Should You Invest in Your Own Warehouse or Outsource Ecommerce Fulfillment?
Online sellers know what time of the year it is – Thanksgiving, Black Friday, Cyber Monday, and Christmas shopping is about to begin. As exciting as the prospects of smashing sales targets seem, this time can be stressful for eCommerce businesses. An increase in sales means a spike in logistics requirements, order fulfilment, shipping, returns, and many other headaches. As a result, one big question is, should you invest in your own warehouse or outsource e-commerce fulfilment?
According to a global eCommerce survey, 74% of customers satisfied with a company’s delivery services increase their spending with the retailer. Not only this but 53% pay memberships for delivery. Therefore, one of the things you can do to improve customer experience is to review your fulfilment process. This article will examine self-fulfilment and 3PL to know which is best for your business.
Self-fulfilment vs. 3PL: which is better?
Right off the bat, self-fulfilment allows personalised control over the entire process, while third-party logistics offers more flexibility and peace. Although this looks like an oversimplified explanation, it is the core idea that will eventually guide your decision. For a more in-depth analysis, let us examine further explanations and definitions.
What is self-fulfilment?
Self-fulfilment, in-house fulfilment, or personal warehousing means your eCommerce business independently handles the entire fulfilment process. In other words, your business is responsible for choosing inventory storage, packing boxes, shipping orders, receiving products, unpacking them, purchasing postage, processing return, etc.
From this explanation, it’s clear-cut that this approach controls the process from one end to the other. However, it can take up your time – so much that you will focus more on fulfilment than other vital areas of your business.
Third-party logistics outsourcing is the opposite of self-fulfilment. In this case, you store your inventory in a warehouse outside your control. The warehouse handles picking, packing, shipping, returns, etc. Not only this, but the 3PL is responsible for improving your brand’s logistics image. Unlike self-fulfilment, 3PLs have multiple facilities in and outside the country. Therefore, they offer flexible movement and peace of mind. More importantly, you can focus on your business and let the 3PL handle all the stress. But is that enough to make a decision? No, it is not.
From the definition above, which plan of action should a business take? However, there are certainly other factors you must consider. They include:
- Scalability and growth plan
- Inventory and warehouse management
- Shipment locations
- Return process, etc.
Choosing between owning your warehouse and outsourcing to 3PL means digging beneath the surface. For example, although 3PL offers more flexibility, your capital can’t afford a 3PL if you are a startup. In contrast, do you desire Same-Day Shipping? You don’t have time to do it yourself.
Managing your warehouse and its benefits
Control over inventory and warehouse operations
Your warehouse space is an extension of your business. You can customise your warehouse as desired instead of conforming to a standardised operation pattern. As a result, you have direct control over your inventory and staff and how items are stored, packed, shipped, and distributed to customers.
Exercising control over your inventory and warehouse operations is particularly useful if you deal with fragile or perishable items. You can choose a picking system, schedule staff training, and ensure that goods are stored and handled with care.
Customisable and personalised touches
It is common for an eCommerce business to want to add personalised touches to their product packaging. Anything to make you stand out from the competition, right? However, this is impossible with 3PL. When you own and operate your warehouse, you can use specially curated boxes and sell fragile, handmade, gift-wrapped items that require special care. Since you packed them yourself, there is a measure of reassurance that you are doing the right thing each time.
Suitable for a small or startup company
Operating your warehouse is a better choice if you are a new company. The reason is that, for your level, you don’t have to struggle to meet customer demand. It is also effective if you have an involved return process.
Outsourcing to a 3PL and its benefits
No need to fund or plan for infrastructure
A fulfilment partner takes the weight of warehouse setup, workload, maintenance, budgeting, planning, and financing from your shoulders. You don’t need to buy or lease warehouse space, purchase forklifts or other warehouse equipment, recruit and train staff, comply with regulations, etc.
Large geographical footprint
Does your business send items outside a city or country? Then, a 3PL is a more suitable choice. Most 3PL allow their clients to store inventory at locations close to their customers to reduce shipping costs and time in transit. Wait, does it reduce cost? Yes, it does. 3PL companies serve more than one client and send multiple goods to the same location in bulk. This reduces the cost per product and will help you save money.
Streamlined shipping and connection to sales channels and IT capabilities
3PL warehouse systems are connected to popular eCommerce platforms and online marketplaces. As a result, online orders are sent to the warehouse directly. They also have real-time inventory tracking that ensures you don’t lose your products. With this, customers can track their inventory and order process.
Saves time against competitors
One of the competitive advantages of a 3PL warehouse is it reduces cost and has a dynamic location. If your competitor uses self-fulfilment, a 3PL can get you a better freight rate and fast shipping options like same-day delivery.
How to choose which service is better?
Choose personal warehousing if you fit into the following categories:
- If you are a new startup
- If you have a complex return process
- If you desire personalised interactions with customers
- If you want to manage your inventory
Choose 3PL warehousing if you fit into the following categories
- If you desire more time to focus on in-house efforts
- If you’re struggling with high customer demand
- If you want to optimise shipments based on customer locations
- If you have plans to grow and expand fast
- If you want to save the cost of renting a warehouse and training staff
Choosing your warehouse and operating it offers complete and minimal cost, provided the volumes are low. You can also add a personal touch to your delivery. However, the associated costs of running your warehouse can soon amount to a lot – real cost and opportunity cost. If you desire scalability, delivery speed, free shipping, and insignificant opportunity cost, outsource to a 3PL.
Always bringing you value to your eCommerce journey,
Awesome Pack Team
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