Kitting is an inventory management technique used to assemble as few packages as possible. Traditional inventory models required warehouse workers to package separate SKUs (stock-keeping units) individually and send them out as multiple different shipments. This increased shipping times and costs for the company and the customer. Today, most retail companies kit products together to streamline order fulfillment and provide better customer service.
In this article, we’ll discuss what kitting is and the different types of kitting you can implement in your retail business. We’ll also cover the practical benefits of kitting, when to use kitting, and how the kitting process works.
What is Kitting?
Kitting is the process of packing individual, yet related SKUs into a single package and shipping them as a kit to a single customer. The kitted package becomes a new SKU that can be sent out again whenever a new customer orders the kitted package.
Also known as warehouse kitting or inventory kitting, this inventory management technique makes warehouse packaging more efficient, cost-effective, and reduces the amount of space needed to store multiple products.
Kitting Example
A medical supplies company sells a variety of healthcare equipment used by hospitals all across the Northeast. There’s been a recent increase in demand for lung biopsies due to a radioactive spill in the area. To facilitate the delivery of lung biopsy tools, the medical supplies company kits forceps, brushes, and needles for tissue collection into a newly packaged SKU. This SKU is ready to be ordered and shipped whenever a hospital needs a new lung biopsy kit.
Kitting vs. Bundling
Kitting and bundling are sometimes used interchangeably in logistics. Both terms involve grouping multiple items together for shipment. However, kitting refers to packaging-related items that complement each other and are often used together, such as a skincare kit. Bundling is a broader term that refers to packaging items into a new SKU, whether they are used together or not, such as a toolbox.
Kitting example:
A skincare brand wants to enhance results for their customers. Instead of selling a cleanser and exfoliator individually for clearer skin, the skincare brand creates a kit that includes a cleanser, exfoliator, toner, serum, and moisturizer. The new five-step system promises skin that is not only clear but hydrated and more vibrant. These results can’t be achieved unless all items are used together.
Bundling example:
A hardware store wants to sell more of their overstocked pliers. To increase sales and clear out their shelves for new products, the hardware store bundles together their bestselling hammers, screwdrivers, and wrenches with their undersold pliers. Although all of these items can be used on the same home repair project, they also work well individually.
Kitting vs. Assembly
Kitting is also sometimes confused with assembly, which is a fulfillment service that groups products together for manufacturing purposes. Assembly is different from kitting and bundling because the package being formed might be used to assemble a product, as opposed to being the product itself.
Assembly example:
For example, a furniture company might assemble a package that contains a wrench, screwdriver, rubber mallet, and instruction manual for customers who purchase a couch. This package isn’t the product itself, but it helps assemble the product purchased by the customer.
Although kitting and assembly are often part of the same order fulfillment process, they are separate activities. Third-party logistics companies offer assembly services to make sure all necessary parts of a product are available to the customer when they receive the product they purchased.
Four Types of Warehouse Kitting
There are several types of kitting that can be used in a warehouse. Some kitting strategies are designed to enhance customer satisfaction, such as product, promotional, and subscription box kitting. While others, such as MRO kitting, are meant to streamline warehouse operations.
Product kitting
Product kitting involves grouping related products together and selling them as a signal unit. Also known as inventory kitting, this strategy allows businesses to package and ship multiple products at the same time. Two types of product kitting are common:
Pre-packaged kitting: Products are prepared for shipment in pre-sealed kits and stored until ordered, such as first-aid kits. This method is best for items that don’t have an expiration date and can be stored for extended periods of time.
Pick-and-pack kitting: Products are picked from inventory and packed into kits after an order is received, such as a weekly meal kit. This method is best for items that would expire if pre-packaged and stored for extended periods of time.
Promotional kitting
Promotional kitting involves creating kits for marketing purposes. Products are packaged into promotional kits that include smaller product samples or discount coupons to encourage future sales. These promotional kits are often created to be displayed at retail store chains.
Subscription box kitting
Subscription box kitting involves creating kits for monthly subscription boxes. Kits can be packaged based on customer preferences, company choice, or seasonal trends.
Maintenance, repair, and operations (MRO) kitting
MRO kiting is a type of kitting that streamlines warehouse operations by regularly restocking and organizing kits with the materials needed for production, assembly, and other warehouse tasks. These kits are delivered to the production floor to help workers assemble products without having to constantly look for individual items needed to complete their work. It’s frequently used in manufacturing warehouses where products are constantly being built, such as car manufacturers.
Four Steps of the Kitting Process
The kitting process involves grouping together individual items to create a single, new product offer. Companies can either create the kits themselves, or outsource to third-party logistics companies who source, assemble, and ship the items. Here is a breakdown of how the kitting process works in a warehouse.
Select items for kitting
The first step in the kitting process is deciding which products will go into the kit. Businesses often choose individual items based on product types, customer behavior, seasons, and other strategic categories.
Kitting products that are usually purchased together can help you improve company sales and meet seasonal demands. Kitting slow-moving items with more popular items can help you clear your shelves of unwanted inventory and prevent overstocking. The items you decide to kit will ultimately depend on inventory levels and your specific business goals.
Create a new SKU
Once you’ve selected which products to kit, you’ll have to assign the kit a new SKU in your warehouse management system (WMS). Creating a new SKU for your kit helps employees identify the kit as a new product offer in your WMS. This allows you to make the kit available for purchase and monitor sales across multiple platforms.
Assemble the kit
After you’ve created a new SKU, you can begin assembling the new kit. It’s important for employees to be able to locate the products included in the SKU within the warehouse. Most WMS include barcodes on each one of their products that can be scanned when assembling a new SKU. It’s also best to store kitted items in the same area to help warehouse workers easily find and assemble kits.
Ship the kits to customers
Once the kits have been assembled and stored in the warehouse, they’re ready to be shipped. Label each one of your new kits with their new SKU and make sure employees know where they are stored.
The Practical Benefits of Kitting
Kitting benefits businesses in many ways. Here are five ways in which your warehouse operations might benefit from kitting.
Simplifies inventory management
The first and perhaps the most obvious benefit of kitting is the ability to simplify inventory management. In the absence of kitting, each product would have its own SKU and require individual tracking and shipping. By kitting several products together and creating a new SKU, warehouse operators can easily store, track, and ship inventory. Streamlined inventory management makes the pick-and-pack process more efficient, reduces packaging expenses for the company, and lowers shipping costs for the customer.
Streamlines order fulfillment
As soon as a customer orders a product online, they expect to receive their item within a certain amount of time. Failing to meet customer expectations can damage your business’s reputation and negatively impact future sales. It’s important to make sure customers receive their orders within the time you promised. Kitting helps you deliver orders on time by having orders ready to go in advance, streamlining order fulfillment, and preventing delays.
Enables quick demand response
Most businesses experience fluctuations in demand due to seasonal changes, economic downturns, and other factors. Some demand fluctuations can be anticipated, while others are unexpected. This can make it difficult for business owners to hire or reduce staff accordingly. Kitting allows business owners to quickly respond to increased demand by having pre-assembled kits ready to go.
Reduces packaging errors
Another benefit of kitting is fewer mistakes in the packaging process. Picking items individually every time a new order is placed can lead to packaging mistakes, especially when demand is high or staff is low. Kitting allows warehouse operators to assemble kits in advance, providing opportunities for quality control before they’re shipped.
Improves customer satisfaction
Grouping multiple products into one offering at a discounted price can make customers feel like they’re getting a great deal. Even without a discount, strategically grouping valuable items into one product offering can help customers feel content with their purchase. Kitting can also improve shipping times which means customers receive their orders on time or early.
What are the Disadvantages of Kitting?
Although kitting provides businesses and customers with several benefits, it can also complicate inventory management in a few different scenarios. Take a closer look at the scenarios below:
- If one item in a kit is unavailable, the entire SKU is considered out of stock.
- If a pre-packaged kit is overproduced, multiple products that could be sold individually might be left sitting on a shelf for extended periods of time.
- If a kit includes too many different types of products, it could be difficult to price, package, and ship.
- If a kit requires a long assembly time, orders could be delayed and labor costs could be expensive,
When Should You Use Kitting?
Kitting should be implemented whenever you notice a set of warehouse items frequently used or ordered together. For example, if you sell phone accessories and notice that customers often buy a certain phonecase with a screen protector, you might want to create a kit with a phonecase, a screen protector, and a screen cleaner.
If your company repairs phones, you might kit together precision screwdrivers, tweezers, a suction cup, and other tools needed to fix phones. Businesses should consider kitting when they want to streamline warehouse operations, improve production efficiency, or enhance product offerings.
How Brightpearl Can Help
Using a retail operating system like Brightpearl can significantly improve the kitting process, With its advanced demand forecasting capabilities, Brightpearl analyzes historical sales data and customer behavior to identify which products are frequently purchased together. This insight enables businesses to assemble profitable kits that align with customer preferences while avoiding overproduction. By accurately predicting demand, companies can reduce waste, optimize stock levels, and ensure that kits are always available to meet seasonal or promotional spikes.
Brightpearl’s centralized system simplifies inventory allocation and tracking by linking individual SKUs to their corresponding kits, providing complete visibility into inventory movements. Real-time updates across its unified dashboard ensure businesses can effectively monitor both kit availability and the stock of their individual components. This integration eliminates the risk of overselling and ensures consistency across multiple sales channels. Additionally, Brightpearl’s robust reporting and analytics tools empower businesses to evaluate kit performance, identify sales trends, and refine pricing or promotional strategies based on data-driven insights.
When it comes to reordering and restocking, Brightpearl automates the replenishment of kit components, ensuring businesses have the materials they need to assemble kits without delays. By reducing manual effort and improving supply chain coordination, Brightpearl allows retailers to focus on delivering high-quality products to customers quickly and efficiently. Ready to simplify your kitting process and maximize your profitability? Explore how Brightpearl can transform your operations today!
