Only a few business tactics truly improve operations and increase revenue streams. Kitting and assembly fit into this special category. Inventory kitting is also known as product bundling. This is where a business groups, packages, and sells items together in a single shipment.
One common example is the kitted tool box. Toolmakers can sell screwdrivers, pliers, wrenches, and other tools separately. They can also sell a selection of tools together, even an entire tool box full of them. This collection of items to be sold together is a kit, and kitting is the process of assembling it all for sale.
Let’s dig deeper into how kiting works to improve inbound logistics and outbound logistics. Plus, we’ll explore how kitting assembly can significantly boost your revenue.
Kitting and bundling operational advantages
Product kitting improves your product storage capabilities in many ways, such as:
- Saves warehouse space
- Improves labor productivity
- Lowers costs
- Streamlines material handling
- Minimizes shipping costs
- Reduces labelling costs
Saves warehouse space
Many manufacturers will move kitting to an offsite storage facility for space savings. This may work even better when the process is outsourced to a third party logistics provider (3PL) since you only pay for the space you use. By moving component kitting services and assembly to a nearby warehouse, more floor space can be devoted to production. Manufacturing space comes at a premium, and for growing companies every square foot counts.
Improves productivity and cuts labor costs
Pre-sorted kits save time and labor since the kit components are made available together at the point of use. Otherwise, assemblers spend valuable time searching for inventory, pulling parts, and logging usage.
Rather than having all your product components spread out everywhere, kitting consolidates them for more efficient use of inventory resources. Instead of moving many single units, they get organized for product bundling. With advanced 3PL Software, you can create and manage kit SKUs with just a few clicks.
Instead of shipping many single components, kitting offers the ability for several, or even dozens of items to be shipped with one order. This leads to lower shipping costs overall.
Saves on labels
One kit only requires a single label versus individual labels for many separate items.
Kitting services boost your bottom line
Improved warehouse productivity obviously helps any company’s balance sheet, such as by saving on shipping costs. Still, kitting services also improve business offerings and can even boost sales. For example, today’s online gaming industry has been growing faster than ever. This means many gamers want to buy a PC, but purchasing each component can be time consuming and confusing.
Computer parts retailers and manufacturers, therefore, often sell computer kits. In this kind of kitting and bundling, there are several business advantages that can be realized. For example, the retailer may offer a high level PC and add on a less expensive mouse and keyboard. This leads to increased overall sales.
Another tactic used to improve business outcomes is to bundle stagnant inventory into the kits. In this way, you can move your premium items out along with products that might not sell well on their own.
Other business advantages to kitting and bundling
If competitors offer only non-kitted solutions, you can stand out by selling both kits and individual components to grab more market share. Marketing can highlight this difference to establish your brand position apart from the competition.
Lower return rates
When products aren’t compatible, the rate of return rises. With guaranteed compatibility built into your kits, the rate of product return drops.
Improve consumer satisfaction & win more customers
By having an agile kitting system in place, you can adapt to changing customer preferences. For example, if you see a surge in customers ordering certain products together, you can create a kit for them and generate even more business.
Easily test new offers
Even if you don’t see a kit trend appear, you can build new bundles that make sense commercially. This may allow you to be the first to market with a kit that appeals to many customers.
Promotions, special deals and seasonality
For many businesses, samples, promotions, and seasonal offers drive revenue all year long. These diverse offerings require the ability to assemble kits rapidly to meet the pace of marketing campaigns.
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The real power behind kitting and assembly
Although kitting is a useful inventory and logistic strategy, modern technology increases its value exponentially.
When you automate your kitting process, everything moves much faster. For example, you may have several items scattered out in storage, and suddenly you decide you want to generate a kit. With software powered processes, this can all be done quickly from a central command.
Order fulfillment software can even handle this work for you which you can direct at a distance from an easy to use digital platform. This brings many elements together to streamline business processes:
- Inventory can be stored off site, thus maximizing the space available for manufacturing.
- Inventory management gets handled by a 3PL provider under your guidance and control.
- Kitting can be coordinated from a distance to improve efficiency and sales.
- Advanced warehouse management optimizes the entire pick, assembly, bundling, and packing processes.
Intelligent solutions go even deeper
Kitting and assembly can be an extremely intricate process. For example, imagine a toolbox with 20 or 30 different components. Plus, the individual items might need to be changed at a moment’s notice due to supply chain issues. Keeping all this coordinated manually or with outdated spreadsheets significantly decreases the value of kitting.
With more sophisticated technology, these complex kitting issues are handled with ease. Some platforms even allow you to simply click on the items you want to include in your assemblies. If you need to remove an item, you simply delete it via the dashboard.
Also, if a particular item is low in stock, you get alerted so that you can order more, delete the item, or replace it.
Warehouse optimization takes kitting to the next level
Another big cost component is the labor that goes into efficient kitting. When employees gather products that go into a kit, this consumes many hours of selection and packaging work. The best practice, therefore, will implement smart warehouse layout designs. Plus, advanced pick & pack algorithms can optimize picking paths to get the job done faster with less employee effort.
Then there’s directed putaway which is intimately linked to picking and packing. Product storage algorithms improve the efficiency of this highly important warehouse process. When goods arrive, where they get placed on shelves impacts when an order comes in later. The correct items must be easily located, packaged, and shipped.
The placement of goods entering a warehouse affects picking and packing efficiency.
If configured correctly, a WMS Software collects inventory data, order picking, order packing, and shipping history. The system can then determine how long it takes for workers to pick an item—from the moment an order arrives to the moment an order leaves. Plus, when more popular products are identified, they can be placed to move faster off the shelves.
The complexity of these factors affect the entire kitting process as items must be continuously located and placed in the bundles. The faster this gets accomplished, the more resources that are saved, and the faster orders get shipped.
Scale and pivot kitting on demand
These days, customization is the key to commercial success. If a sudden demand for a particular bundle appears, you want to be able to respond rapidly. Any solution you implement should enable you to ramp up kitting and assembly in real time. By the same token, if demand falls, you want to be able to stop kit assembly or pivot to create new combinations.
With traditional methods, this kind of agility was unheard of. You basically got stuck with a certain number of kits and had to try to sell them regardless of demand. Now, with modern kitting methods, these changes can be made to meet market shifts as they arise.
Bonus advantage for kitting and ecommerce
If managed incorrectly, kitting can become an organizational nightmare. With shifting product supplies and multiple packages, the combinations can lead to major errors or shortages. If you also try to link this all to your online store, the headache is magnified.
With the right digital innovation, however, this entire process becomes more efficient and accurate from end to end. When your kits are created, they can be published for sale. When a sale is made, the transaction gets transmitted directly to the warehouse in real time where the kit gets shipped on the same day.
Meanwhile, levels of product stock are updated automatically. Everything is managed from a single place, and the entire process is easily visualized. This is a huge advantage for any brand that completes sales online.
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