simple but effective order fulfillment strategy that can save your business time and money, not to mention make your fulfillment operations simpler and more organized. It’s also something that you’ll need to assess on a regular basis. As your business grows you might be adding new items to your inventory list, plus customer interests will change over time and vary from season to season. Auditing your inventory for efficiencies—like kitting opportunities—is best to do often to capitalize on all the benefits possible when kitting is done right.
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.
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