Meet our Expert
Nick Coffin is a solutions engineer with a deep knowledge of how robotic automation works in production environments. Before joining OSARO, he was a product manager at READY Robotics. Prior to that, he was an applications engineer and manager for JR Automation, a major automation integrator, where he worked with a number of 3PLs and retail companies. Nick is a hands-on engineer who also has credentials as a welder and was a race team engineer for Kalitta Motorsports.
As Senior Director of Solutions at OSARO, Nick actively works with clients and integrators to identify issues and ascertain the right automation for each situation. He also manages OSARO’s solutions team. Nick has a BS in Applied Technology and an MS in Quality Management from Eastern Michigan University.
Learn more about why and how you should integrate kitting into your warehouse operation.
Subscription products are driving the need for kitting
By Barbara Buell | OSARO Ask an Expert series
Smarter piece-picking robots are moving in to handle a growing segment of e-commerce fulfillment: kitting. That growth is being driven by a popular merchandising concept – subscription products. Typically, the products are sold in recurring, curated kits of beauty, fashion, toys, pet, or food items. In 2021 a UBS investment research report estimated that the market for e-commerce goods sold by subscription would grow 25% annually to $687 billion in 2025.
Warehouses and fulfillment centers need to be ready to handle the coming avalanche of products that require kitting. Nick Coffin explains.
What is kitting?
Coffin: Kitting combines multiple products, or SKUs, into one larger order that is packaged in a single box with a new SKU and shipped to a customer. Distribution giants like Amazon streamline processing and lower costs by shipping multiple single product orders together to a customer. Customers appreciate less packaging.
Another approach to subscription sales is for retailers to sell a collection of different but related products – through a repeated buying scheme. For example, meal kit companies like Blue Apron create weekly kits delivering everything needed to make three different dinners three times a week. Subscription product kits are sold on a weekly or monthly basis and contents are varied. Warehouse workers often preassemble kits, so as soon as orders are received, the company can ship them immediately. Kitting eliminates the need to individually pick, pack and ship each item.
What are top kitting use cases?
Coffin: The top applications for kitting are beauty, food and beverages, pets, fashion, children’s products, and health and fitness. McKinsey & Company reports that 15% of online shoppers have signed up for one or more subscriptions to receive products on a repeated basis, usually through monthly packages.
Examples include Dollar Shave Club (razors), Blue Apron (meal kits), Home Chef (meal kits), Hello Fresh (meal kits), Birchbox (beauty), Sephora Play! (beauty), Glossybox (beauty), Grove Collaborative (natural household, personal care products), Just Fab (women’s boots), Loot Crate (monthly boxes of gaming related merchandise), Lovevery, (monthly age-appropriate toys for infants and up), and BarkBox, (monthly box of varied dog toys, treats, and chewy bones), to name a few.
There are three categories of subscription products that rely on kitting:
Companies such as Dollar Shave Club broke into the subscription market with a new take on an old product. Buying razors was a time-consuming process and Dollar Shave delivered blades straight to customer doorsteps. The company quickly captured a loyal customer base and was acquired by Unilever for $1 billion 2016. The subscription service allows a customer to order once, and they don’t have to worry about it again. Replenishment accounts for about 32% of the subscription market, according to McKinsey & Co.
Curated subscriptions, which account for 55% of subscription services, aim to delight customers with new or personalized experiences in apparel, beauty or food. Stitch Fix, Blue Apron, Lovevery and BarkBox fall into this category. These subscriptions give the retailer a chance to introduce new products or offer items that may be in surplus. But products are always changing. BarkBox, for example, has 10 changeovers of kit contents each month, and reports it has 2.3 million annual subscriptions. Others like Stitch Fix offer consumers a changing selection of stylish apparel.
Finally, access subscribers pay a monthly fee to get lower prices or members-only VIP perks. These models are most prevalent in apparel and food. Examples in this category include NatureBox (healthy office snacks and catering) and JustFab (women’s boots). Amazon Subscribe & Save offers discounts to customers who commit to repeat orders of products such as detergent, soap, or cat litter on a set schedule.
What are the benefits of kitting?
Coffin: Subscription products and kitting offer both retailers and fulfillment operators significant benefits. Overall, retailers may enjoy more sales — and fulfillment centers has more work.
Customer commitment to repeated purchases makes revenue and inventory forecasting easier.
Subscriptions allow retailers to offer more products by combining individual SKUs into larger orders that customers are urged to buy because of special deals or to solve a problem, such as choosing the right group of toys (they might not otherwise have identified) for a growing infant in the right month of life.
Cost savings to offset price competition
Relentless price competition – thanks to easy online comparison shopping – is a major issue for retailers and 3PLs. By combining SKUs into one box, packaging and shipping costs are reduced allowing retailers to stay competitive on price.
Better inventory control
Order predictability allows fulfillment centers to pre-assemble packages for seasonal surges and improve inventory control. Retailers can also reduce surplus inventory by offering certain products as add-on extras.
How to optimize your kitting process
Coffin: Kitting requires decision making and physical manipulation that until recently could only be done by humans. At the same time, there has been a persistent shortage of people to do the work which can be dreary and repetitive. A new generation of smarter robots, however, is able to meet the rising demand for kitting. These AI-driven robots are more intelligent and can handle the constantly changing SKUs of varied sizes and textures that are packed into subscription boxes.
The advantages of using robots in kitting include:
Machine learning-enabled robots, working with low-cost camera systems and sensors, learn and adapt to new SKUs in real time on the job. The size and shape of each product build in the robot’s memory which enables it to handle a large inventory of SKUs.
Advanced sensing and vision allow the robot to place objects in a specific location within a box. Precise placement enables faster processing without jumbled products obstructing box closure.
Robots offer flexibility. They can be temporarily idled or put on 24/7 production schedules to deal with temporary spikes in demand. They can be attached to a conveyor or moved to another part of the warehouse when future needs change.
4. Labor shortage relief
Short staffing and high turnover are common problems in the warehouse. Robots can gear up on short notice for long hours to handle dips and spikes in demand..
5. Lower costs
Efficient kitting with the deployment of smart robots may seem like a costly investment. However, Robot-as-a-Service contracts can cut costs by moving investment from a large capital expenditure to manageable operating budgets. Depending on the situation, smart piece-picking robot systems cost the same or less annually than a human worker when purchased through a RaaS contract.
Boost your fulfillment with a kitting solution
With the subscription box industry taking off, 3PLs, integrators, and retailers with fulfillment operations will need to install smart robots to handle the expected increasing demand for curated kits, especially in the face of a labor squeeze that is not going away. That means liaising with your floor operations managers about current layouts and challenges and then making a powerful business case for automation – especially kitting – to your C-suite about a RaaS-based budget for smart robots.
The experts at OSARO, a pioneer in smarter automation, are here to help you assess your needs.