Now with one purchase, they have all the pieces they need for a complete product, rather than wasting their time combing through isles to find a whole bevy on smaller, supplementary products. This kitting process is easily integrated into an ERP solution and also allows companies to save money on their labor costs, as they have decided to assemble and sell a finished good. This finished good, will also likely have a higher value than the sum of its otherwise less-significant parts. To put it simply: it’s a win-win.
Imagine you want to set up your own computer, so you go to your local electronics store to pick up an unassembled computer. Upon getting home and opening up the box you find that some critical components are missing- it may need a different type of adapter, a chip to insert somewhere, etc. You begin to get upset that the company left out some key assets you had purchased, so you go to read the box, only to notice that in fine print it says that what you noticed was not included. It turns out, it was your responsibility, as the consumer, to read this in the store, and search through the isles to pick up the additional pieces, adding to the time and money you’ve already invested in this project. This is not how it should be. Companies are turning to kitting as a cost effective means of managing this inventory. This is the best way to ensure accuracy and save time in complex assembly tasks. It simplifies the purchase decision, reduces the return rates of incorrect items mistakenly purchased, and limits errors that occur when a customer assembles a kit on their own.
ERP Systems have made the process of organizing and selling kits very simple. The products that could be sold individually (or in bulk, depending on the company’s desire), can now be compiled into a single grouped item. This offers multiple benefits for the business, in reconciling the difference between searching for 1 kitted “item,” versus searching for all of its multiple product components:
· Greatly reduced search time in warehouses
· Saved physical warehouse space due to more efficient packing
· Less stock keeping units to track
· Better resource organization within the warehouse based on usage
· Increased warehouse productivity and reduced handling costs
· Fewer purchase orders for accounts payable
On top of this, a company can pick and choose products that they want to be put into a kitted product, allowing for maximum profit margins while costs stay relatively constant. This often involves a balancing act between elements of high and low usage; information easily tracked by an integrated ERP solution.
Kitting provides many benefits for a company that sells component goods (such as electronics or small parts). Order fulfillment becomes less expensive for a company because, if an order is placed that has a kit the pick and packer only needs to find a single “item” in the warehouse, versus multiple items needing to be picked and packed separately. On top of that, because these items are pre-packed before shipping, the cost of packing is reduced (standardized packaging allows for less human error at order fulfillment), making the piece more profitable. Finally, since the items are prepackaged and put into a single kit “item,” there is less room for the picker to choose the incorrect items if a customer buys all of the items in the kit individually. These leads to better customer satisfaction and high customer retention. Contact HSO today to learn more!