Owning an eCommerce business heavily depends on an efficient order fulfilment process. Many business owners decide to use in house fulfilment in order to save money and hold a greater control over the process.
Others tend to use their budget wisely and opt for third party order fulfilment (3PL) so they can streamline their process.
In this article we will explore in house fulfilment vs 3PL order fulfilment to help you decide which is best for your business.
Benefits to managing your own fulfilment warehouse
Control
A deciding factor when choosing between in house fulfilment or 3PL services is the level of control. Operating your eCommerce order fulfilment yourself allows you to decide exactly how each product is picked, packed and shipped.
Control is important so you can ensure that products are stored securely and packaged correctly to avoid unhappy customers and returns.
In house fulfilment means you do not share a warehouse with other businesses like you would with 3PL fulfilment. Giving you the space and freedom to decide storage.
Knowing the ins and outs of a business is the key to success, this is something that only in house fulfilment can provide.
Handling your own fulfilment means you can keep track of each and every order, making communication with your customers much easier.
One of the biggest benefits is that any changes you wish to make can be done quicker as you do not need contact and engage in a back and forth discussion like you would with a 3PL service.
Customisation
Customisation is a very important part of eCommerce businesses. Due to the lack of a physical store, your customers can only get a feel of your brand from social media, your website and your packaging.
Offering custom packaging is something that increases customer satisfaction and it is extremely easy to do with in house fulfilment. 3PL fulfilment providers have to streamline their process and therefore many do not offer the option to use custom packaging.
Benefits of outsourcing fulfilment
Financial Implications
Choosing a 3PL service provider over in house fulfilment comes with a great deal of benefits. Often 3PL’s are associated with being over priced, while this is true for a handful of companies, it is the minority not the majority.
Third party order fulfilment companies are able to access cheaper shipping rates due the high amount of orders they process. Using a 3PL also saves you from:
- Renting a warehouse
- Purchasing forklifts (heavy equipment)
- Purchasing and setting up internet
- Purchasing office supplies
- Hiring and paying warehouse staff (includes sorting out insurance, dealing with payroll and individual staff issues/needs)
- Creating management software
- Obtaining the correct licences
- Training staff correctly for the use of all equipment
- Overall management of the warehouse, products, staff and customer queries
This list emulates just how much money and time can be saved when outsourcing to a 3PL company.
Expertise
3PL fulfilment companies handle thousands of orders each month, making them experts in the order fulfilment industry.
When discussing in house fulfilment vs 3PL an important difference is that 3PL fulfilment services have more years of experience.
This means their receiving, labelling, storing, picking, packing, shipping and return handling process is tried and true, it works!
If you outsource to a third party order fulfilment provider, they have an established process that they enter your business into. There’s no fussing, stress and failures like there would be with in house fulfilment.
Streamlined Process
With in house fulfilment vs 3PL services, it is known that 3PL fulfilment is streamlined.
This is due to the fact that third party order fulfilment services have bigger budgets and bigger teams. Things such as having access to the latest technology helps them advance their processes.
Other benefits include real-time inventory updates, automatic order tracking and faster shipping options such as same-day delivery.
How to determine which approach suits you
How many SKUs do you need storing and fulfilling
If your business features a high amount of SKUs, you may prefer to handle your orders yourself.
3PL fulfilment companies often charge you per SKU you store within their warehouse and even if it is not selling, they still require you to pay a storage fee. This will end up costing you a lot of money if your SKU rate is high.
What are your growth plans
Evaluating your monthly order volume can help you decide between in house fulfilment vs 3PL fulfilment.
If your business has a steady flow of orders that continue to grow, 3PL fulfilment providers can give you the space to scale. Whereas if you grow with in house fulfilment, you will constantly have to upgrade your storage space.
Similarly, choosing third party order fulfilment is a smart decision for smaller companies who don’t receive a high order volume. This is because it prevents you from paying high rent for storage facilities and eventually having to downsize.
With 3PL services you don’t have to worry about a sudden burst or decline in orders, it almost operates like a safety net.
What would the returns process look like
With 3PL fulfilment, returns are handled quickly and efficiently to provide the best service to your customers.
In house fulfilment is ideal for those who need to repair customer returns such as technology items or hand made products as this cannot be handled by 3PL.
What are the total fulfilment costs and pricing for both options
Pricing is available across multiple 3PL service providers websites. It is recommended to estimate the cost of rent, bills, packaging, shipping, management and wages to figure out the rough price of in house fulfilment.
You can then compare this to 3PL prices. Many will be surprised to discover that 3PL services are not as pricey as they assume.
Do you want to manage your own fulfilment
In a world where Amazon Prime exists, the consumer world is used to fast shipping. Operating in house results in a slower order fulfilment process due to the lack of space, staff and time. Outsourcing to a 3PL equals faster delivery.
Plus when you give up on managing your fulfilment, it opens up the door for you to develop new ideas and build your brand further.
Next Steps:
After weighing up the pros and cons of in house fulfilment and 3PL fulfilment, there is a clear winner. While it requires you to relinquish control of your fulfilment, in the long run it will help keep customers happy and scale your business. If you have any questions, don’t hesitate to contact us.