Self-fulfillment or Third-Party Logistics: What Are The Pros & Cons

For many eCommerce businesses, order fulfillment may not sound like an exciting part of the sales process. While it is one of the most important factors of keeping customers loyal and expanding your organization to achieve its goals, self-fulfilling orders can take up a significant amount of time for personnel in small to medium-sized eCommerce businesses.

The good news is that you don’t have to do it all by yourself. This is the point at which important decisions are made. You can keep the order fulfillment process in-house or outsource it to a third-party logistics provider (3PL). In this blog, we will compare the two fulfillment options and provide some insights for the pros and cons between the two. Keep reading to discover more about the benefits and drawbacks of self-fulfillment versus third-party logistics and which works best for your company.

Self-fulfillment

The Pros of Self-fulfillment

• You will have complete control over your branding, inventory, and orders.
• It works well if your key consumers are nearby, the logistics are manageable, and the shipping costs are low, particularly when starting out or with low order numbers.
• It is simple to get started if you have the necessary space and equipment. An you have the personnel who can responsible for print address labels, do pick and pack, and stand in line at a post office. 
• You can store and ship perishable or dangerous but still shippable commodities, such as flowers or lithium batteries, while not all 3PLs providers accommodate this.
• Because this option includes more consumer touch, you can get closer to your customers. 
• Branding and packaging can also be easily customized.

The Cons of Self-fulfillment

• This strategy necessitates the use of personnel to oversee the customer service and fulfillment procedures. 
• Self-fulfillment may divert your attention away from selling and building your brand and your business.
• To store inventory, you must have enough warehouse space.
• Working with a 3PL might make it easier to assure rapid international shipping.
• Human errors can occur as orders grow in size and complexity, especially if you do not use inventory management software.

Expert Advice For Self-fulfillment

When you pursue self-fulfillment, you will have the full control. Self-fulfillment can save money for small businesses and startup, but it may cost more in the long run. With self-fulfillment, you can maintain track of order processing and shipment, as well as labeling, packaging, and branding procedures. Overall, self-fulfillment can save small businesses money and provide them control over the order fulfillment process, but it is time-consuming. Because your company is in charge of the entire process, from packaging to delivery, for all items. This could possibly increase your expenditures if not managed properly, as more resources are necessary as your organization grows. For example, you’ll need to pay for a warehouse or extra storage space, hire and manage new personnel, and invest in packing equipment as well as software or systems to keep everything organized.

Outsourcing

Pros Of Using A Third-Party Logistics (3PL)

• There are no prerequisites in terms of resources or abilities.
• Finding the correct 3PL can save you time and money, for example, through economies of scale with bulk shipping costs.
• It works well for both local and worldwide distribution, and several storage locations allow for faster delivery.
• It is suitable for a rapidly expanding company with high order volumes.
• You can still choose to have control over customer service and refunds.

Cons Of Using A Third-Party Logistics (3PL)

• You have less influence over your inventory and consumer experience.
• It can take time to find the proper provider on whom you can rely.
• 3PLs can be costly, especially if you only have a small number of orders.
• Perishable, dangerous, or combustible commodities are often not permitted by 3PL suppliers.

Expert Advice For Outsourcing

One of the obvious benefits of third-party logistics is that it saves time. You’ll have more time to focus on product development, sales, website development, and marketing. Organizations have more flexibility and scalability when it comes to leveraging supply and distribution capabilities as needed. Because a third-party logistics business specializes in supply chain management. When sales are low, there are no redundant investments or underutilized resources, and businesses can grow up when demand jumps. On the other side, in today’s complex global market, it’s difficult to anticipate and accommodate internal expertise across all capacities and areas. A third-party logistics (3PL) service provider can assist with transportation paperwork, import and export, international compliance, and international compliance and economic standards. Businesses wishing to expand into new segments or locations can use their partner’s logistical skills and know-how to minimize costly delays, enhance cycle times, and make the transition to a new market easier. As a result, you may have to make concessions in terms of complete control and packing quality. If you do your homework and select a reputable logistics partner, this should not be a problem. 

Are you looking for a reliable third-party logistics partner in Canada? SPExpress assists businesses in streamlining their shipping procedures by providing necessary infrastructure and skills. Click here to discover more about our services.

Other Concerns

When is it appropriate to use third-party logistics?

Partnering with third-party logistics is appropriate for eCommerce businesses that sell their own unique products and experience fast sales growth. If you don’t have enough employees or resources to handle the increased demand, you’ll have to make a decision.

As long as your items aren’t customized for each consumer, it’s a good idea to outsource your logistics to a third-party logistics partner.

Does your business have an inventory management in place?

That is most likely the time to explore an inventory management system that tracks inventory movement in real time across all of your sales, distribution, and fulfillment channels whether you choose self-fulfillment or working with a 3PL. 

Having an inventory management system reduces your chances of overselling or understocking dramatically. Inventory management is all about having the correct amount of inventory in the right place, at the right price, at the right time, and through the right sales, distribution, and fulfillment channels. Determine the “correct amount” of inventory to stock. To avoid ordering too little goods and losing consumers, you need inventory tracking at your fingertips. Similarly, if you order too much, you will be stuck with excess goods that will become obsolete if not sold at a discount.

Determine which inventory management tasks can be automated. You’ll need to set the proper price, know when to reorder new inventory, and have the right technology for tracking your inventory amount. Many new businesses manage their inventory using an Excel spreadsheet. Using spreadsheets for inventory management becomes cumbersome and time-consuming as your firm grows and gets more sophisticated.

Does your business need multiple fulfillment centers?

Determine the best location to sell and distribute your inventory is essential.

Do you sell through a variety of channels? Do you need fast delivery? If you do, ensuring you have the proper amount of products in the right location is most likely an ongoing struggle. The advantage of selling things online is that you can fulfill all requests from the same stock pool. As a result, you don’t have to worry about how many things you want to allocate to each sales channel. However, this might bring with it a whole new set of issues. For example, if your online inventory indicates five products available, you want all five to be ready for sale in your warehouse rather than sitting idle in your consignment store at the other end of the country. Working with a 3PL allow you fulfill orders from multiple locations while knowing where your goods are stored with a proper inventory management system in place.

What are the important factors to consider when choosing between self-fulfillment and a 3PL?

When comparing self-fulfillment to third-party logistics, cost, quality, and control must all be considered.

Ask yourself these questions to help you make an informed decision.

What is the current state of your company?

Do you have the manpower or resources to fulfill the order yourself?

Do you really require complete control over your order fulfillment?

Which is better for your company: investing in new infrastructure or systems or working with a third-party logistics provider?

The basic truth is that you have complete control over your fulfillment process. Most third-party logistics providers in Canada have the infrastructure and efficiency to meet your company’s needs.

Summary

Direct fulfilment is frequently a better alternative than outsourcing for startups.As your company grows, you may want to consider hiring a third-party logistics service. In any case, you should choose an appropriate software solution to automate inventory and order management.