For e-commerce businesses, the holiday season comes with an influx of orders and revenue. Effectively managing inventory during these seasonal peaks and valleys is critical to streamlining fulfillment and maximizing profits. To effectively manage inventory, many businesses and fulfillment centers utilize de-kitting services. By breaking down bulk inventory into smaller, more manageable units, dekitting services enable businesses to optimize their seasonal inventory management.
Still trying to figure out what a de-kitting service is? Don’t worry! We’ve got you covered.
What is De-kitting?
Think of dekitting as the act of unbundling different items that were put together for sale. For example, if you sold a gift basket that contained multiple items, each with its own SKU, kitting would put them all together to create a brand new SKU number that accounts for all the items in the set. This helps retailers keep track of how much inventory is sold. De-kitting breaks down the set the fulfillment center created and then assigns a new SKU to each item so it can either be sold individually or as part of a new set later down the line.
Of course, gift sets and subscription boxes are just one example! When it comes to kitting, there’s no limit as to what this can include – and the same can be said for de-kitting. Items that commonly utilize de-kitting services include beauty products, office supplies, home decor, exercise equipment, and non-perishable food.
De-kitting services are even available for furniture and children’s toys that may require assembly. If items didn’t sell or more were produced than needed, these parts will be disassembled for future use.
3 Challenges of Seasonal Inventory Management for Fulfillment Centers
Here are the top challenges e-commerce brands and fulfillment centers face when it comes to seasonal inventory management.
Fluctuating Demand
Every year, there’s always that one hot item that’s in demand during the holiday season. On top of that, retailers are now having to meet the demand of microtrends. Microtrends are trends that experience a meteoric rise due to social media apps like TikTok.
To capitalize on the popularity of a microtrend, retailers may find themselves going all in only to have the demand for certain items fade after the rush of the holiday season, unable to recoup the money they initially invested. Though certain colors, shapes, and materials may be in high demand, microtrends tend to last only a couple of weeks, maybe a month, so the demand for popular items fluctuates.
Combatting microtrends is just one piece of the puzzle, as the demand for items just changes naturally. Regardless, retailers have to be on their toes for when the demand for an item or set fizzles, or, likewise, experiences a sudden influx of interest.
Overstock and Understock
If an item was put on the shelves because it was popular, but that item’s popularity faded quickly, what do you do with the overstock you have left? What if you kitted items, so now there isn’t enough inventory to meet customer demand? What if the limited-time event you had items packaged for – such as the Super Bowl – did not do as great as you thought, leaving you with deadstock?
These questions can be answered with de-kitting since it will break down bundled orders so that popular components can be sold individually (but more on that later).
Space Constraints
One of the biggest challenges fulfillment centers deal with when it comes to seasonal inventory is that it takes up a lot of room on shelves that could be given to other types of inventory, including those that regularly bring in a profit for the retailer using them.
Just like how time is money, storage will directly impact your bottom line. If you’re not using your storage effectively, you could be wasting money that could be better invested elsewhere.
3 Strategies for Using De-kitting to Manage Seasonal Inventory
The examples above highlight the common questions retailers and fulfillment centers have to ask themselves, and, fortunately, they’re all questions de-kitting can answer. Here’s how de-kitting can be used to manage seasonal inventory.
Maximize Space in the Warehouse
Warehouses provide an excellent solution to business owners who are looking for more space. However, as any business owner knows, space can get lost quickly the more inventory you bring in. This is especially true during the holiday season, as retailers tend to place big orders with fulfillment centers to meet the demand.
De-kitting is one effective way of managing your inventory once the holiday season is over and you’re left with extra sets and boxes. As mentioned above, de-kitting breaks down items into individual components that can be repackaged or sold individually. If the kitted item you have is large and bulky, breaking it down automatically leaves more room on your shelves.
Plus, once the items are de-kitted, it’ll be easier to keep track of your inventory. Warehouse management systems like barcode scanners will make it easy to quickly track their location and current stock level so you know how to proceed moving forward.
Managing Overstock and Understock
If you own a business, it’s going to be impossible not to have overstock, but you’re going to want to reduce it as much as you can.
Overstock can lead to wasted money and lost resources, whereas understock (as mentioned above) can lead to the inability to meet customer demand. For retailers managing seasonal inventory, having both overstock and understock is possible, though not having enough in-demand inventory tends to be the worst-case scenario between the two. After all, if you don’t have the products your customers are looking for this season, it would stand to reason that they won’t think you’ll have it the following.
To combat overstock and this kind of negative reputation, retailers can instead turn to de-kitting at multiple points throughout the holiday season. For example, at the start of the holiday season, retailers can keep track of which SKU numbers are selling to see if they notice any trends. Then, they can turn to their fulfillment centers to de-kit items for individual sale, meeting an appropriate demand. Likewise, at the tail-end of the holiday season, when the shopping rush is over, they can keep track of the inventory that sold well while kitted or re-strategize by combining items that didn’t sell individually but may fare better when bundled together at a different rate.
Of course, the holiday season is just one example. This strategy can be used for all types of seasonal inventory, including both summer and winter, other holidays like Fourth of July, Halloween, and New Year’s Day, as well as annual events like the Back-to-School season. Though the holiday season may be the biggest time of year for retailers, managing seasonal inventory is a year-long task that de-kitting can assist with by breaking down bulk items and redistributing inventory.
Preparing for Upcoming Promotions and Gift Sets
As just mentioned, de-kitting allows retailers to strategize for the next seasonal promotion by analyzing what sold, what didn’t, what is likely to be in demand, and what should be repackaged.
The goal of promotions and gift sets is to maximize profits on items while also letting the customer enjoy a good deal. Take perfume and body lotion kits, for example. For the cost of an average perfume, customers can buy a gift set for either the same price or less that contains more items. These savings help sell more products, especially if they’re designed to meet the demands of the holiday season.
Breaking down items for future marketing plans takes time, and as mentioned before, time is money. So, hiring a professional de-kitting service to handle this inventory for you is the best way to meet customer demands, get prepared for the holiday rush and seasonal promotion, and keep your bottom line.
Turn to Sherpack For All Your De-Kitting and Fulfillment Center Needs
Located in the Midwest, we know what it means to work hard. Our fulfillment center has worked with a wide range of industries to provide quality de-kitting services. If you’re ready to get started, we encourage you to request a quote or call us at 810-213-4647 to speak with a member of our team.
We also routinely run new client specials, and we’re happy to help you take advantage of them to minimize your costs even more! When you work with Sherpack, you’ll never worry about order fulfillment again.
