Kitting Made Easier: How Microsoft Dynamics 365 F&SCM Helps Distributors Manage Bundled Products

Kitting—or bundled packaging—offers a way to sell multiple products as a single product rather than individually. While this can simplify the sales process and improve customer satisfaction, it also introduces significant challenges that can ripple through your supply chain. Distributors have learned to live with these challenges, but today, they have a solution that can give them the benefits of kitting without the risks. 

The Challenges of Kitting 

Distributors that use traditional kitting practices grapple with several issues impacting everything from front-end sales to back-end billing. 

Inventory Management Complexities 

Managing stock levels becomes a balancing act when you sell items individually and as part of kits. If distributors overproduce kits, they risk ending up with obsolete stock. If they underproduce, it can disrupt customer satisfaction.  

Pricing and Costing Confusion 

Selling kits at a packaged rate compared to individual parts can create pricing complexities. For instance, a kit of four items costing $20 might sell as a complete kit for $18. The challenge lies in determining appropriate pricing and ensuring profitability while simplifying the purchasing experience for customers. 

Order Customization Complications 

In some industries, kits are customized to meet specific requirements. For instance, a school supplies distributor may bundle lab equipment with textbook variations based on grade level or curriculum. Allowing kit customization can help your sales team close deals, but it also increases the complexity of order management and fulfillment. The more granular the customization, the harder it becomes to maintain efficiency. 

Preassembled Kits vs. Just-in-Time Kitting 

While preassembling kits can speed fulfillment, it creates storage challenges. Warehouse space is expensive; keeping large numbers of preassembled kits on hand can become unmanageable and unprofitable. Just-in-time kitting, where items are gathered and bundled only upon order fulfillment, adds operational complexity but can lower holding costs. 

Demand Forecasting Difficulties 

How do distributors know when to reserve inventory to a kit versus saving it for individual stock orders? 

Kitting vs. Individual Stock? 

While kitting provides convenience and value for customers looking for comprehensive solutions, selling individual stock allows businesses to cater to specific needs and maintain better inventory control. 

Some of the key differences between the two approaches include: 

• Customer experience: Kits simplify purchasing by bundling related items, enhancing convenience, and often providing a cost advantage. Individual stock sales allow customers more freedom to choose just what they need. 
• Inventory management: Managing kit inventory requires careful planning to ensure the availability of all the necessary components. Individual stock sales provide clearer visibility but may lack the bundled value your customers prefer. 
• Pricing strategies: Kits sometimes come with discounts, which can complicate pricing structures. Individual stock sales maintain straightforward pricing but may not offer the same real or perceived value. 
• Operational efficiency: Kitting can enhance order fulfillment efficiency by preassembling kits or implementing just-in-time kitting. Individual stock management is generally more straightforward but lacks the upsell opportunities that kitting provides. 

How to Effectively Manage Kitting 

What’s the answer? Until now, distributors have developed various workarounds to address the challenges of product bundling.  

Distributors implement hybrid inventory management systems to track items used in kits separately from those sold individually, trying to improve visibility and avoid stock discrepancies. Some companies opt for manual solutions, like spreadsheets or isolated databases. To counter pricing and costing complexities, distributors create custom pricing models for kits. 

However, these piecemeal solutions rarely seamlessly integrate with broader supply chain operations. Even just-in-time kitting—a strategy aimed at reducing storage costs by assembling kits only when orders are placed—can fall short without the right technological infrastructure. Ultimately, these workarounds may offer temporary relief but do little to resolve the root issues caused by outdated or incompatible systems. 

Solving Kitting Challenges with Dynamics 365 Finance & Supply Chain Management 

Microsoft Dynamics 365 Finance and Supply Chain Management (D365 FSCM) directly addresses the pain points associated with kitting: 

• Product bundling functionality: D365 FSCM enables businesses to create and manage kits with better pricing and inventory visibility. You can sell items individually or as part of a bundle, and the system tracks inventory at both the kit and individual-item levels. 
• Integrated costing and pricing models: D365 FSCM simplifies financial management by maintaining separate costing and pricing structures for kits versus individual components. 
• Streamlined order processing: The platform allows distributors to quickly add entire kits to sales orders by adding a single parent item, enhancing efficiency and reducing errors. 
• Inventory visibility: Enhanced tracking capabilities keep kit inventory visible and accessible for individual sales when necessary, which reduces the risk of overstocking or understocking. 

Ready to Improve Your Kitting Workflows? Sikich Can Help 

Implementing and optimizing Microsoft Dynamics 365 requires expert guidance. At Sikich, we specialize in: 

• Customized technology implementation: We can tailor Dynamics 365 FSCM to your kitting needs, ensuring operations run smoothly and efficiently without costly downtime. 
• Training and support: Our team provides hands-on training to your workforce and continuous support. 

Distributors can transform their kitting operations from a pain point to a streamlined, efficient process that boosts profitability and improves customer satisfaction. Reach out for a demo today!