How are orders fulfilled in your company's warehouse? Is each item a SKU (stock-keeping unit) that a worker needs to retrieve separately when an order comes in?
This traditional approach does work, but it's very inefficient and ends up making you pay more in labor, shipping, and warehouse space, to name just a few costs. Especially if you're trying to make your business grow, this can weigh on you heavily.
By using a kitting in warehouse management system instead, you can cut down on the time your team spends fulfilling each order, saving you money in several ways and providing value-added services to your business and processes. Keep reading to learn about the kitting experience and why you should try it out in your business.
What Is a Kitting Process in a Warehouse?
Kitting is the process of bundling individual items into one package to simplify the order fulfillment process.
When you fulfill an order, someone in your warehouse has to locate each item with its unique identifying code. Next, they have to actually find and retrieve each item and update the inventory for each one; only then can they complete the order fulfillment. This is a very slow process since the worker has to pick, pack, and ship each item in the order separately.
If you have items that tend to be ordered together, like shampoo and conditioner, you may realize it's more efficient if you can keep those items close together or even package them together in advance. There are two kitting models — pre-packaged and on-demand — based on when you bundle the items.
You are following the pre-packaged model if you bundle your items together before receiving an order for the bundle. You might use this model if you're selling items that customers often buy together, like a phone and a charger.
Pre-packaging allows you to customize your bundle's packaging to add perceived value. For example, Apple does this with its products to make its customers feel like unboxing something from Apple is an experience.
When you follow the on-demand model, you put together the kit after the customer has placed their order. This model lets you save on packaging materials and ensures the customer's items stay together, reducing the chance for shipping errors.
Amazon offers this option to its Prime users with Amazon Day Delivery, asking if they would like to receive their orders in a single bundle instead of as individual orders.
What Is the Process of Kitting?
The kitting process works on an assembly line, where workers have specific tasks that directly lead from one to the next without overlapping. The general process is:
- Figure out the items to bundle together in your kit. This could be based on items that tend to get ordered together, or shared qualities like a theme or color.
- In your system, assign a new SKU number to this bundle. This lets you track your bundle as a single sellable product, which will give you a better idea of sales trends and your inventory.
- Relocate all the items that will go in the kit so that they're close together. This makes it easy and efficient for your staff to bundle them in the kitting area when they need to.
- Now that everything is set up, you can sell and ship your kits.
For on-demand kits, you will have to assign the SKU last, since you won't be able to anticipate the items to bundle together.
There are many reasons why you should consider adopting a kitting assembly line in your warehouse.
The most significant benefit that kitting has is the improved efficiency that comes with it. After all, it's a process that aims to clarify and reduce the steps involved in order fulfillment through customized fulfillment solutions. It sets up an assembly line with specific roles for each worker, cutting out a lot of wasted time that appears when workers' roles are unclear.
Also, since pre-packaged kits are put together in advance, fulfilling an order is just a matter of finding and sending the kit.
Since you can prepare kitted materials in advance, you have stronger control over your inventory and can enjoy a continuous assembly line.
Higher Order Value
One item on its own may not seem that appealing to a customer. However, if that item is bundled together with a few other products, the customer has a harder time estimating the value of the bundle. This leads them to think they're getting more than their money's worth, or a higher order value, by buying a bundle instead of just one product.
By kitting your items, you end up with fewer SKUs. This reduces clutter, helping you organize your inventory more easily. As a result, there will be less time spent on sorting through and retrieving items for order fulfillment.
Lower Labor Costs
If every worker has to find an open order, track down one item in the order, update the inventory, and package and ship it, you end up paying far more workers than you need.
If you're kitting orders, you can establish an assembly line that assigns workers specific jobs, in which you can then train them. Since the process becomes more efficient, you need fewer people overall. This saves you a lot of money without sacrificing your ability to complete orders.
When sending items individually, there's room for many errors. An item could get the wrong shipping label, or a worker might forget to include it. Shipping carriers may also lose an item in transit, or a deliverer could forget to deliver one of the items.
Packaging an order into one unit ensures that items don't get split up at any point during shipping. Each order only needs one shipping label, so there is a much lower chance of any errors coming up.
You can train workers in specific roles of the kitting process, which reduces the potential for mistakes to crop up when they're putting items together for an order. As an added bonus, the training will ensure your workers know their roles, making it easier to move to similar roles on a different bundle.
Faster Shipping Process
If you're shipping every item in an order individually, you lose a lot more time than you may realize in just packaging and weighing each item.
By bundling items together, you can save a lot of hassle with shipping. You have a far lower chance of human error, such as forgetting an item. You can also weigh the bundle as one item instead of weighing each item individually, saving you time and money.
If you package items individually, you're most likely packing everything into standard-size boxes. Depending on the item, these boxes might be unnecessarily big, causing you to spend more on shipping. This issue could compound if the item is fragile, in which case you might spend more money padding out the box to make sure it doesn't break.
If you kit items together, you can greatly improve your packaging. Instead of each item being in its own box, you can put together a custom-sized box for everything. This cuts down on the overall size and weight of your shipment and saves you money on packing materials.
If each worker will be responsible at some point for all steps in picking, packing, and shipping inventory, they will all need a number of tools and products that ultimately take up a lot of space.
Since the full kitting process in a warehouse operates in an assembly line, workers only need the tools and products necessary for their specific role. This ensures that only as much space as necessary gets occupied, giving you more free space in your warehouse.
Better Workplace Safety
Warehouses have several moving parts, which means there are many ways someone could get injured. If your workers constantly have to go a long way to pick up individual items, the risk of an accident can be quite high.
Inventory kitting cuts down on how long and far your staff has to move around to put orders together. This means there is a lower chance for them to have an accident.
Additionally, eCommerce sellers who utilize their own warehouse and self-fulfill will most likely have to pay more in insurance costs and workers' compensation to protect their warehouse employees; another costly expense that cuts into business profits.
Handling returns can be frustrating for any business, especially if a customer returns an item because it didn't work with another product in the way that they had expected.
If you offer on-demand kits, customers can choose the specifications they need for their order. This reduces the number of orders that get returned.
What Business Owners Should Know About the Process
You should know that kitting leads to impressive cost savings if you have an online business. It helps you save money on:
- Leasing and maintaining warehouse space
- Warehouse management systems for stock management, order statuses, and item locations
- Hiring and training warehouse workers
But there are ways you can optimize this further. For example, if you get multiple items for a kit from one supplier, you could ask them to package their products together before sending them to you. You already have some items bundled together from the supply chain when you start kitting inventory.
And there are multiple other ways in which you can expand on your kitting process. Some ways you can try out include:
You can give customers the ability to make recurring payments in return for regular boxes of items. For example, a company like Bokksu revolves around this strategy, sending subscribers a box of Japanese snacks and tea every month.
This approach capitalizes on people's love to discover new things and be surprised. Of course, the quality of the items has to meet a certain standard, so subscribers feel like you're giving them higher order value. Once you have earned their trust, though, you will have a consistent customer base with high brand loyalty.
You could also use these boxes to test certain products with a smaller set of consumers who likely fit your target market.
The one challenge to anticipate with subscription boxes is the additional time pressure.
If you offer a deal where a customer can buy one item and get another for free, you should be using a warehouse kitting process. If you bundle the products together, customers will feel like they got something special, as opposed to sending the free and purchased items separately.
Remember that, in order to make this successful, you will have to make sure the sales, marketing, and fulfillment center teams are communicating well. We ensure that communication is our top priority, in order to make our relationship cohesive and as effective as possible. The free item will probably also be available for purchase on its own. So you have to make sure that some of its stock stays in storage with its original SKU number, while the rest is kitted and given a new SKU number.
Selling Excess Inventory
You may have some excess products in your inventory that you just can't sell. You could have a better chance of selling them if you kit these products together — maybe with a product that's in higher demand.
If you do it right, you can make customers feel like they're getting more for their money and free up warehouse space for new stock.
To be sure, you will have to make certain the products you bundle together are related in some way. If customers can't immediately tell what links everything in the kit, they may suspect that you have some ulterior motive. This, in turn, may cause them to avoid the bundle.
Giving Customers Extra Choices
If you're selling one kit to customers, why not offer a second that has one or two different items? That way, you get to offer customers a product that feels different without needing to produce or purchase anything new. By comparing two bundles, the customer can develop positive feelings for the bundle they prefer, encouraging them to make a purchase.
Video game companies like Nintendo do this when selling consoles. They usually include a game and an accessory with the console. Nintendo's latest console, the Switch, is available in multiple bundles, which include different games or different colored consoles and accessories, empowering the consumer to find one that suits their specific tastes.
Challenges of Kitting
Although industrial kitting can significantly optimize your order fulfillment, there are some hurdles you will need to overcome to ensure it's effective. If you're trying to revamp your order fulfillments and considering kitting, here are some challenges you should anticipate.
Making an Effective Kitting Set-up
For a kitting process to be successful, a company has to have a few things available. These requirements can make your capital a barrier to getting started with kitting fulfillment. These include:
- Enough space to store inventory and assemble the kits
- Trained staff who are able to switch between kitting product lines as necessary
- Access to suppliers for packaging and kitting services, especially if you're doing custom packaging
You should ensure you have enough capital to cover these requirements. It's also a good idea to routinely re-evaluate whether you're still meeting these requirements, to make sure you're getting the most out of your fulfillment kitting services.
Cost of Packaging
It can be cheaper to just buy a lot of standard-size boxes to package items individually, especially when buying custom-sized packaging for your kits. This isn't an issue if you sell all the kits, but the money spent on assembly and packaging materials is lost if some kits are leftover.
Make sure you're tracking the sales of your kits so you can have the most accurate idea possible of the demand for them. Otherwise, you might find that the kitting business is making you spend more money than you're saving.
Step Up Your Fulfillment Process
Kits can significantly increase your warehouse efficiency and improve your order fulfillment. But it may not be easy for you to find the time to put in the initial investment towards kitting and packaging.
Especially if you're an eCommerce business owner, outsourcing your kitting and fulfillment services can open you up to multiple extra benefits, such as having inventory distributed across multiple fulfillment center locations around the country. With your inventory available in more locations, you can get products from one place to another faster and in a more cost-effective way.
Partnering with Rakuten Super Logistics can help you get the most out of your order fulfillment and free your time up to focus on growing your business. We can help you set up a kitting logistics and assembly plan that reduces fulfillment costs, increases efficiency, reduces errors, and increases your order value. Contact us to see how we can help your order fulfillment excel.