Meta: Need a 3PL provider? Explore the pros and cons of in-house fulfillment and 3PL warehouses to determine which option is best for your eCommerce logistics.
After a few years of running an eCommerce business, you’re faced with a good problem…
You’ve done everything correctly, and your online business is growing. Business goals are being surpassed, especially as the global ecommerce market is forecasted to reach a value of $58.74 trillion by 2028.
It’s all good, except you’re bending over backwards just to meet the demand.
Should you find a 3PL or third-party logistics provider to handle order fulfillment? Today, we’re going to help you know when to outsource your logistics.
Generally, there are two options. First, you can use in-house fulfillment; the second option is working with 3PL companies. You need to know which route is best for your eCommerce company so your operations support and grow alongside your sales.
What is In-house Fulfillment?
In-house fulfillment, or a private warehouse, is when your business is responsible for handling the entire order fulfillment process. This involves hiring the necessary staff, managing inventory, and shipping customer orders from your own warehouse.
Pros of Inhouse Fulfillment
- Lower cost: You may potentially see cost savings, but only if your volumes are low. If your volumes are on the high end, it becomes more expensive to fulfill orders in-house.
- Streamlined Operations: You can improve operations, like turnaround times or lead times, without involving outside partners. No need to worry about 3PL warehouses failing to meet your standards.
- Flexibility: Since you control your fulfillment process, you can change things according to your needs.
Cons of Inhouse Fulfillment
- Higher Costs: You must constantly invest in infrastructure, from larger warehouses to specialized equipment. You must also allot resources for daily operations, which will build up.
- Lack of Focus: Logistics operations distract from core business aspects, like sales, marketing, and customer service.
- Less Flexibility: If you need to scale to meet a surge in demand, it’s much harder when you’re limited by a single warehouse.
Most small businesses start with in-house fulfillment before transitioning to a 3PL warehouse. Then, their operational needs become too much for them to handle internally. And they have to make a decision.
For example, housing inventory yourself isn’t a problem if you ship less than 500 orders monthly. But if you’re getting 5,000 orders every month, inventory management inevitably becomes a major responsibility. Along with that comes a lot of expensive infrastructure to meet your new operational needs.
What is a 3PL Warehouse?
A 3PL warehouse is a physical location where a fulfillment company handles the supply chain and logistics operations of other companies. Supply chain management can get complex. So, choosing a 3PL company to do it simplifies everything—especially when you’re competing against eCommerce businesses with omnichannel fulfillment networks.
Pros of 3PL Warehouse
- Lower cost: You’ll save money in the long run, as 3PL providers can scale efficiently.
- Expertise: You’ll have experts handling your merchandise—no need to hire and train staff.
- More Flexibility: You can get additional services like having the warehouse handle returns.
- International markets: You can potentially explore and test markets abroad.
Cons of 3PL Warehouse
- Less Control: You’ll only monitor your fulfillment process from a distance.
- Risk of Outsourcing: Not all 3PL providers give quality services. You must find one you can trust.
- Expensive Upfront Costs: You have to invest funds to start working with a quality 3PL provider.
Using a 3PL warehouse is an expenditure, but it’s one that makes sense for growing businesses looking to reallocate resources. If you work with a quality 3PL provider that delivers on its promises, using 3PL warehouses frees you from burdensome responsibilities.
Find the Perfect Logistics Fit
Whether you opt for in-house fulfillment or choose to partner with a 3PL provider, remember that both options have their advantages and drawbacks. Making an informed decision will help ensure that your eCommerce logistics align with your business growth. Then, you’ll have a solid foundation for success in your emerging eCommerce business.
Looking for a reliable 3PL company to work with?
At San Legend, we help eCommerce businesses scale their brands and break into new markets by providing customized, agile, and forward-thinking third-party logistics solutions. Reach out today to see how we can help.