This article is relevant if you would like a better understanding of NetSuite kits so that you can make wise decisions on advantages and trade-offs.
Background
NetSuite kits are handy in that they allow you to create bundles that are put together in a warehouse operation. Instead of using assembly records that require Work Orders and related Assembly Build records, the kit simplifies the assembly operation as part of the warehouse pick, pack, and ship operation. While there is no specific status for kitting or bundling, NetSuite works with the underlying kit components in the item fulfillment record operation.
While kits are especially convenient for being able to sell a single concept and price it just like any other item, NetSuite has some challenges in reporting and usage. Thus, the purpose of this article is to help the reader become more centered about the use of NetSuite kits when considering the trade-offs of their use. Still applicable today, readers may also be interested in my 2015 article, Understand NetSuite Item Groups vs. Kits to Produce Superior Reporting.
NetSuite Kits in the Ordering Stage
When you sell a kit on a Sales Order, NetSuite acts like any other inventory item in the sense that it tries to tell you the number of available units and backorders by location. The reality though is that these values are calculated from the availability of the underlying component items respecting the quantity required in the kit. Thus, if you are faithfully maintaining a perpetual inventory system (meaning, you can trust the inventory ledger at all times — a topic I can discuss in another article about the challenges I see many clients face in developing good inventory management practices), then the quantities that NetSuite present to you are conceptually reliable.
I have included a snapshot of NetSuite’s inventory quantity definition here for convenience (click image). It’s important to contemplate these values as you consider kits because these numbers will change as underlying component items are used in other inventory operations. In my mind, here are the two important concepts to hold:
- Quantity Backordered: this quantity indicates that we don’t have enough of one or more components to fulfill. It won’t tell you which component without additional inquiry. Yet, it helps to see that we don’t have enough inventory to perform the warehouse kitting operation.
- Quantity Committed: the commitment quantity is working on your behalf to hold underlying kit member components so they will not be allocated to other orders or use. Commitments are the key to working a reliable perpetual inventory system. I recommend a deeper read in my 2017 article, Learn how to get Control over NetSuite Backorder Situations. If you can’t get a commitment, then you can’t fulfill it.
NetSuite Kits and Next Available Date
Subject to a future article, my firm has developed a mechanism to help understand when a kit would become available by inspecting all the underlying components targeting on-hand delivery expectations without needing to purchase additional NetSuite modules. This is not an easy process as it requires a recursive search technique to dig into the depths of underlying components which may include other assemblies, purchase orders, work orders, and transfer orders.
NetSuite Kits in the Fulfillment Stage
NetSuite keeps the item fulfillment record conceptually simple. You indicate how many kits you are going to ship. However, we know that the real work is in the underlying pick, pack and ship operation of the kit’s member components. NetSuite helps you see this information via Print Ticket (driven by the Sales order) report. The “Display Components On Transactions” option on the item definition is meant to drive the underlying print engine and not the actual record form.
We often are asked by our clients to get control over the display of the underlying information. The classic request is to see serial numbers or lot numbers in component items. We can easily do so because of our use of our Content Rendering Engine tool that allows us to produce linked saved searches and thus high-performance outputs.
NetSuite Kits and Drop Ships
Often times, I have heard organizations think about using Kits in dropship situations. This is not going to work because it requires the underlying ledger system to be in place. NetSuite Drop Ships effectively bypass the ledger until the vendor bill — a fundamental architecture approach that will not work with goods that are being driven with item fulfillment. While I have solved for what I call drop ship accruals here, the underlying items must be ordered through more conventional purchase orders to bring them to stock. If you are going to use some type of dropship scenario with a kit, then the Item Group offers a way to get an independent line that can have its own unique fulfillment approach. Of course, you can always revert to assemblies and work orders, as well.
Reporting Profitability with NetSuite Kits
The most significant trade-off with NetSuite Kit is the ability to measure item based profitability. I have written an article on how to approximate this. See How To: Generate NetSuite Item Weighted Price from Kits. I have had many organizations come to me after they have implemented NetSuite and wished they understood this challenge before they went with kits. I usually can come up with a way to work around it but it often sits in a larger profitability discussion.
Normally, cost (cost of goods sold) is associated at the item fulfillment level on inventory operations. When you search an item fulfillment that has kits, it reveals the full glory of the underlying structure that is driving the ledger. Readers may be interested in my article to explain why they are seeing three lines for every component item. To get through these searches demands some advanced saved search techniques.
Work with NetSuite Experts
My hope with this article is that you are now more centered when it comes to NetSuite kits. When new clients are seeking to get on to NetSuite, I share how important it is to model the business in the platform while understanding the underlying platform architecture. Without understanding the implication of upfront item type choices, it can be demanding and costly to later change out configuration.
If you found this article helpful, feel free to sign up to receive notification of new articles. If you have a demanding NetSuite kit challenge, let’s have a conversation.
Marty Zigman
Holding all three official certifications, Marty is regarded as the top NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 30 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.
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