eCommerce Kitting: Reducing Cost by Kitting Orders in AdvanceSeptember 25, 2014 by Josh Haynes
For the uninitiated, eCommerce kitting refers to pre-assembly of order items into packaged kits instead of picking and packing orders as they come in. There are several types of kitting, but for eCommerce purposes, this usually comes into play by bundling products based on ordering patterns, pre-packing kits as part of 3rd party website orders (think Food52, ShopHQ, and others), or as part of a daily deal or crowdfunding campaign, where the orders are usually very similar to one another and can be grouped.
Kitting is an excellent way to save cost, as it will take much less time to process 100 of the same order in one picking session rather than individually picking each order one by one. In most instances, several laborers can be put on a kitting line, where one person prepares the product, another packs the boxes, and another seals the boxes and affixes the packing slip. Essentially, this creates an assembly line that saves time and, in turn, puts more money in your company coffers.
A Few Kitting Case Studies:
eCommerce Kitting Case #1
Jennifer operates a fitness apparel and accessories business, including instructional DVDs. To generate funding and kick off marketing for her new product line, she runs a campaign on Kickstarter. She sets up three types of rewards, one with 3 products, another with 4, and another with 5. Her campaign becomes fully funded, and she receives 100, 200, and 300 backers for each reward, respectively.
She notifies her fulfillment house that she has several groups of orders ready for kitting. Instead of paying $1.50 for the first item and $.50 for each additional item (hypothetically), she works with her account manager, who conducts a time study and determines that the kitted orders can be completed for $1.15, $1.25, and $1.35 per order, saving her over $1,100 dollars.
eCommerce Kitting Case #2
Donny has a greeting card and gifts company with both direct to consumer and wholesale customers. He sells cards and gifts individually online, but sells cards in 6-packs to wholesale clients. Instead of paying $1.50 plus $.50×5 for each order for wholesale cards, which would cost $4.50 order, Donny works with his fulfillment account manager to determine that one hundred 6-packs of a card can be assembled in two hours, costing him $150. Using normal order rates would have costed him $450, saving him a big chunk of change.
eCommerce Kitting Case #3
Brian has a Lacrosse equipment company and he ventures into a subscription model, where customers can sign up to receive a lacrosse ball, a deodorizing equipment bag ball, and a roll of tape each month. His subscriber list grows, from 250 to 500, then 1,000 customers. Instead of processing each order as they come in, Brian directs his fulfillment company to kit them in bulk the last week of each month, and ship them the first of each month. In doing so, the fulfillment company is able to cut 33% of handling from each order, allowing Brian to expand marketing for the subscription program.
In each case, kitting management is easier than it looks. Crowdfunding websites, for example, will allow you to export a spreadsheet of backers, which you can then send directly to your fulfillment company for processing. When taking orders via a normal eCommerce store, a direct integration to your fulfillment center Warehouse Management System should be available.
In total, it is wise always to seek ways to kit your orders or products in advance, which will save time and money for everyone involved.