Kitting is a warehouse and inventory management process in which individual, separate but related items are grouped, packaged, and supplied as one unit or “kit.” Instead of picking and shipping multiple related products individually, the warehouse pre-assembles these components into a single SKU. Kitting streamlines order fulfillment when customers frequently order a specific combination of items together, improves accuracy, and simplifies the picking and packing process.
For example, consider a manufacturer of electronic devices. Instead of assembling a customer’s order by separately picking a smartphone, charging cable, headphones, and an instruction manual, the warehouse can pre-create a “starter kit” that includes all these items in one package. Whenever an order for the smartphone bundle is placed, the warehouse picks one “kit” SKU instead of handling multiple SKUs individually.
Benefits of Kitting:
- Increased Efficiency:
By pre-assembling commonly ordered item combinations, employees spend less time picking multiple items at the time of shipment. The result is faster order processing and improved throughput.
- Reduced Picking Errors:
Kitting consolidates multiple SKUs into a single unit. This reduces the complexity of picking orders and lowers the risk of shipping errors since all required components are already assembled.
- Cost Savings:
Streamlining the pick-and-pack process often leads to decreased labor costs and less operational overhead. Also, packaging materials can be standardized and optimized, often resulting in cost savings.
- Improved Customer Experience:
Customers receive pre-bundled sets that are immediately ready to use, enhancing their experience. This can increase customer satisfaction and repeat business.
- Inventory Optimization:
By tracking kits as single SKUs, inventory management becomes simpler. Forecasting demand for bundles is easier, and stockouts of individual components can be mitigated through strategic kitting.
How Kitting Works:
- Demand Analysis and Kit Design:
The process begins with analyzing order history and sales data to identify frequently co-purchased items. Based on this data, the company designs kits that make sense from a sales, cost, and efficiency perspective.
- Pre-Assembly of Kits:
Warehouse staff or automated systems take the individual items and assemble them into a new package or container. This kit is assigned a unique SKU or part number, allowing it to be tracked as a single inventory item.
- Inventory Management:
The WMS (Warehouse Management System) or ERP (Enterprise Resource Planning) system recognizes the kit as one stock item with a defined bill of materials (BOM). The software automatically adjusts inventory levels of the individual components whenever a kit is created, ensuring accurate stock counts.
- Storage and Labeling:
Completed kits are stored in dedicated bins or shelves, clearly labeled with their unique SKU and description. This makes them immediately accessible for picking when an order comes in.
- Order Fulfillment:
When a customer places an order for the kit, the picker retrieves the entire assembled kit from its location instead of multiple separate items. This reduces handling time and speeds shipping.
- Continuous Improvement:
Companies monitor sales data, feedback, and inventory movements to refine their kits over time. If certain items are not selling as well, they may adjust the kit contents or discontinue the package.
Software Used in Kitting:
- Warehouse Management Systems (WMS):
A WMS provides real-time inventory visibility and the ability to manage kitting as a function. It can handle BOM structures, guide workers through the kitting process, and track component usage.
- Enterprise Resource Planning (ERP) Systems:
ERP suites that integrate inventory, order management, and procurement also manage kitting. They synchronize component availability, trigger replenishment orders for components, and record kit assembly as a type of production operation.
- Manufacturing Execution Systems (MES):
In scenarios where kitting aligns closely with a manufacturing process, MES can manage the assembly step, ensuring that each kit meets quality standards and is assembled correctly.
- E-Commerce Platforms and Order Management Systems (OMS):
For online retailers, the OMS can recognize kit SKUs on the front end and communicate with the WMS or ERP on the back end to ensure the correct pre-assembled package is available.
Use Case Example: A Subscription Box Service
Consider a subscription box company specializing in healthy snacks. Each month, the business offers a themed box containing a curated selection of snack bars, dried fruits, and teas. Rather than individually picking these items when orders come in, the warehouse pre-assembles the monthly boxes in anticipation of subscriber demand.
- Designing the Box:
The company’s merchandising team selects five snack bars, two bags of dried fruit, and one box of tea for the “Spring Wellness” box.
- Pre-Assembling Kits:
Using the WMS, staff identify the components needed for a batch of 10,000 boxes. The system ensures that adequate stock of each item is on hand. Workers gather the items and pack them into branded boxes, labeling each final box as a single SKU (“SPRING2024BOX”).
- Inventory Adjustments:
As each “SPRING2024BOX” is assembled, the WMS reduces the inventory counts of its constituent items accordingly.
- Order Fulfillment:
When subscriber orders arrive, the warehouse simply picks the “SPRING2024BOX” as a single item. Because it’s pre-packed, order fulfillment is near-instant. Orders ship out quickly, delighting customers.
- After the Promotion:
The subscription company analyzes customer feedback and sales data to decide next month’s selection. This continuous improvement cycle refines which products to include in future kits.
In Summary:
Kitting streamlines the order fulfillment process by grouping related items into a single SKU. It relies on strong inventory management systems and can deliver substantial efficiency, cost, and accuracy benefits. By leveraging WMS, ERP, or integrated software solutions, warehouses can effectively manage kitting, improve customer satisfaction, and gain a competitive edge in today’s fast-paced distribution environments.