Most small and medium-sized retail businesses see the value in outsourcing their kitting and assembly operations to third-party fulfillment companies. However, e-commerce businesses who want to focus on production and sales can also benefit from enlisting a 3PL service provider to gather, package, and ship products to customers.
Here, we’ll take a look at what kitting and assembly are and discuss the key benefits of outsourcing these operations to a 3PL service provider.
What Is Kitting and Assembly?
While people often use the terms kitting and assembly together, they both serve two different purposes. It’s important to understand the separate functions they perform in your overall order fulfillment process. Doing so can help you decide whether you should handle these activities in-house or outsource them to a 3PL.
Kitting refers to the process in which two (or more) related goods are grouped and packaged together to create a new SKU that is ready to be shipped. This is typically done preemptively, that is before the customer’s order is received and both products will leave the inventory at the same time. Kitting is also called product bundling.
Here are some examples:
Subscription boxes. Instead of selling shaving products separately as individual items, you may decide to bundle them and sell them as a single item or as a subscription box.
Rainbow packs. Manufacturers might want to bundle, say, six flavors of a drink into a single kit and sell it as a rainbow pack.
Gift with purchase. If you’re a retail store and want to include a gift with purchase (GWP) such as a small toiletry kit with a high-end cologne.
Late stage customization. This allows manufacturers to customize packages for specific retail stores (for example bundle packs for club stores) or distribution channels.
Assembly is when all the individual items of a kit are arranged and readied for shipment.
For example, shaving products (a pack of razors, shaving gel, and wipes) are grouped, packaged, and shipped as a single item. Kitting and assembly are most-effective in scenarios where you have to fulfill the same orders with two or more items. This can help you save time and improve your bottom line.
For instance, you can bundle together products that complement each other – such as video games with video game controllers or stationery items with notebooks. As a result, you’ll be able to sell more items while saving on packaging costs. Doing so also gives you the option to offer free shipping to your customers.
Similarly, if you sell subscription boxes, which involves shipping goods such as beauty items, fitness products or shaving accessories, you can group them together to create a new SKU that is stored as a single item.
You can apply the kitting and assembly model to almost any type of product. Here are some different types of products that are typically kitted and assembled:
Subscription box programs
Promotional items and literature
Now that you understand kitting and assembly operations, let’s take a closer look at the key benefits of outsourcing them to a 3PL service provider.
Benefits of Outsourcing Kitting and Assembly Services to a 3PL
Kitting and assembly play a vital role in your company’s order fulfillment process. By enlisting a 3PL service with expertise in handling these processes, you’ll be able to fulfill customer orders on time and in a cost-effective way.
E-commerce businesses are always looking for ways to offer faster and more reliable shipment options to their customers.
One way to speed up kitting is by doing it in bulk instead of performing the same picking and packing activities every time a new order comes in. Taking the bulk approach allows you to streamline your operations and improve the productivity of your warehouse staff.
If you’ve established an in-house kitting assembly process, you’ll be able to optimize your processes and save time. However, if you choose to outsource order fulfillment to a 3PL service provider, you’ll be able to complete orders in a much more cost-effective way.
Using a fulfillment company with expertise in picking and packing enables you to group, package, and ship products together as one unit as opposed to paying for picking and packing each item individually.
On top of the direct expenses associated with kitting – such as picking, grouping, packaging, and selling – there are overhead costs involved. These costs may include purchasing and integrating IT management systems, hiring staff, renting additional storage space, and buying specialized equipment.
These overhead costs can take a severe hit on your resources and ultimately affect your bottom line. In some cases, it might even make it difficult for you to set up kitting and assembly operations in the first place.
By hiring a 3PL company to handle your kitting and assembly operations, you’ll be able to save on overhead costs. Why? Because fulfillment companies have expertise in handling kitting and assembly and likely have the infrastructure in place. If you’re in a similar situation, outsourcing kitting and assembly will cost you less than managing it in-house.
Many e-commerce businesses experience fluctuations in product demand throughout the year, which forces them to look for ways to optimize their storage space, warehouse staff, and equipment. However, hiring new staff and acquiring storage facility whenever demand goes up may not be easy (or cost-effective) for most businesses.
Ideally, your focus should be on growing your business and implementing scalable solutions that can adapt to your changing requirements and enable you to stay flexible as product demand fluctuates.
3PL order fulfillment service providers typically work with multiple businesses at a time and can offer their services at scale. In addition to this, they have the resources to anticipate variability in market demand and the flexibility to scale up and down according to your needs. By working with a 3PL, you’ll be able to meet sudden surges in customer orders head-on and turn the seasonality risk into an opportunity.
Another factor which decides whether you should outsource your kitting and assembly operations or handle them internally is the cost of packaging. Enlisting a 3PL service provider to handle kitting operations enables you to save on postal expenses by using efficient and cost-effective packaging.
For instance, instead of using a standard, fixed-sized box, you might consider creating a custom box for frequently ordered kits to minimize the size and weight of your packages. As a result, you’ll be able to save on shipping costs. This is possible because 3PL service providers buy packaging materials and custom boxes in bulk while still charging you a reasonable price.
Fewer Shipping Mistakes
A telling sign that you’re unable to handle your kitting and assembly operations internally effectively is an increase in the number of shipping mistakes. Many businesses try to complete customer orders with existing resources when they experience a rise in product demand. Doing so results in all sorts of shipping mistakes and inaccuracies.
Shipping your items in kit form enables you to minimize shipping errors during order fulfillment. For starters, it allows your warehousing staff (or your shipping partner) to use pre-printed shipping labels. This way, individual items don’t have to be weighed and labeled every time a customer places an order. Not using pre-printed labels slows down order fulfillment and can potentially lead to shipping mistakes.
A 3PL order fulfillment company gives you access to its skilled staff who have expertise in handling kitting and assembly operations. Additionally, they have the tools to track your orders in real-time as well as proper infrastructure and streamlined processes to handle order fulfillment activities.
Kitting and assembly play an integral role in your order fulfillment process. By knowing the challenges and opportunities they bring to your e-commerce business, you’ll be in a better position to decide to handle these operations in-house or outsource them to a 3PL service provider.
What sorts of products are you thinking of kitting? Let us know by commenting below.