Packaging, Kitting & Assembly are 3PL services that can help companies reduce costs, increase revenues and elevate the total customer experience. 

Third party logistics providers (3PLs) are the behind-the-scenes partners who enable manufacturers and ecommerce merchants to scale up their operations without the upfront costs of warehouse space or new personnel. In other words, they offer the logistics and supply chain services that allow sellers to concentrate on their core competencies rather than having to become supply chain experts. Assembly, kitting and packaging are three essential services that are part of the fulfillment process and may dramatically enhance the deliverable to the customer.

Outsourced omnichannel services such as assembly, kitting and packaging are vitally important to growing companies, notably those businesses trying to accelerate global growth. Cross border logistics can be a daunting process for those unfamiliar with global commerce regulations.

Omnichannel logistics providers have an array of services ranging from comprehensive end-to-end supply chain management to the administration of only specific segments of the supply chain. These services can include procurement, fulfillment, transportation and warehousing.

What Exactly is Fulfillment?

Fulfillment, or really order fulfillment, is the process that involves all of the steps needed to fill a customer order. It is also known as order processing. Everything starts with the customer order which then proceeds to an order request that is noted in the inventory system. This triggers an order request at the warehouse where a worker locates the product, picks it, and packs it for shipping. The package is then shipped and delivered, and in some cases returned. Either way, the inventory is updated to reflect the sale or the return of the item.

What are the Four Basic Fulfillment Methods?

1. Businesses can store and ship to customers directly. This is known as In-house Fulfillment.
2. When a business fulfills an order by sending the order to a manufacturer who then sends the product to the customer, the process is known as Drop Shipping Fulfillment.
3. A business can use a Third-Party Logistics provider to ship the order. This is 3PL Fulfillment.
4. When a business chooses to use one or more method of shipping depending upon inventory or shipping costs, it is known as Hybrid Fulfillment.

What 3PL Fulfillment Services Are Most Used by eCommerce Merchants?

Three of the main fulfillment services utilized by eCommerce companies are assembly, kitting and packaging. Since assembly and kitting are similar in some respects, it would help to define the two terms.

Assembly is usually used as a manufacturing term, referring to the labor process that creates a product from parts or sub-assemblies. Sub-assemblies are substructures that are then linked to create a product or part of a product, as some sub-assemblies can be formed by the combination of other sub-assemblies.

The assembly process can be completed by the OEM manufacturer or outsourced to a provider that has the requisite space, equipment, and personnel to carry out the process in a cost-effective manner. The process of assembly is most often carried out in an assembly line, where workers at every step, or stage of assembly, perform one task each and then pass the product down the line until the product is finished.

Selected services may be included in the assembly stage. Product Testing to maintain quality standards may be assigned to the assembly team or the kitting team as appropriate to the product process.  Other service examples include RFID tagging, product or service activation options, personalization, multi-channel packaging and more. Build-to-Order customization is yet another product option.

The sub-assembly process is often completed by companies that can create the sub-assemblies at a rate of speed or reduced cost that makes it advantageous for an OEM to outsource the component.

This brings us to another term used with the makers of sub-assemblies; tier one and two suppliers. Tier one suppliers create sub-assembly components directly to OEMs. Tier two companies supply tier ones, etc.

Product assembly and sub-assembly manufacturers and service providers utilize a bill of materials (BOM) which describes the composition of the product, including raw materials, components, parts and assemblies, quantities of each, and how to procure each. So, the term BOM is one more to know, and one that is fundamental to an effective supply chain and manufacturing process. A bill of materials helps to ensure uniformity, minimize inventory inaccuracies and avoid production delays.

Kitting is different from assembly, in that the process is not done in an assembly line setting. Rather, kitting is the grouping and packaging of two or more separate SKUs into a single package with a single SKU. An example of kitting might be the creation of a subscription box collected to attract a certain audience such as coffee enthusiasts. The box might contain a flight of coffee roasts, a coffee grinder, a coffee maker, and a variety of cookies. Each item would ordinarily have its own SKU, but as a sampler, the box would have one separate SKU. And even though the box would contain multiple components, the components would not be assembled into one product – it would be a curated collection of products, offered as a single product.

What Are the Basic Kitting Steps?

1. Determine which items (SKUs) should be in the kit – this can be determined on several factors. Ana analysis of products that are most often ordered together may be a good indicator of items that would work well together as a kit. Another reason to add a product to a kit?  The product might be a slow moving inventory item. Aside from the use of a clearance sale, sometimes bundling the item with faster moving ones can help to free up warehouse space. A product introduction is the perfect opportunity to use kitting to build awareness and boost sales.
2. Assign the Kit Its Own Unique SKU Number – Once the individual items have been determined, a new individual SKU should be assigned.
3. Assemble the Kit Items – All items of the kit should be pre-assembled in large batches and should be placed near each other (and in sequence if necessary) rather than picking and packing as the product moves into the inventory. Note: it is never a good idea to assemble partial kits. When one or more of the kit items is no longer in the inventory, the complete kits should be packaged and brought into inventory under the new SKU, while the separate components should go back into inventory until all of the parts are available for kitting.

Kitting and assembly outsourcing is often a cost-saving option for merchants who sell:

• Electronics
• Supplements
• Cosmetics
• Subscription program boxes
• POP/POS display kits
• Product testing kits
• Small parts assembly
• Healthcare products or home testing kits

Kitting is a process of inventory management that allows companies to possibly increase revenues by creating kits of items used in a similar way. So instead of selling one product, such as a printer cartridge, a company might have a 3PL provider shrink-wrap three or more cartridges together and offer the new “product as one SKU at a special price. It’s kind of like a “value meal” for merchants; it can sell more product by bundling.

Regarding “bundling” – sometimes the terms kitting and bundling are used interchangeably, but actually bundling refers to any grouping of items, while kitting is used to indicate the grouping of related items that are often used together.

What are the Real Benefits of Kitting to a Merchant?

• Pre-assembled kits can reduce picking errors since pre-packaged kits are usually more accurate
• Kitting can lower labor costs by reducing the amount of time needed to pick the individual components
• Reducing the multiple packaging of individual units into one kit can help to save warehousing space
• Combining products can help to raise the AOV (Average Order Value) and increase customer satisfaction through special pricing
• Shipping costs are reduced; the cost to ship one package is less than the cost of shipping multiple items
• Kits often ship faster because the picking and packaging time is less 

Are There Benefits to Kitting for Manufacturers?

3PL logistics providers that work closely with their client’s supply chain can often help to reduce costs by kitting the components used in certain steps of the manufacturing process. This can be especially helpful when components or sub- assemblies are manufactured or warehoused in different locations or even different countries. It can reduce lead times and avoid possible assembly line interruptions.

Also, because kits are pre-assembled and often consist of just a few items, kitting in manufacturing can result in a higher quality product.

Packaging – in addition to assembly and kitting, 3PL logistics providers perform custom packaging services that help their customers save time and money during shipping. The packaging process not only deals with the product shipping container or outer box, but might also involve an inner box and the labeling or re-labeling, barcoding, RFID tagging, inspection or sorting of products. These steps in the order fulfillment process can be time consuming or require equipment or personnel that isn’t normally used in the manufacturing process, so outsourcing could even improve customer satisfaction by speeding up shipping time and lowering delivery costs.

Sometimes clients might require that packaging is POS (Point of Sale) ready, so that store clerks can quickly convert a box into a POS display container. The packaging specialists at some 3PL providers can help to create cost-effective and efficient packaging that will make merchants and their customers happy.

Certain omni channel logistics providers make green sustainability a core part of their supply chain strategy and can help businesses with their sustainability goals. These logistics companies help clients reduce GHG (Green House Gas) Emissions by implementing lean processes. The re-design of product packaging and shipping processes can result in significant cost savings as well as measurable sustainability goals.

In addition to providing green packaging solutions, a few 3PL companies also offer packaging design and matching of international shipping and packaging standards. This matching service can save on shipping costs as well as avoid shipment delays due to inappropriate packaging.

Re-packaging should also be mentioned, as occasionally inventory may be damaged or become obsolete. In those cases, a packaging provider can help with the re-packaging or re-labeling of products for sale. Overstocks of items might be blister packed together as a specially priced duo. The re-packaging of damaged items into sample sizes for GWP (Gift With Purchase) or BOGO (Buy One Get One) promotions could repurpose inventory that would otherwise be lost.

The proper re-packaging of items may also be required so that returned items can be returned to inventory and sold.  This is especially important when high price point products such as electronics or jewelry are returned for credit. The original packing materials may be damaged or missing altogether when returned, even though the product is in pristine condition. Instead of having to reduce the price of the item or sell the product to an off-price store for resale, re-packaging can ensure that the item is sold at full price.

What Other Omnichannel 3PL Services are Available from a Logistics Provider? 

Besides assembly, kitting and packaging, some service providers can also give eCommerce merchants and manufacturers a unified view of their supply chain, permitting them to closely monitor and control all aspects of the supply chain in real time. 3PL services include integrated reporting, dashboards and scorecards that allow inventory analysis. All of these services are essential to the introduction of new products, product end-of-life management and risk mitigation.

Some other services available are product and service activation, personalization, engraving, product testing and JIT (Just-in-Time) inventory management solutions.

Are You Looking for the Best Assembly, Kitting and Packaging Experts for Your Products?

ModusLink can help you to solve any individual assembly, kitting or packaging problems you may have, or streamline your entire supply chain process. Either way, you’ll see for yourself the compelling results that make our clients successful.

Contact ModusLink today for a private consultation with one of our knowledgeable agents.