Manufacturers in virtually any industry are always on the lookout for ways to cut costs, but is it possible to reduce overhead and improve customer experience at the same time? Innovative kitting and packaging processes can provide just that, bringing more of the process to local economies in the meantime.
Shipping (particularly between overseas OEMs and domestic distribution centers) is an expensive part of the manufacturing and distribution process, and it’s not always the most cost-effective choice to complete product kitting and packaging overseas. Instead, innovative solutions in domestic 3PL kitting operations provide greater flexibility as well as some particular advantages of kitting and packing products at the distribution center.
What is Kitting?
Kitting is the process of combining two or more products into a single package, which is sold as and considered a single product unit regardless of how many individual items are included in the kit. Kits sometimes have their own SKUs and/or tracking numbers. Some common kits are promotional packets or product sampler sets, media kits, craft kits, building toy sets, and book series.
Benefits of Kitting in Order Fulfillment
Since kits are pre-assembled and then stored in the warehouse, fulfilling orders for these kitted products becomes far quicker and more efficient. When kitting is not incorporated in the order fulfillment process ahead of order receipt, workers have to take much more time picking and packing each individual item included in the kit. Hollingsworth is a logistics provider that’s equipped to kit to individual orders. This enables the customer to pick and choose from several options for their order, provided the seller/manufacturer offers these options. Such a level of customization radically improves the customer experience.
Kitting can be done ahead of actual orders at greater scale to enable distribution centers to stay on top of and/or get ahead of their order fulfillment. And if the facility’s order fulfillment is outsourced, their pick-and-pack costs will be reduced. Having these kits pre-packed and stored as a single inventory item significantly cuts down on labor costs as well as delivery times.
Innovative Supply Chain Kitting Solutions
Kitting is a fine-tuned picking and packing process, with many complexities. This is particularly true with kitting for industries such as automotive and consumer electronics, where kits contain parts that are sometimes delicate and/or valuable. Experienced 3PL companies have developed some innovative kitting solutions to optimize supply chain management, minimize costs, and maximize production.
Shipping in Bulk: Shipping is one of the most important costs in logistics, and since many products are often manufactured overseas, it’s an expensive one. Reducing shipping costs is a priority for efficient order fulfillment and companies want to streamline shipping as much as they can. Kitting can help minimize shipping costs because international parts manufacturers can simply transport the different parts in bulk (not yet assembled or kitted) to enable low-cube shipping with many more units per pallet and reduced usage of space.
Postponement: The idea of postponement is that an OEM ships devices in ‘vanilla’ condition so that customizations in assembly or packaging can be completed later, when they actually fulfill an order. For example, with consumer electronics such as cell phones, the maker can order a bulk shipment before they know the actual quantity to be ordered by their carrier customers. Then, the phones are packaged when specific orders are received, eliminating the costly, time-consuming need to dekit and repackage for uses that are different than initially forecasted. The only drawback with postponement is the requirement for additional warehousing to store the devices until they are needed, but it’s still far more cost-effective with regard to shipping and/or dekitting.
Customized Packaging: By outsourcing assembly, kitting and packaging to a 3PL provider, manufacturers can benefit from more customized packaging options. Products can be specially packaged for events such as the holiday season or special promotions, which is a significant advantage for retailers and their varying needs. This presents added opportunities for revenue and increased sales, while maximizing efficiency by packaging and kitting the product bundles just prior to distribution.
Managing Upgrades & Software Updates: An aspect of kitting that is particularly relevant to the consumer electronics industry is the logistics provider’s process for handling product upgrades and software updates. For example, newly released electronics almost always have last minute bug-fixes, upgrades or revisions to software and if they are already at the distribution center, must be shipped back to the OEM, abroad. An equipped 3PL with capacity to manage these updates on their own is an important partner to have, since they can eliminate or at least minimize delays in the availability of the product and keep things on track. The 3PL partner can also be sure to conduct upgrades to the OEM’s standards, and the kitting process ensures the latest instruction manuals and other key collateral is included in the new packaging. Other upgrades may be initiated by changes in consumer taste, such as consumer electronics made in fashion colors, since colors can be switched out when they are no longer popular.
Material Procurement: One of the cost-effective advantages of outsourcing kitting services is that a 3PL partner can most likely procure and manage materials for kitting and packaging at a fraction of the cost of doing so in-house. They already have a network of vendors, and can usually obtain materials in bulk for lower cost. A 3PL’s material procurement is typically facilitated with materials requirements planning technology systems (MRP), which automates the process of procuring and managing supplies to speed up the process and eliminate human error.
Hollingsworth is your preferred partner for expert packaging and kitting services, with a specialization in solutions for complex industries such as consumer products and automotive. We offer the flexibility and customization to kit as orders require, regardless of the complexity or number of options. This benefit increases customer satisfaction, while opening up new opportunities for revenue generation and an edge on the competition. Contact us to discuss your order fulfillment and warehousing needs.