Discover the pros and cons of 3PL vs. in-house fulfillment. Learn how to choose the best option for your e-commerce business based on factors like cost, scalability, and expertise.
3PL vs. In-House Fulfillment: Which is Right for Your Business?
It doesn’t matter how careful you are with managing your logistics, if there’s a minor slip-up or an inefficiency, you are at risk of hurting your bottom line as well as overall customer satisfaction and loyalty. To avoid this, ensuring your logistics management is optimally efficient should be at the top of your list of priorities.
There are two main options to help you get it right: managing your own fulfillment (in-house) or outsourcing to a third-party logistics (3PL) provider. But here’s the catch—what works for one business might not work for yours. Factors like your product type, growth rate, stage of business, and customer demands all play a role in determining the best fit.
This brings us to the big question: Which is the better fit for your business – 3PL services or in-house fulfillment? Continue reading to find out which logistic management option is right for your business.
What is 3PL?
Third-party logistics (3PL) is a widely recognized term in the e-commerce industry, known for its ability to simplify supply chain operations by serving as an extension of your team. E-commerce experts often regard 3PL as a valuable resource for businesses, as it alleviates the complexities of logistics management, allowing business owners to focus on growth rather than the day-to-day challenges of their supply chain.
A 3PL handles your warehousing, inventory management, logistics details (picking, packing, shipping, and tracking), and other fulfillment operations. The end goal is for them to act as your weightlifters, while you focus on core aspects of your business.
Key Advantages of 3PLs
Cost Efficiency
Businesses are very much concerned about cutting down on their spending and saving money as much as possible, and this is one of the areas 3PL offers an edge. Saving costs on logistics forms part of their forte. They understand how costs can quickly accumulate while trying to sort out major business expenses like logistics operations especially for small and medium-sized businesses.
When you outsource to a 3PL provider, you are placing the heavy burden of expensive operational costs on them. 3PL fulfillment providers are happy to take on the larger part (80% to 90%) of the burden, thanks to their effective warehousing strategies, leaving you with enough funds to invest in other aspects of your business.
Flexibility
Flexibility is an essential e-commerce feature that 3PL offers in abundance. With 3PL, you gain access to global networks and specialized services like same-day or next-day delivery.
During peak seasons like promotion days, discounts (Black Friday), and holidays, 3PL can efficiently keep up with your order and delivery requests. This can boost your customers’ trust in you because they’ll see you as accommodating and willing to put their needs first.
3PL also offers the flexibility to handle sudden changes without disrupting your operations. They can easily scale back during quieter months, saving you money and resources.
Scalability
The ability to scale effortlessly is one of the greatest advantages of a 3PL. They align seamlessly with your company’s growth and demands, which is an indispensable asset to have in the ever-demanding and increasing e-commerce market.
With access to a network of warehouses, advanced fulfillment technology, and an established carrier system, they can handle increased demand without requiring you to invest in additional infrastructure or hire more staff.
So, whether you are in your spike-in-orders season, launching a new product, expanding into new markets, or experiencing fluctuating orders or unexpected growth, a 3PL can seamlessly adapt and adjust their fulfillment capacity to each flow because they are built for scalability.
What is In-House Fulfillment?
In-house fulfillment means internally managing the entirety of your logistics processes. No third-party involvement – just you. This includes your warehousing and storage, inventory management, distribution processes (packing, picking, shipping, and tracking), and other operational duties.
Advantages of In-house Fulfillment
Total Control
For business owners who prefer overseeing every minuscule detail, this option offers unmatched hands-on management. You are the boss in charge of every aspect of your supply chain. This level of control allows you to tailor every detail to meet your brand standards, craft how you want your customer experiences to be, and ensure that nothing gets lost in translation between your vision and execution.
Personalization
When you’re in control, you can personalize your logistics process. In-house fulfillment is best suited for businesses that prioritize personalization over speed or scalability. If your brand thrives on offering unique, customized experiences (handwritten letters, eco-friendly packaging, or personalized delivery methods), then some internal logistics management may give you the flexibility to implement those choices without compromise.
Cost Comparison: 3PL vs. In-House Logistics
Before saying yes to a product or service offering, it is a well-known fact to compare costs. Why? Cost is the top determining factor when choosing a product or service, and for e-commerce logistics management, it’s highly essential. Let’s compare and break down the cost of a 3PL vs in-house:
Typical 3PL Services
Listed below are the kind of table stakes services to consider when considering a 3PL. These services are often offered with fixed costs and long-term contracts, whether you use them or not. Note that within a shared services model like Standvast, clients pay only for the space and services they use, which often vary from season to season.
Storage Fees
While 3PLs provide the warehouse where your products are stored, most charge a fixed rate for space whereas with a few, you only have to pay for the space your product occupies. Shipping Rates
This is more often than not offered at a discounted rate due to the extensive volume of shipping contracts with carriers or distributors.
Service Fees
Charged for picking, packing, and other operational tasks.
Setup or Account Management Fees
These are one-time or recurring fees charged for onboarding your business into the 3PL’s system or for ongoing account support.
Technology Fees
This fee is either added to their service package or listed as an additional cost (never optional). This gives you access to their advanced logistics software.
Standvast’s Memphis Fulfillment Center expedites delivery of forward-deployed inventory for the Southeast.
In-House Logistics
Warehousing Fees
This includes rent or purchase, maintenance, and utilities, which can be expensive, especially in high-demand locations.
Technology Investments
Efficient logistics requires systems like warehouse management software (WMS) and transportation management software (TMS). These tools come with high initial setup costs and ongoing maintenance.
Operational Overheads
Utilities, security, insurance, and other overhead costs for maintaining a facility also add up.
Short-Term vs. Long-Term Cost Implications
Short-Term:
With the handling of warehousing, staffing, and other logistical operations by 3PL providers, you get to save more money, as you only pay for the services you use. On the other hand, in-house logistics requires a significant amount of space, staffing, and technology, which, if it’s for a short period, is highly expensive.
Long-Term
The long-term costs of 3PL services can rise due to an increase in volume, storage, and services, and these costs are harder to predict. On the other hand, if your in-house facility is set up, ongoing costs become more stable and predictable, making cost budgeting easier.
Optimize your logistics without breaking the bank. Contact Standvast to explore affordable 3PL solutions today!
Scalability and Flexibility: 3PL vs. In-House Logistics
When it comes to scalability and flexibility, in-house logistics and third-party logistics offer two distinct approaches, each with its strengths and limitations.
3PL With Standvast
One of the most significant advantages with Standvast is the ability to scale up (or down) quickly and efficiently. No matter the season, good days, or better-days-ahead periods, Standvast fulfillment can seamlessly adjust to meet your needs. With access to networks in multiple regions, scaling into new markets without setting up your own fulfillment facility is easy and hassle-free.
Their ability to be flexible, no matter the time or situation, is unmatched. They are quick to adapt to change, such as new shipping regulations, order volume, economic crises, emerging technologies, and market trends, often without long-term commitments or overhead costs.
In-House Fulfillment
Scalability with in-house fulfillment is possible but is slower and requires a lot of resources. Businesses need to invest in larger warehouses, additional staff, and advanced technology. This requires significant capital and planning. The growth process or expansion is gradual, taking up to months or years to efficiently scale. During peak seasons or rapid growth, without proper management, operational inefficiencies or delays may occur. Flexibility and adaptation to changes can be slow and costly.
Which Businesses Benefit from 3PL?
A common misconception is that 3PL services are only accessible to large organizations with substantial revenue. In reality, 3PL solutions are designed to cater to businesses of all sizes and industries, providing scalable logistics support tailored to diverse needs.
Here are some industries that benefit from 3PL services
- Manufacturing companies
- Retail businesses
- Medical/Health sector
- Hospitality industry
- Automotive manufacturers
- Mattress manufacturers
- Sporting goods
- Home Improvement
- Construction
Whether your business is a startup, small-to-medium enterprise, seasonal operation, or large corporation, 3PL services can provide valuable benefits tailored to your needs.
Thinking of scaling your business? Learn more about our 3PL fulfillment services.
Which Businesses Benefit from In-House Fulfillment?
Some businesses may benefit more from operating in-house fulfillment than outsourcing to 3PL providers. Some of these businesses include:
- Startups testing new markets
- Businesses with proprietary or sensitive products
- Local and niche businesses
- Companies focused on brand experience
- Businesses with highly customized products
- Luxury and high-end brands
While the benefits of this option may be expensive, requiring maximum effort and resources, it empowers businesses to see their vision through and delivers a memorable customer experience, on their terms.
Final Thought: 3PL or In-House—Which is Right for You?
Deciding between 3PL and in-house logistics is a critical choice that depends on your unique business needs. If you’re looking to scale quickly, manage costs efficiently, and adapt to the ever-changing demands of e-commerce, a 3PL partner is likely the optimal solution. However, if maintaining full control and adhering strictly to your own processes is a priority, in-house fulfillment might be a better fit. Ultimately, the choice comes down to your business goals and priorities. Take the time to carefully evaluate your logistics needs before making a decision
Still not sure? Contact us for advice on selecting the best logistics solution for your business.
