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Kitting in warehousing is an inventory management strategy used by many companies to meet consumer demand, drive sales, and reduce overall business expenses. To make the most of kitting, it’s important to understand how it impacts warehousing and shipping, as well as the circumstances that make kitting an ideal choice for shippers.
Key Takeaways
In the guide below, we’ll take a look at the basics of warehouse kitting and the advantages it offers to businesses.
Table of Contents
Kitting is the process of boxing multiple related products with individual stock-keeping units (SKUs) into a new, single SKU.
In practice, you can break kitting down into three steps:
This service is performed for a wide variety of industries including consumer electronics, e-commerce, retail, and even fresh food. Consider these more specific examples of how kitting is used in warehousing:
Each kit SKU should be tracked separately for inventory and revenue purposes.
When discussing kitting, it’s important to remember the items included must be related to each other, which means they complement one another in some way. There are similar logistics processes called bundling and assembly, but they differ from kitting in significant ways.
Before we get much further into kitting, let’s distinguish these three processes.
Now we can examine why businesses might choose to kit their goods and the benefits kitting can provide to everyone involved in the transaction.
Not every business will want (or need) to use a kitting service, so knowing when it’s useful is important. Below, I’ve listed some common reasons that businesses choose to put their goods together in a kit.
In some cases, kitting reduces the costs of warehousing and shipping.
For example, an online retailer that sells office supplies might notice that customers frequently purchase a pack of pens, a legal pad, and a padfolio together. By creating a kit of these items, they can reduce pick and pack costs from their distribution partners. Companies can also create custom packaging that reduces the size and weight of the shipments, in turn lowering shipping costs.
Offering pre-built options for customers to choose from can put them in the driver’s seat of their purchase.
For instance, the video game company Nintendo offers pre-packaged console sets that include a game, controller, and all necessary cords. By offering multiple sets with different games, consumers feel empowered to choose the one that they like. This also spares the disappointment of receiving a console without a game to play immediately.
After analyzing sales data, a company might discover some related items aren’t selling well. This creates excess inventory. Kitting can sometimes solve this issue by increasing the value proposition of the items in question.
Let’s say our previously-mentioned book company publishes a 10 book children’s series, but two of them aren’t selling well.
By kitting those two books together and discounting the final product, they increase their chances of moving the products and turning a profit. You can see how this might play out in the tables below.
This gives us a total of $300.00 profit between both titles. Let’s see if we can do better.
Since the titles aren’t selling as well as others, the shipper decides to sell them in a kit at a discounted price with a lower profit margin, which achieves the following results.
As an anthology, the books are boxed under one SKU at the shipper’s 3PL and sold as a kit. Buyers are incentivized by the idea of getting a deal on previously higher-priced merchandise. This is advantageous for all involved parties.
Each of the three parties involved in any given ecommerce transaction can benefit from kitting in some way. For instance:
In each of these cases, the party either saves money during the purchase or increases potential revenue.
Related: Pick and Pack Warehouse: What You Need to Know
It is also important to consider the additional time and expense it takes to weigh and print out a shipping label for individual items. When items come as part of a kit, it takes less time since you can pre-print the kit SKU labels.
With those advantages in mind, mistakes can occur during the kitting process. Businesses who aren’t familiar with the logistics aspect of this process can easily find their hard work ruined by customer complaints and shipping difficulties.
Several issues can arise from inaccurate packaging, and kitting does open up more opportunities for mistakes, simply due to the multiple components involved compared to a single item.
These errors can include:
For instance, an experienced or incorrectly trained warehouse worker might use packing tape to secure a box of hardware to an otherwise complete kit and neglect to print a separate shipping label for the hardware.
This can easily lead to the hardware box coming loose in transit and, with no separate tracking number, there would be no way to trace it. Everyone from the shipper to the customer ends up losing money and/or time. This just another reason to leave kitting in the capable hands of a 3PL with staff who understand the ins and outs of storage, packing, and shipping.
Are you interested in introducing kitting as part of your business model? If so, don’t hesitate to contact Fulfillment and Distribution. We have over 20 years of experience in third-party logistics and have provided kitting services to businesses in a variety of different industries.
We deliver cost-effective solutions to help you drive revenue, meet customer expectations, and unlock your business’s potential. In addition to kitting, we also offer a full spectrum of logistics services for businesses of all sizes, such as
We understand that there’s no one-size-fits-all kitting process for businesses, which is why our team will work with you to find a solution that does meet your specific needs and goals.
When you’re ready to get started, give us a call at (866) 989-3082 or request a quote online. Our logistics experts are standing by to help you implement kitting strategies for your business.
