Value-added services means exactly what the name implies. It is the process of doing something to a product that results in greater value.

Common services include ticketing, kitting, gift wrapping, labeling, store-ready packaging and personalization.

Memec offers its customers value-added services on the electronic components it sells. Its distribution center in Reno, Nev. provides programming of chips, etchings and tape and reel services. They also perform specific bar coding of products to meet customer specifications and packaging requirements, such as placing a specific number of chips in a tube or tray configuration.

"Technology changes so fast and customers cannot invest in this kind of programming equipment themselves, so instead of them having to do the programming when they get the product, we do it upfront before it leaves," says Mike Kenny, Memec's director of operations in Reno.

For some DCs, these services are difficult to perform and are outsourced instead. In fact, some of the programming Memec offers is outsourced to another provider.

"We identified our core competency and felt a partner was better to handle much of the programming," explains Kenney. "They ship directly to our customers from there."

Givens, Inc. is a third party logistics provider (3PL) in Chesapeake, Va. that currently performs a number of value-added services for about half of its dry goods, electronics and automotive clients.

"We perform kitting, which is putting different parts together so they can be sold as ready-to-install kits," explains Lee Watkins, general manager. "Some of the mass merchandisers also require that product arrive in a certain form, so we package it as a value-added service to make sure it goes out properly. In addition, we do testing on some of the electronics that we distribute to make sure they meet the standards for our customers."

Watkins says that a benefit of using a 3PL for value-added services is that they are designed for flexibility. A client only pays for the work performed, which can be much less than developing a full time service area internally.