Kitting Guide: Definition, Examples, & Benefits of Kitting Inventory
What if we told you there was a way to increase customer satisfaction, reduce costs, improve warehouse efficiency and sell more low-volume items using one simple strategy? You might be thinking it’s too good to be true, but kitting can help you achieve these goals.
Keep reading to find out what kitting is, how it can benefit you, and what you need to do to get started today.
What Is Kitting?
Kitting involves packaging complementary products together to be sold as a single unit. For example, an e-commerce store that sells haircare products could create a kit that includes a selection of the best products for a customer’s hair type.
Kitting vs. Bundling vs. Assembly
Although kitting, bundling, and assembly are similar, there are a few key aspects that set them apart.
It’s true that kitting and bundling both involve offering a collection of products to be purchased as a group. Kitting focuses on packaging a mix of complementary products together, such as a subscription box or selling a phone with the charger and a case. On the other hand, a bundling strategy can group any mix of products together, even if they don’t complement each other such as a hairbrush, lotion, and nail clippers.
Kitting and bundling are also assembled differently at the warehouse level. The kitting process includes picking and packing the kit under a single SKU in your inventory system. Conversely, bundling entails picking each item individually and shipping them in the same box, typically at a discounted rate.
Assemblies are in a category of their own. While these packages include multiple pieces, they are all a part of a larger part. A great example of an assembly is a package of parts and hardware needed to build a desk in your home or office.
Different Types of Kitting
Kitting can happen at multiple points in the supply chain. Some companies complete kitting operations before the supplier ships to the warehouse. You can also opt to complete kitting during regular fulfillment workflows.
Let’s take a closer look at some of the most popular types of kitting throughout the supply chain.
Kitting in Warehouse
Perhaps the most common type of kitting is warehouse kitting, which occurs in the warehouse during the standard fulfillment process. Depending on the kit you design, once your company receives an order of that kit those that work at the warehouse will pick all necessary items and put together the package at dedicated kitting or packing stations.
Kitting in Manufacturing
Kitting in manufacturing takes place before finished goods ship to you. There are two types of kitting at the manufacturing level: material kitting and internal kitting.
The material kitting process is identical to warehouse kitting, except instead of kitting operations occurring in your warehouse, it takes place at the manufacturer’s location before shipment. Your kits would then be stored all together once they arrive at the warehouse.
Internal kitting focuses on helping manufacturers assemble inventory. For example, one employee might be responsible for combining the raw materials needed to build a certain product. The next employee would use the produced kit to assemble the product before sending it off to be packed and shipped to you.
Private Label Kitting
When kitting operations are outsourced to a third-party company, it is called private label kitting. This kitting method allows companies to purchase kits from other companies to sell under their brand names. Private-label kitting services can also offer branded marketing materials, manuals, and more.
On-demand kitting allows customers to build their collection of products included in a kit. In this model, kitted items are listed under different SKUs and packaged together once the order is received in the warehouse.
Benefits for E-commerce Businesses
Using kitting can help your business make more money, increase customer satisfaction, and make warehouse operations more efficient.
Kitting makes it easy and convenient for customers to make one purchase that includes everything they need. This can result in higher sales revenue, especially since kitting enables you to combine low-volume sales items with more popular sellers to boost sales.
Customers can also enjoy lower shipping costs and faster transit times thanks to the fact that all of their desired products are shipped together in one kit.
Kitting is also a great way to champion healthy inventory management practices. Using a dedicated kitting or packing station can reduce picking and packing errors that could leave customers missing products or receiving more than they ordered. Kitting also allows for more efficient use of warehouse space since you’ll be able to store multiple products under a single SKU.
It’s also worth noting that kitting can result in lower labor costs since the process allows for faster picking and fulfillment.
How it Works
The kitting process looks different for each business that takes on the task. Some kitting processes are as simple as adding SKU stickers while others might require tasks such as removing packaging and building boxes.
Luckily, the process is easier than you might think. Most e-commerce businesses can master kitting in a few simple steps.
First, curate the kit. An easy way to determine what’s in demand for your customer base is to look at previous orders. By identifying items that are frequently purchased together, you can more effortlessly combine good sellers with complementary items that aren’t as popular.
Next, generate a SKU. This number identifies the kit as a single unit for sale. You’ll also need to list the SKU number in your inventory management system, which allows you to keep track of inventory levels in real time.
Then, it’s time to assemble the kit. This process involves gathering each item in the kit and packaging them together. Remember to use packaging that is as close to the combined product dimension as possible while allowing room for protective packaging materials to save money and champion customer satisfaction.
Finally, create a product listing on your website for the kit. Make sure to include detailed product descriptions for each product included to encourage customers to make the purchase. As orders are placed, warehouse personnel will use the pre-assembled kits to quickly and efficiently fulfill orders.
Working with a third-party logistics service, or 3PL, can further simplify the fulfillment process by eliminating the need to internally pick and ship kits. With this model, kits would be stored at the 3PL fulfillment center and picked, packed, and shipped from their location as orders come in.
Best Way to Implement Kitting Into Your Business
One of the easiest ways to implement kitting into your business is by using your existing tech stack, which should include warehouse management software. This software can be used to analyze existing and previous orders to help with the kit curation process.
Warehouse management software is also essential in creating and storing SKUs, which make it possible for customers to place orders and warehouse personnel to fill them.
How much does it cost?
Kitting costs vary from business to business. To determine how much kitting will cost you, you’ll need to factor in the cost of staffing, packaging, and technology such as warehouse management software that makes kitting possible.
What is a kitting lead?
A kitting lead is an individual responsible for overseeing the team of pickers, packers, assemblers, and shippers responsible for putting a kit together. Their responsibilities include organizing, executing, tracking, and shipping kits from a warehouse, manufacturing facility, or fulfillment center.
What businesses are best for this strategy?
Some of the best businesses for kitting are those that have a wide product category and enough volume to use warehouses or fulfillment centers.