Kitting simplifies ordering and receiving, reduces freight costs, speeds picking, and optimizes assembly. For example, let’s say an original equipment manufacturer (OEM) needs cabin insulation for specialty vehicles. The OEM can order 15 different parts and receive as many as 15 different shipments. That’s a lot of shipments to pay for and plenty of paperwork to process.
Inventory and assembly can increase waste, too. If each of the 15 parts arrives separately, stockers could make as many as 15 different trips from the receiving area to the storage racks. Then, when it’s time for assembly, pickers need to pull the parts and move them to production. There’s wasted time spent wandering the warehouse. Then, if the wrong part gets picked, it’s back to the racks.
These aren’t the only risks or costs. If 15 different parts come from 15 different suppliers, the failure of any one supplier could leave you with quantities of 14 parts that won’t complete an assembly. For Procurement, there are 15 different SKUs to order and 15 different vendors to track. For Accounting, there are as many as 15 different invoices. Working with a single vendor, SKU, shipment, and invoice is easier.
To reduce costs and increase efficiency, the OEM begins ordering kits that contain all of the cabin components for a specialty vehicle. Each kit arrives in its own box, but there are fewer shipments since the boxes are shrink-wrapped together and arrive on a freight pallet. Instead of stocking 15 separate parts, inventory personnel just put individual boxes on a shelf. Then, when it’s time for assembly, there’s no hunting for the right parts to pick.