When running an eCommerce business, getting products to customers quickly and efficiently is essential. But should you handle fulfilment in-house or outsource it to a third-party fulfilment (3PL) provider? The decision can have a major impact on your costs, efficiency, and scalability.
Many businesses assume that in-house fulfilment saves money because they have complete control over the process. However, outsourcing to a 3PL can often be the smarter financial move, especially as a business grows. Let’s compare the costs of both options to determine which is the most cost-effective choice.
The Costs of In-House Fulfilment
Managing fulfilment in-house means taking care of everything—from storing inventory to packing and shipping orders. Here’s a breakdown of the costs involved:
Storage and Warehousing
- Renting or purchasing warehouse space
- Utility bills, security, and insurance costs
- Warehouse equipment (shelving, packing stations, forklifts)
Labour Costs
- Hiring and training staff for picking, packing, and shipping
- Wages, benefits, and payroll taxes
- Overtime pay during peak seasons
Packaging and Shipping
- Buying packing materials (boxes, tape, bubble wrap)
- Negotiating shipping rates with carriers
- Managing returns and customer service inquiries
Technology and Software
- Investing in inventory management software
- Implementing automation tools to speed up processes
At first, handling fulfilment yourself might seem more affordable, but these costs add up quickly. Small businesses often struggle to keep up with demand, leading to inefficiencies and increased expenses.
The Costs of Third-Party Fulfilment (3PL)
A 3PL takes care of warehousing, picking, packing, and shipping on behalf of your business. While there’s a cost to outsourcing, it often results in significant savings.
Storage and Warehousing
- 3PL providers offer flexible storage options, so you only pay for the space you use. For hassle-free inventory and shipping, learn more about Future Pro Logistics and what they can offer you.
- No need to invest in warehouse infrastructure or maintenance.
Labour Costs
- 3PLs have trained staff, so you don’t need to hire or manage employees.
- You avoid payroll costs, employee benefits, and seasonal hiring expenses.
Packaging and Shipping
- Bulk purchasing power means 3PLs get lower rates on packaging materials.
- They have partnerships with major carriers, leading to discounted shipping rates.
- Advanced shipping optimisation helps reduce delivery costs.
Technology and Efficiency
- Many 3PLs provide real-time inventory tracking and automated order processing.
- AI and robotics speed up fulfilment, reducing errors and delays.
Which Option Saves More Money?
The answer depends on the size and stage of your business:
For Small Businesses and Startups
- If you’re fulfilling a small number of orders, in-house fulfilment might be manageable.
- However, as order volumes increase, storage and labour costs can become overwhelming.
For Growing and Established Businesses
- 3PLs help reduce overhead costs and improve efficiency.
- Lower shipping rates, bulk packaging discounts, and automation often result in long-term savings.
- The ability to scale quickly without investing in additional warehouse space makes outsourcing the more cost-effective choice.
Reasons to Choose Providers with Same Day Fulfilment
Ensures Customer Satisfaction
Amazon has changed the game when it comes to delivery. They can offer next day delivery like it’s nothing. Well, unfortunately, this expectation is passed to you, even if you’re a small business. In other words, customers have the same expectations when they order something from you. This means that you have to work very hard to keep them happy and ensure that they don’t complain. With same-day fulfilment, you’re getting orders out as quickly as possible, avoiding any potential issues.
Beats the Competition
Know that other businesses aren’t going to offer this type of perk. Therefore, if you want to show you’re the best in your industry, you need to show that you do offer same day fulfilment. Indeed, this can set you apart and customers might be more likely to place another order with you due to the speed.
Boosts Sales
Did you know that same day fulfilment can actually make customers more likely to purchase something? When they like a product, they want to receive it quickly. When they see that your business ensures this happens, they’re more likely to buy it. If they have to wait a long time, it means that they’re less likely to make impulse decisions.
Conclusion
While in-house fulfilment can work for businesses with low order volumes, it becomes costly and inefficient as you grow. Third-party fulfilment offers significant cost savings through bulk discounts, automation, and flexible warehousing.
If you’re struggling with rising fulfilment costs, outsourcing to a 3PL could be the best move to save money and streamline operations.