Regardless of the nature of your business, the end goal is always getting products successfully into the hands of your customers. The two most common order fulfillment methods include in-house fulfillment and using a third-party logistics company, also known as 3PL.
3PL providers are usually highly experienced and have the right infrastructure, tools, and technologies to handle fulfillment — everything from receiving inventory to storage and control to picking and packing, as well as shipping, delivery, and returns.
As with any business decision, considering the pros and cons is necessary to determine which order fulfillment method is best for your operations. Both have their strengths and weaknesses, which you need to consider based on your current needs and future scaling plans.
Both in-house and 3PLs have various advantages and challenges, so it’s important your company chooses what’s best for it based on your needs not only now but also in the future.
What to consider when choosing between in-house and 3PL
Understanding your order fulfillment needs is crucial to determine how you can best streamline it. For instance, if your operation handles products in bulk, has a higher throughput, and a simple packaging process, then 3PL may be a cost-effective and viable option. However, if you have a lower throughput and a more intricate order fulfillment process, like complex packaging, then in-house fulfillment may be the way to go.
Here are some considerations when assessing your order fulfillment process:
- Your packaging procedure (and level of complexity)
- Whether products can be stored/prepared in bulk
- Freight and logistics costs
- The rate at which goods are produced, sold, and stored
- Customer satisfaction rate
Pros of 3PL fulfillment
3PL can help you cut down delivery times and reduce postage costs, as well as facilitate shipping at a larger scale, whether nationally or globally. 3PL facilities also typically have more than enough warehouse capacity to house fulfillment across various locations. This saves businesses a ton on holding and warehousing costs while maintaining the ability to scale as needed with regard to space, labor, and transportation.
Cons of 3PL fulfillment
While 3PLs may be a more affordable option, trade-offs include losing control and visibility over shipping functions. If you have a specific process for fulfillment, it might be challenging to hand it over to 3PL. However, this is something that can be remedied using 3PL warehouse management software that allows you to maintain control over your inventory and order fulfillment processes.
Pros of in-house fulfillment
When inventory is stored in-house, you can direct shipments as needed based on the order of priority, and you won’t need to worry about competing with other 3PL clients. Using your own warehouse also allows for easier product tracking, as all your inventory is in one place. You can also schedule customer pick-ups, which can be challenging to arrange via a 3PL.
Cons of in-house fulfillment
In-house fulfillment can limit your operations to the level of expertise you have, logistics-wise, which may not be as optimal if you’re scaling or expanding delivery areas. There’s also a great deal of labor cost, recruitment, discipline, and training that goes into managing your own warehouse.