This guide will help you understand every aspect of product kitting and show you ways to apply it in your own operation. First we’ll take a look at what product kitting is and why it’s useful in ecommerce sales. Then we’ll explore samples of product kitting in action in various ecommerce settings. After that, we’ll look at three ways to manage kitting: in-house, via fulfillment partners, or through your product vendors.
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What is Product Kitting?
Product kitting, also called product bundling in some software systems, is an inventory management term that refers to the process of combining single items into one unit for sale. When a kitted item is purchased, the inventory system automatically links each single item to the sale. Goods sold both by the piece and as part of as a set, subscription box products, and products assembled on order all are examples of kitting in action.
Here’s an example of two items sold both individually and as a set. Each piece of luggage is tracked and sold as a unique inventory item, and as a component of this two-piece set using product kitting:
Why Use Product Kitting for Ecommerce?
The kitting process is an extremely useful merchandising tool for ecommerce sellers, mainly because it lets you do much more with your existing stock. Using kitting, you can easily bundle items that you sell by the piece to create merchandising options like discounted sets, cross-sell promotions, special deals, and more.
For example, looking at our luggage items, you could offer a discount when customers purchase the set. The result? Your customer sees a good deal and you get higher-value sales and move more product:
Kitted items give you more products to market, plus more categories and pages to optimize for the search engines. And the best part? Extending your collection through kitting doesn’t add inventory or storage costs since you already purchase and stock these items.
“I sell a product, as a distributor, for washing your car without water. This is offered shipped from the manufacturer as just the product. But I bundle the product with towels to apply and buff with, and these bundles are very popular with my customers. I bundle items when orders are packed.”
— John Skurka, Owner, Driwashsolutions
Beyond a little merchandising creativity, the only thing product kitting really requires is an inventory system that supports it, which we’ll discuss in detail below.
We’ve looked at one example of product kitting in action. Now let’s explore four more real-life examples of kitting in small ecommerce operations.
Four Examples of Kitting in Ecommerce Operations:
Product kitting makes it easy to manage all sorts of ecommerce goods and business models, such as:
1. Packed-to-Order Sets
This is one way I use product kitting in my own online store. Packed-to-order sets are a great way to offer your customers choices in set quantities, colors, and product mix. In my operation, we sell plastic drinkware and dishes by the piece, so customers can order anywhere from one to 1000 of any item we carry. Their choice. But we also offer sets, as shown above, that combine these same items in many different ways.
We do this because over the years we discovered some customers don’t want choice, they want easy. Some people feel it’s easier to buy a set of 4 or 8 glasses, or a 24-piece dinnerware set, than it is to add items to their cart individually. Product kitting makes it possible for us to service both customer types all from the same inventory. Plus we can offer discounts on sets and encourage larger sales.
“We sell high-quality custom challenge coins for commemorating events, honoring our heroes, awarding employees, and more. Our online store provides kitting and bundling for our products. Customers are free to order a variety of coins in one batch, as opposed to just one type of coin.
We also offer a range of packaging options at an additional cost to complement our coins. These include standard PVC pouches, velvet bags, coin capsules, velvet presentation boxes, custom pouch inserts, and coin stands. By kitting orders, we provide customers extra flexibility and options to choose from.”
— Cody Clifton, Director of Ecommerce, Challenge Coins 4 Less
2. Subscription Boxes
Subscription boxes are a great example of kitting since they are a single item made up of many components. Some are sold as-packed only, while others give their buyers options per box contents. In both cases, the product kitting process makes tracking inventory, costs, and reorders for individual items manageable. You can even track your customized box as an inventory component. This is handy since boxes are one item you’re sure to reorder in this type of ecommerce business. Learn more about ordering custom-made boxes here.
3. Assembled Products
Kitting is widely used to track parts inventory and reorders in manufacturing and assembly operations. For an ecommerce seller assembling good on order, kitting is an invaluable part of the process. In fact, it can even let you provide better service and more options to your customers.
Say you sell built-to-order racing bikes. Since you stock parts individually, then assemble bikes when purchased, you can offer your customers many choices. For example, a Level One package has base-quality brakes and gears, while Level Two had upgraded brakes and gears. Using kitting, each level’s components are tracked separately in your inventory system and assigned to the appropriate package.
So when a customer buys a bike with a Level One package, all of the Level One inventory components are automatically connected to the order, and the inventory for each component is reduced accordingly..
4. Custom-made or Personalized Items
Like the bike example above, custom-made or personalized items can, from an inventory perspective, be considered assembled goods. Say you custom-make personalized tee shirts and novelty signs, kitting can help you can track each material that goes into the product. In this case, tee shirts, sign blanks, and vinyl imprint materials are tracked as unique inventory items so you know what you have on-hand, and what you need to reorder.
How Product Kitting Fulfillment Works
Physically packing kitted products together to ship can be handled a few ways. You can do it on-the-fly, meaning kitted items are stocked separately then packed together when ordered. Or, packing can be done in batches to fill a specific number of units at a time.
With batch kitting, you pre-pack a supply of kitted items so they’re ready to ship, rather than combining them when ordered. Batch kitting can be useful for high-volume shipping, like product promotions, crowdfunding rewards, or monthly subscription boxes.
“Our clients often use kitting to sell bundled products which are also inventoried and sold separately. Often, the bundles are assemblies of individual products. One prime example is this kitted item comprised of 8 different inventoried items. Note, it’s important that product availability is based on whichever component has the least available inventory.
We’ve tried several tools, but our preferred is Ordoro, as it includes shipping functionality. Its pricing is competitive, as well. Our clients primarily pack when ordered. It really depends on whether the components are often sold individually. If there is high demand for the individual components, then “batch-kitting” is not appropriate.”
— Bret Williams, Novusweb
However you handle the packing side of things, the real key to product kitting success is proper inventory management. Done right, every item you carry exists as a unique item in your inventory system, with a unique sku, item name, and inventory count. To create a kitted item (or bundled item, depending on your inventory software), you simply create a new item, with it’s own sku and name, and assign other items as parts of this item. The available quantities of each product in the kitted item determines if the kitted item is in stock or not, like this:
Remember, the items that make up a kitted item can be sold individually, too. Or, they can just be stocked as part of a kitted item, as in parts for assembled products. Even if you don’t sell each item individually, tracking parts as unique items makes inventory management and stock reorders accurate and efficient.
Now that you have an idea of how product kitting works, and how it can help expand your ecommerce operation, let’s take a closer look three ways you can get the job done:
Three Ways to Manage Kitting for Ecommerce
As we’ve seen, product kitting combines a packing process with precise inventory tracking. And we’ve covered several ways kitting can enhance specific types of ecommerce companies. Now let’s look at the logistics side by exploring the three primary ways you can manage product kitting for your ecommerce operation:
1. Handling Kitting In-house
Whether you’re kitting orders on-the-fly, assembling items made-to-order, or pre-packing kits in batches, the real key to managing kitting in-house is good inventory software. Believe me, tracking kitted items manually on spreadsheets usually ends up in a mess of inventory shortages and backorders.
I use Ordoro which handles kitting beautifully, but many order management systems such as OrderHive, Finale Inventory, and even QuickBooks support kitting. You’ll see this called product bundling in some systems, but it’s the same concept. Some online stores’ inventory systems support kitting, too. For example, you can create and track inventory for kitted items in your Shopify store by adding the SG Product Kits app to your Shopify dashboard.
Since I know Ordoro, we’ll use it as our example of kitting management, but all systems follow the same logic. For kitted items, Ordoro uses parent and child skus, like this:
Simply put, the kitted item is the parent sku, and the individual items that make up the kit are child skus. Stock levels for child skus are tracked individually, and these items can be sold individually as well. They can even be parts of other kitted items, like this:
A big plus for using inventory software that supports kitting is that if a child sku is out-of-stock, the kitted item is considered unfillable, as shown below. And if your software integrates with your ecommerce store, the kitted item will also show out-of-stock on your website. This is a nice feature that prevents unexpected backorders and angry customers.
If you already handle order fulfillment in-house, adding kitting to your fulfillment process isn’t hard at all. The right inventory software lets you manage all key kitting tasks efficiently, including:
- Track stock levels for child skus included in parent skus
- Create low-stock alerts and automatically generate purchase orders
- List alternate items if a child sku is out of stock
- List alternate vendors for items if available
- Update stock availability to online stores for all child and/or parent skus
- Print packing lists that include all child skus needed to fill a kitted order
- Include inventory locations on packing slips for faster order picking
If you don’t handle fulfillment yourself, here are other ways that you can enable kitting for your online store.
2. Using a Fulfillment Center
If you use or plan to use a third-party fulfilment partner (3PL) to stock and ship your online orders, you’re in luck. Product kitting is a service that nearly all fulfillment companies offer. You’ll definitely want to ask about this service when you talk to prospective fulfillment partners, but most will be able to meet all of your order kitting needs.
When interviewing a potential fulfillment partner, be sure to cover every detail of what you plan to ship. For example, batch-kitted subscription boxes and packed-per-order sets are handled in different ways, and may have different costs. But the good news is that most fulfillment companies do a fair amount both. They can answer your questions and even make valuable suggestions. Plus, it’s likely they already have inventory management systems in place to handle every detail for you.
Fulfillment companies handle kitted products day-in and day-out:
Even if you handle daily order fulfillment yourself in-house, a fulfillment company can be a good option if you have a large batch-kitting project, like the one above. Say you have a big seasonal promotion and limited storage space. A fulfillment company can receive your stock, pre-pack your kits, then store and ship everything as a batch project. This leaves you free to handle your day-to-day fulfillment without interruption.
For some businesses, a fulfillment company is the clear solution for managing kitted orders. But there’s still one more option to consider: your product manufacturers.
3. Using Product Manufacturers & Vendors
If you need to kit a quantity of goods made by the same manufacturer, don’t hesitate to ask them about kitting services. After all, their job is to produce items and package them for distribution. That’s kitting. Most are willing to pack custom sets or grouped items for you. They might even provide a custom wrap, box, or label at little or no extra charge.
Vendors usually have an order minimum, but sometimes these are quite low. For example, I asked my US-based tableware manufacturer to custom-kit 144 sets of plastic tableware, like the set shown above. Surprisingly, they only charged me a 25¢-per-set bagging fee. It would have been more costly to pay my staff to do this. They even drop-shipped the order direct to my client, saving me an inbound shipping fee had I handled it in-house. So the entire project was highly cost-effective and completely turnkey.
If you import goods, your minimums likely will be higher. But it never hurts to ask. You might be surprised what your vendors are willing to do for a good customer.
The Bottom Line
Product kitting combines detailed inventory tracking with several packing processes to create all sorts of merchandising opportunities for online sellers. Since many ecommerce inventory systems support kitting nowadays, it’s something every online seller should understand and consider using to increase online sales without adding inventory costs.
Kitting also is a key process for several online business models, such as subscription boxes, bundles savings sites, customized items, and made-to-order products. You can easily handle any or all of these kitting programs yourself in-house if you have inventory software that supports kitting. If you don’t handle order fulfillment yourself, or have limited space for large projects, using a third-party fulfillment center with loads of kitting experience can be a great strategy. And last but not least, your own product manufacturers can be a surprising source for cost-effective product kitting.
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