Kitting services set record growth during the pandemic. We are expecting continued if not increasing growth in 2023 over 2022. This is good news for the fulfillment centers as well as their clients whose customers rely on shipments to receive their orders. For all the consumers with busy schedules, those who are housebound, or who live some distance from shopping areas, kitting, shipping, and delivery are critical and will continue to expand in 2023. Likewise, B2B businesses have found competitive advantage and cost savings by outsourcing their kitting needs to third-party fulfillment centers. This will also increase in volume in 2023.
Shipping costs are expected to rise 6.9% in 2023 as released by UPS and FedEx. According to Sifted, “There’s no sugarcoating the news. Shipping rates are rising and maintaining profitability in today’s current shipping environment is a concern for almost every business. To ensure continued profitability, visibility into your shipping operations is critical. Closely evaluate your fulfillment center’s shipping operations to understand what you can afford to offer customers – and what costs your customers will have to absorb.”
Sifted continues, “Take a look at efficiencies across every aspect of your shipping, including:
- Packaging: Know which packages will be hit with additional handling fees and take all possible steps to reduce package size and weight to meet DIM requirements and avoid additional fees.
- Network Distribution: Gain visibility into what zones you’re shipping to most frequently to see where you can reduce zone-based shipping costs by locating more products closer to more customers.
- Free and Fast Shipping: Calculate the total landed cost of shipping a product to find when you can offer free or fast shipping and when customers will need to pay more for these services.
- Carrier Mix: Diversify your carrier mix to help bring down costs. FedEx and UPS are both looking for quality over quantity in their business. If you’re unhappy with your current carrier contract because of performance or fees, you may be unable to switch between the two carriers. However, more regional carrier choices are available than ever before, allowing you to diversify your carrier mix to create a multi-carrier shipping network that will lower shipping costs and improve performance.”
Consult with a kitting and fulfillment center to optimize your kitting and shipping concerns. They can assist you by offering suggestions to meet your needs.
Record growth in eCommerce shipping has been occurring for some time. However, residential deliveries remain the most costly and inefficient type of delivery for both carriers. It is yet to be determined if suppliers will assume the cost increases for kitting and shipping or if they will pass these cost increases on to the buyers.
What is causing these increases? Sifted identifies that “Fuel surcharges alone have increased dramatically. And for a decade now, fuel prices have held steady at 7% to 8%, but they’ve risen sharply in the last year. As of August 2022, they were hovering near 20%. Fuel costs have become so volatile, carriers are adjusting the rate on a week-to-week basis. Additionally, FedEx continues to face labor shortages that require increased wages to mitigate. There is also a UPS contract negotiation in 2023 with the union, and it’s nearly certain that higher labor costs will be part of the renegotiation. Inflation also continues to impact everyone’s bottom line – including carriers.”
Will this impact kitting and shipping? Of course. Will there be significant declines in business? Of course not! Buyers and sellers have become so comfortable with online ordering, kitting, and delivery, whether to an office or to homes that we will see continued growth in 2023. The growth will not be as significant as in 2023, but it will be an increase over 2022. As per Stratview Research, the global core material kitting market would reach an estimated value of US$ 550.1 million in 2024. North America is expected to remain the largest market for kitting during the forecast period.
So, what can we expect to see in 2023? Rich Berg, senior vice president of owner success for AIA Corporation states, “We will see greater personalization and customization (in 2023). We will also see the emergence of kitting specialists. Be creative and envision the customer experience. Strive to create the ‘Wow’ factor. A custom box can be a blank canvas for creativity. Utilize suppliers’ full-color capabilities with enticing graphics and messaging. It’s also important to invest in your relationships with (kitting) suppliers and fulfillment partners. This will go a long way in solving any logistical challenges.”
Lance Stier, CEO of NC Custom provides his predictions for the kitting market, “It will become more sophisticated. Everything from packaging design to the products will have an increasingly elevated look and feel. Expect more themed gifts/packages. It will be very much about creating an experience for the recipient and evoking senses. Plan ahead and work with an (outsourced kitting) supplier that has the capabilities to execute kitting campaigns efficiently and provide the best customer service along the way.”
In summary, kitting services set record growth during the pandemic but that will not continue at such an extreme rate into 2023. This is good news for the fulfillment centers as well as their clients’ customers who rely on shipments to receive their orders. With such busy schedules on behalf of consumers, those who are housebound, and those who live some distance from shopping areas, kitting, shipping, and delivery are critical and will continue to expand in 2023. Likewise, B2B businesses have found competitive advantage and cost savings by outsourcing their kitting needs to third-party fulfillment centers. Expect that this will also continue to increase in volume in 2023.
To learn more about Think Patented kitting, packaging, and fulfillment services, contact your Think Patented account executive or call 937.353.2299.