In-House Vs. 3PL FulfillmentApril 14, 2021
Every ecommerce business that experiences substantial growth eventually needs to determine whether to continue fulfilling orders in-house or outsource their operations to a third-party logistics provider.
While there is no right answer, businesses looking to make a decision can look at several factors to help determine whether in-house or 3PL fulfillment is right for them. The areas they should examine include:
#1: Technological Capabilities
Having effective warehouse operations software is vital if a company wants to keep its fulfillment in-house. As a business expands, manual record-keeping may not be effective enough to handle the complexity of high-volume shipping.
A warehouse management system records the data businesses need, like inventory levels to determine process pain points and find solutions. If your warehouse lacks this kind of technology, you should consider a 3PL that does.
#2: Team Capabilities
Before choosing to go in-house, consider your employees’ skill levels. Be sure they have the specialized knowledge needed to develop efficient fulfillment processes and the ability to launch a warehouse expansion without losing focus on daily tasks. If your team is on the smaller side or lacks the necessary experience, a 3PL is likely the best place to go.
#3: Product Specifications
Another important consideration is your product specifications. If you make products that can be packaged inexpensively in large quantities, 3PLs are the more cost-effective option. If your product requires more complicated packaging, it might be worth keeping it in-house. Please remember that some 3PLs offer kitting and custom packaging services that can take the burden of more complex packaging off you.
Now that we’ve covered several factors to consider, here is an overview of both fulfillment methods’ advantages.
The Advantages of In-House Fulfillment
The biggest advantage of in-house fulfillment is that you and your team know your business inside and out. Having a deep understanding of your business gives you the unique ability to determine priorities.
However, remember to weigh the cost of acquiring new staff or the additional workload you’ll have to give to existing staff to go in-house. Your overhead plays a large role in determining whether to use a 3PL or not.
The Advantages of 3PL Fulfillment
The biggest advantage should you decide to choose a 3PL is the experienced, professional team you’ll acquire. With a 3PL you’ll have access to many logistics services like transportation, advanced warehousing, shipping, and more.
With a 3PL, you’ll also be able to out-source many stressful tasks related to fulfillment. This includes the difficulties in maintaining relationships with carriers, negotiating shipping rates, and inventory management among other tasks.
Know Your Capabilities
Before deciding to use in-house fulfillment, it’s important above all else to know what your capabilities are. With the right team, warehouse-setup, and technology, in-house fulfillment is a great option. However, for most businesses that don’t have the means to acquire these resources, choosing a 3PL is likely the best decision they could make.