Kitting: A tool for building your brand and customer experience

The importance of customer experience in e-commerce continues to grow. Your competitors know it too, and they never sleep and are always looking for new ways to differentiate themselves, provide new shopping experiences or attract new customers. Maybe yours.

Kitting plays an important role in this context. It’s a creative tool that has a direct impact on customer loyalty, average order value or the lifetime value of your customers. While it may seem like a marginal or supplemental part of your logistics processes, its quality can make a significant contribution in building your brand, customer satisfaction, operational productivity or customer retention.

What is kitting?

In the broadest sense, kitting is the process of final preparation of inventory so that it is available for immediate picking from stock at the moment of order receipt.

By default, kitting is the assembly of multiple products from different suppliers (so-called semi-finished products) into a saleable package. However, the kitting process can vary in complexity. For some sellers, it can be a much simpler task such as unpacking the product from the supplier, checking the quality of the product and attaching a label.

The products intended for these sets are often not sold separately, but can be put in the desired order in designer boxes, with a branded ribbon, etc. All this with the single purpose of enhancing the customer’s unboxing experience.

What is the difference between kitting and assembly?

In practice, these two terms are often confused, but the two terms express a different process. Kitting means arranging the product into its final saleable form – putting together a package of several different products, adding promotional material, labeling, sticking a sticker, wrapping it in a leak-proof box, etc. Assembly, on the other hand, is assembling the product so that it can perform its function at all – imagine, for example, assembling a children’s toy from different parts.

What is the difference between kitting and bundling?

These two terms are even closer to each other. Not surprisingly, both terms represent the putting together of a final unique product (SKU) from multiple products before shipping to the end customer. However, there are differences between them in the picking process and the exclusivity of the package contents.

The bundling of products into packages takes place only at the time of order receipt. It occurs in a situation where a retailer offers, for example, a cosmetic starter pack on its online store, consisting of several individually saleable products. When such an order is received, the warehouse staff has to pick individual products from several storage positions and the bundling of this pack takes place only at the packing station.

In contrast to kitting, individual products that are often not individually saleable are completed before its storage. The warehouse operator therefore only takes this prepared package from one warehouse position as one unique product when picking the order.

Advantages of kitting

As you probably already assume, kitting brings with it a number of advantages. Here are some of them.

Identification of manufacturing deficiencies and defects

Has your supplier forgotten to include a sticker, leaflet, label or bag with each product? Does the delivered product not meet the agreed quality parameters? By setting up kitting guidelines and following them, you can reduce your complaint or return rates, or avoid unpleasant interactions with your own customers.

More efficient storage

Thanks to pre-kitted packages, it is possible to store a larger number of different products in one warehouse position. In other words, kitting increases your warehouse capacity by freeing up half-empty warehouse positions for other products. When you work with a fulfillment provider, you also achieve lower storage costs.

Simplified and more accurate picking

As previously mentioned, when an order is received, the warehouse operator picks a kitted package from a single warehouse position, increasing productivity and reducing errors.

More productive dispatch

Kitting reduces the time it takes to get your shipment into the hands of the end customer from the time the order is delivered. Whether because of the aforementioned faster picking or packaging, when you are already working with the final product and the shipment only needs to be addressed with an address label, for example. In other words, by kitting you are able to process a larger number of orders per day.

Increased revenue

Kitted packages contain more products that customers might never buy separately. This increases their average order value (AOV). This is especially true when introducing subscriptions, i.e. repeat purchases for greater customer convenience.

Improving the customer experience

Accuracy of package content, faster delivery, unboxing experience, product exclusivity… All of these features combine to create a customer experience that will keep customers coming back… increasing their lifetime value (CLV).

“When we decided to choose a fulfillment provider, we didn’t want to be a drop in the ocean among other clients. That’s why we finally chose Skladon, which gave us a feeling of individual approach from the very beginning. Today, they kit 40+ gift wrapping variants exactly according to our wishes,” Lukas Hejtmanek, Co-Founder of Pepperfield.

The kitting process: step by step

The setup of the kitting process depends on its complexity – from sticking a label to putting together design packages with higher units of products. However, the individual processes are linked by the following steps.

Step 1: Decide what will be included in the package

First of all, you need to decide what needs the kitted package should fulfil. On this basis, you need to select the products that best match your purpose. Multiple complementary products can be added to the package, for example based on usage, theme, premiumness, etc.

Example: A candle company offers a “Make Your Own Candle” children’s gift package. This package will include everything needed for the production, i.e. wax, fragrances, dyes, wicks and more. The cardboard box used will be eye-catching and colourful to appeal to children between the ages of 6 – 9. All these items are recorded in a so-called BOM, which defines the composition of the final package; the packaging process is documented in a packing rule.

Step 2: Create a new SKU

Once you know what the package will contain, you need to name it with a specific SKU code that is unique to each type of final product. This code needs to be recorded in the warehouse management system (WMS) and linked to the offer on your online store. In this way, you can start tracking sales trend, inventory size including number of semi-finished products and other parameters like other products.

Step 3: Kit the package

This step is the most time-consuming. For higher productivity, we recommend working with a specific BOM of the final package, i.e. a list of all relevant products. The individual semi-finished products need to be transported to a dedicated kitting station and then started to be kitted to the final packages according to the agreed packing procedure.

Example: A candle company will bring everything from the BOM to the kitting station, i.e. wax, dyes, wicks, tissue paper and a cardboard box tailored to the exact contents of the defined contents, eliminating the risk of damage during transport and ensuring a positive unboxing experience. The individual items are wrapped in tissue paper and placed in the desired order in the folded box. All this according to an agreed packing procedure. Once complete, he places the package in a stock position for future orders.

Step 4: Sell the package

Once the packages are kitted and stored, enter the available numbers into the warehouse system and into your e-store. The moment the order is received, the package is picked from a single stock position, moved to the packing station where it is address labelled and dispatched to the end customer.

Types of kitting

Kitting can be carried out at different stages of the supply chain or at different frequencies.

Kitting at the supplier

The seller can request kitting directly from his supplier for an additional fee. However, not every supplier is willing or equipped to do this. Another condition is the physical presence of all products on his premises. The advantage is that the vendor receives the final kitted packages in his warehouse and only prepares them for future orders. The disadvantage of this option may be lower packaging accuracy.

Kitting in the warehouse

This is the most common and most popular kitting processing. The kitting packages are completed during a classic warehouse operation, usually at a customized station and by long-term delegated workers. The frequency and intensity of kitting can be tailored to the needs of the customer or adapted to current stock levels, especially if some of the products included are sold separately.

Subscription

The subscription principle is based on repeated shipments of usually complementary packages. Thus, kitting occurs at specific time intervals (e.g. weekly, monthly, quarterly, etc.) according to the number of subscribers. Subscription packages are generally always unique.

Customized kitting

You can also offer a “Build your own package” option on your online store. This gives the customer the (limited) freedom to determine what to include in the kitted package. You can also offer options for personalised dedication, engraving, etc. In other words, with this sales strategy, you need to be sufficiently pre-stocked, equipped with the appropriate equipment and constantly alert, because the kitting process starts the moment the order is received.

“Among fulfillment providers, we were looking for a partner who would be able to complete and customize our orders exactly according to our requirements. Of course, the agreed quality of the service was maintained. That is why we finally chose Skladon,” Michaela Steinhauser, Co-Founder & COO Skinners.

How to manage the kitting process

Any process that is manually controlled can become very complicated. That is why kitting management, just like other warehouse processes, needs to be managed systemically, i.e. with an appropriate warehouse management system (WMS).

Above, we’ve listed a few of the kitting benefits that can have a positive impact on your business growth. However, there is a flip side to the coin, there can be more serious problems when not handled systematically, the most common being inventory management issues. As you are using existing stock to kit your packages, you need to ensure that the quantity of each item is always correctly updated systemically. Either in the warehouse system or directly on the online store.

“Skladon was very professional in setting up the processes, which in our case are very complicated due to kitting, packing of parcels, etc. We clarified all possible problems personally and set up a completely new process. Since then it has worked absolutely amazingly well,” Tomas Pokorny, Co-Founder of Dogsie.

Warehouse management system (WMS) and setting up the correct operations for many e-commerce stores involves high investment costs and deeper IT skills. That’s also why these e-commerce players turn to reliable fulfillment providers that already have a robust WMS built in. This saves their clients significant investments, minimizes the risk of human error, and is a solution to other employee-related concerns.

“When we handled our kitting back in our warehouse, we kept it at a really high level. By moving to Skladon, we were concerned about maintaining accuracy and quality of packing… quite unnecessarily,” Martina Kovacova, Owner & Co-Founder of zKokosu.

Skladon: individual approach not only during kitting

At Skladon, the needs and wishes of our clients always come first. We take an individual approach to each client, both at the level of warehouse processes, IT requirements, as well as warehouse and personnel capacities.

We provide kitting services at a dedicated workstation directly in our current 16,000 sq.m. distribution center to a number of clients such as Skinners, Pepperfield, NAREX and others. As such, we delegate specific staff for the purpose of creating gift packs / sets / kits who are familiar with individual kitting regulations and other product specifics from each client’s portfolio.

Our clients mainly use two main methods of kitting with us. The first is so-called batch-controlled kitting, which takes place either immediately upon receipt of semi-finished products into stock, or for pre-stocking for a planned marketing event when a large number of packages need to be kitted at a time. The second most common variant is the kitting control based on the “min-max” quantity level monitoring function, where when the system-set minimum quantity level of a specific SKU in the shelf positions is reached, we start kitting up to the maximum level. Thus, we kit continuously, but also in certain time cycles.