When it comes to managing your logistics, you may be wondering what options will be best for you. Should you do all logistics in-house? Or should you outsource them to a third-party logistics (3PL) provider?
While both options have their pros and cons, the best choice for your business may depend on factors such as company size, budget, operational complexity, and growth plans. This blogpost is going to dive into both options and explore the advantages and drawbacks of each, so you can make an informed decision for your business.
In-house logistics is when you will manage all aspects of logistics internally, from warehousing and inventory management to shipping and delivery. You may have your own warehouse and staff who will process, and ship orders out to your customers. You will handle all integration, storage, picking, packing and shipping, as well as returns. There are several pros and cons to doing this and these can include…
Managing logistics internally gives you full control over the entire supply chain process. You can ensure that your operations align with your company’s specific needs and standards, and you’re always fully aware of what is going on with your orders.
With in-house logistics, you can tailor your processes, technology, and workflows to fit your needs completely. This can be especially useful for businesses with unique needs or complex inventory systems, like if you need specialised packaging or storage systems, or even need to use specific couriers.
If managed effectively, in-house logistics can save costs in the long run, especially if you have the infrastructure and resources to support it. For small to medium-sized businesses with steady volume, internal logistics may be more affordable than outsourcing, but this may not always be the case (as 3PL providers can offer amazing warehousing and shipping rates).
Direct control over shipping, inventory, and delivery can allow for quicker response times and more personalised services for customers, contributing to better customer satisfaction. With the right staff training, you can ensure orders are being sent out correctly to ensure your customers are as happy as possible.
Setting up in-house logistics requires significant investment in infrastructure, such as warehouse space, technology, equipment, staff and training. These costs can be way too much for start-up and small businesses.
Maintaining logistics internally can require a lot of resources. It takes time and expertise to manage, and without a dedicated team, it can be extremely risky. You need to have a lot of knowledge in logistics and understand the complexity that comes with eCommerce selling.
As your business grows, so does your logistical complexity. Scaling in-house operations to handle increased volume or expanded service offerings can be difficult without continually investing in resources and technology. More and more orders may come in, which requires a lot more staff, resources and time.
Without the right tools or experience, in-house logistics can result in mistakes like inventory inaccuracies, shipping delays, and higher operating costs, and therefore lead to very unhappy customers.
Third-party logistics (3PL) refers to the practice of outsourcing logistics functions to an external provider who specialises in warehousing, inventory management, shipping, and fulfilment. 3PLs offer a range of services, and businesses can choose the level of involvement that works best for their needs (whether it be all the services they offer, or only some). You can read everything you need to know about 3PL here, but for now here are some key pros and cons…
3PL providers bring years of experience and specialised knowledge in logistics (and many areas of eCommerce) which means they are better equipped to handle complex and dynamic supply chain challenges.
A major advantage of 3PL is scalability. As your business grows or faces fluctuations in demand, a 3PL can quickly adjust to meet your needs, whether that means increasing storage capacity or adding new services like international shipping. Their huge warehouses will have enough space to keep up with the growth of your business, even at extremely fast rates.
While there are ongoing fees associated with 3PLs, they can be more cost-effective than in-house logistics for many companies. By leveraging the economies of scale of 3PL providers, businesses can save on warehousing, shipping (due to many discounts they get with couriers), and technology costs.
Outsourcing logistics allows your business to focus on its core competencies, such as product development, marketing, and customer service, rather than getting bogged down in the complexities of supply chain management and logistics. It gives you more time to focus on areas of your business that you may neglect and therefore can grow faster.
Many 3PL providers use amazing technologies that allow you to sell on multiple-platforms and view real-time tracking, sales and returns. These technologies are a great way to create demand forecasting sheets too. Small and mid-sized businesses can benefit from these technologies without having to invest in them directly.
Outsourcing logistics means you are losing some control over the supply chain process and putting your trust into another company. If a 3PL provider doesn’t meet your expectations, it can negatively impact customer satisfaction and brand reputation (which is why it is KEY to do your research before).
You rely on the 3PL provider to handle your logistics accurately and efficiently. Any missteps or delays from their side can result in poor service and damaged relationships with customers.
Depending on the provider and the scope of services, 3PL can become expensive, if there are several services you require. It is important to negotiate exactly what costs you need covered when partnering with one.
While 3PLs offer flexibility, they may not be able to fully tailor their operations to meet every unique requirement your business has. If you’re a company who sells particular products such as food, it may become complicated. For highly specialised logistics needs, in-house logistics may be a better fit.
Both in-house logistics and 3PL have their advantages, and the best option depends on the unique needs of your business. For companies with the resources to manage logistics effectively and a need for direct control, in-house logistics may be the way to go. On the other hand, businesses looking for scalability, reduced overhead costs, and expert support might find that partnering with a 3PL is the optimal choice.
Evaluate your company's current logistics requirements, future goals, and available resources carefully before making your decision. Either way, having a well-planned logistics strategy is crucial for ensuring smooth operations and satisfied customers.
If you believe 3PL is the way forward for your business, GNOC are here to help. We are a third-party logistics provider who helps over 300 brands fulfil their orders to customers on the daily. We offer warehousing, fulfilment and Amazon services to our customers, to ensure that they can be as successful as possible.
Our expertise in eCommerce means we can help guide you through all logistics and help you to be as successful as possible. Why not contact us today or fill out our form here and let us know all of your unique business requirements and one of our helpful team will get back to you as soon as possible.
Supercharge your growth with GNOC today…