3PL vs. In-House: What’s the Difference?

The end goal of any ecommerce business is to get products into the hands of your customers. So, how do companies do it?

Depending on the organization, the two most common methods of order fulfillment are either handled in-house or outsourced through a third-party logistics (3PL) partner. 3PL partners are experts with the right tools, technologies and infrastructure to handle the entire fulfilment process – receiving inventory, storage and control, picking, packing, shipping, delivery and returns. 

Both in-house and 3PLs have various advantages and challenges, so it’s important your company chooses what’s best for you based on your needs not only now, but also in the future.

How to Know Which is Right for You:

In-House Pros & Cons

Pros: Industry and business knowledge is unmatched You maintain complete control over the entire process Ability to offer made-to-order services to customers Internal issues can be resolved without involving a third party Last-minute changes are more flexible

Cons: Constantly must balance what your 'core competency' is Limited to your own logistics operations expertise ('only know what you know') Inability to shift labor to meet demand Labor recruitment, retention, and discipline Managing labor, space and equipment capacity Understanding full breadth of associated costs

 

Outsourcing to a 3PL Pros & Cons

 

Pros: Deep industry expertise and well-equipped to meet the varying demands of businesses Contracts include service level agreements Access to the latest warehouse software and technology  Ability to stay flexible with increasing order sizes as your business grows Effectively reduce overall costs and access to discounted shipping rates available to 3PLs Offer transactional pricing at the activity level Leverage their network of partners Requires you to document your requirements and understand all nuances of your business

Cons: Handing over control of fulfillment process Not having your inventory ‘in your backyard’, rather relying on visibility  Finding the right 3PL partner with experience handling your business profile Works with many other companies at the same time, so it’s important you build account management into your solution At face value, costs could be higher than your own costs (be sure you are looking at fully burdened costs) Can be difficult to contact external drivers and shippers

What is Needed for Internal Fulfilment?

If you plan to keep your order fulfilment in-house, here are just a few factors to consider:

1. Warehouse space: The warehouse space you choose should not only meet your current needs, but also have room for growth in terms of square footage, shelving units, warehouse racks, loading docks, etc. Beyond selecting the right space based on anticipated usage and growth, understand your warehouse space is also an investment. Be sure you’re ready to handle all associated costs, such as hiring, equipment and insurance prior to committing.
2. Well-trained staff: Hiring the right staff - both management and hourly roles - is imperative for success. Companies should offer robust training for employees, as well as providing employees with competitive salaries, benefits and room for growth.
3. Warehouse management software: Nowadays speed is expected in the supply chain game. Accuracy and agility within your supply chain, in many ways, have surpassed speed as the top priorities. It’s crucial for companies to maintain a high order accuracy rate to avoid negative reviews, reduce the number of returns and establish positive brand loyalty. By investing in the right fulfilment software, you’ll be able to automate day-to-day, time-consuming tasks like tracking products, advising on inventory replenishment, and reporting and analytics.

Benefits of Third-Party Logistics

For those ready to outsource fulfilment, there are many benefits to partnering with a 3PL including:

• Increased capacity: When working with a 3PL, you can scale your warehouse space, labor and inventory with ease and efficiently handle peak seasons or rapid business growth. As your business grows, instead of spending considerable time finding new warehouses or hiring new employees, a 3PL can help manage it all without the stress allowing you to focus on other tasks.
• Expertise: A 3PL provider has knowledge and experience in areas such as international compliance, shipping regulations, necessary documentation, transportation, and more that you may just not know. Engaging with experts can advance and guide the way your logistics operation is handled. In turn, this allows you to focus on other core aspects of your business.
• Access to the latest technology: 3PLs often have specialized technology that most in-house operations don’t have access to due to cost and technical resources. Innovative technology can help with inventory management and control, cybersecurity, shipment tracking and automation to streamline processes and create better warehouse efficiencies.

What to Look for in a 3PL Partner?

Now, let’s suppose you made the decision to outsource your fulfilment. How do you go about choosing the right partner? There is a lot to consider when making this decision. We recommend first thinking about these characteristics:

• Excellent customer service: An outside logistics provider is tasked with handling certain aspects of your business on your behalf, so it’s imperative that they represent your business – and your brand – positively to maintain a great reputation amongst your customers.
• Tracking for customers: Customers want to know where their orders are at all times and locating the exact whereabouts of their package shouldn’t be difficult. Most 3PL providers have tracking platforms that allow for visibility throughout every step of the supply chain – enhancing the overall customer experience.
• International warehousing: A trusted 3PL partner allows for the flexibility to expand into new markets without major financial risk. By gaining access to warehouses and distribution centers internationally, organizations can grow and expand their market share to stay competitive.

See What SEKO Can Do for You

After outlining the pros and cons of both in-house and 3PL order fulfilment, only you can make the best decision based on your business. SEKO has the global network or shared facilities, multi-channel distribution centers and innovative technologies that you need to turn your supply chain into a competitive advantage. 

Find out how SEKO can transform your business today by visiting https://www.sekologistics.com/uk/.