Ecommerce fulfilment: In-house or 3PL?

Fulfillment is one of the most critical areas of your eCommerce business.  From the second an online transaction is finalised, to the moment a package arrives at the recipient’s address, the entire process needs to function as seamlessly as possible. 

And in our post- Covid realities, the importance of logistics and order fulfillment has never been greater due.  Retailers like Amazon have set the bar incredibly high for eCommerce fulfillment. 40% of shoppers consider the post-purchase experience to be the most memorable part of the brand experience. While 73.6% of shoppers say that delivery is the most important to the overall shopping experience. 

Fulfillment  can be a major pain point for merchants. 24.7% of merchants say that delivery costs are the biggest challenge their supply chain faces. Similarly,  the average cost to fulfill an order is 70% of the average order value.  But if done properly, your fulfillment capabilities can become a major competitive differentiator.

When it comes to how you choose to fulfil your orders, every business is different and will have its own unique set of requirements. 

Payflex outlines some the key factors to consider when deciding on your fulfillment methods: 

Your products

Is your product fragile, perishable or does it require specific care? If you sell items that are custom-made, specially gift wrapped or packaged, or extremely fragile, you may want to choose a more hands-on approach.

Business size and order volume

The number of products you sell and your monthly order volume play a big role in finding a fulfillment solution that works for you. If your business has a low order volume, the most logical and cost-efficient option is to keep your fulfillment on site. However, if you’re expecting an increase in order volumes in the coming months, outsourcing your ecommerce fulfillment is an effective strategy for scaling your business.

The location of your business

Today’s customers are living in an instant gratification shopping culture, where they expect to receive their products as quickly as possible. In fact, same-day order delivery will grow by $9.73 billion during the 2020-2024 period. The ability to achieve this depends on a full range of other factors including proximity to the clients.

eCommerce Fulfillment Technology

The use of technology is transforming eCommerce fulfillment. One of the main factors that should determine your choice of fulfillment service is your technology requirements. Fulfillment software can run into tens of thousands of Dollars per year which means outsourcing might be your best bet. 

In-House vs 3PL eCommerce fulfillment

If you are just starting out and have a small amount of inventory or sporadic orders, it makes the most sense to handle all of the fulfillment yourself. One of the major pros of in-house fulfilment is total control. Handling fulfillment yourself also offers a great way to truly understand your business and your customers.  But as your business scales, expenses rise exponentially, especially when the volume of orders increases and the amount of storage decreases.

Some of these costs include renting and staffing a warehouse space, acquiring the right equipment and materials,  and purchasing warehouse management software. In addition, in-house fulfillment can become extremely time-consuming for a growing business – you’ll be packing boxes when you could be spending the time on sales or marketing.

Outsourcing eCommerce Fulfillment/Third-Party Logistics

A key benefit associated with outsourced  fulfillment is it saves you time so you can focus on the growth of your business. You’ll also save on shipping costs. In addition, you won’t have to perform manual inventory audits of your products yourself. Another important  benefit is you don’t have to worry about customer service and returns which can take up a lot of your time.

But, outsourced fulfillment also has its cons.  For example, there is no room for personalization or branding with your packaging. It can also be costly. And while you will likely save money on shipping rates, there are other costs to consider. These include storage, picking, packaging, and shipping. Lastly, and most importantly, you are giving up control of the entire fulfillment process. 

Same same, but different

Both eCommerce fulfillment models have their advantages and limitations. There is also the option of ‘Mixed Fulfillment’ which is a combination of in-house and outsourced fulfilment.   The best way to determine which fulfillment model is ideal for your business is to distinguish your business goals. No matter what fulfilment option you choose,  the end result should always look the same: accurate, seamless and fast delivery and consistent quality.