Your Business

Should You Outsource Fulfillment or Keep It In-house?

By Rachel Burns

It’s hard enough work to run a successful business on its own, but coordinating the fulfillment aspect — receiving, packing, and shipping products — is a demanding operation that will only grow as your business does. It can be stressful trying to decide how to manage fulfillment in a way that best caters to your specific needs.
In this article, we’ll go over the questions and options you should consider when choosing a fulfillment strategy for your e-commerce business.

What are the order fulfillment options for small businesses?

If you’re struggling to decide between fulfilling orders in-house or using a 3PL to manage fulfillment for your business, we’re here to help you make an informed decision. Let’s break down the fulfillment options available to your business.

In-house Fulfillment

The first option for order fulfillment for your business is to complete the process in-house and without the help of a third party (also called self-fulfillment or merchant fulfillment). Without outsourcing in the picture, you’ll have complete control over the fulfillment process — including how to store, pack, and ship your products.
However, if you expect or experience rapid growth, your demand and costs might become overwhelming without the help of a third-party logistics (3PL) provider. Because a 3PL will have the infrastructure and tools to operate more quickly and cost-effectively than you can in-house, working with them will save you both time and money — it’s the very reason why so many businesses choose to outsource.

Dropshipping

An alternative to both an in-house fulfillment and outsourcing to a 3PL is dropshipping. With dropshipping, a manufacturer produces and stores inventory, then ships it directly to the end customer. It’s especially helpful for SMBs that sell oversized items or fulfill large orders.
While the barriers to entry are low, it’s important to consider that because the manufacturers are often located overseas, shipments can take significantly longer and potentially be more expensive.

Third-party Fulfillment

When inventory management and shipping begin to encroach on your time spent running your business, it’s time to seek outside help. A third-party logistics provider can handle larger shipment volumes to help you scale your business.
When you leverage the help of a 3PL like ShipBob, they’ll pack and ship orders, manage your inventory, and even handle customer returns, giving you more time for the daily demands of your growing business. The extra expense of outsourcing will be offset by the time saved, as well as discounted volume shipping rates and faster shipment times.

3 factors to consider when choosing your fulfillment strategy

Every business is different and will have its own unique set of requirements and limitations. There are three main factors to consider when deciding between outsourcing fulfillment or keeping it in house: the products you sell, your business size, and your business (and customers’) location.

1. Your SMB’s products

The type of product you sell, as well as how you package it, will affect your decision of whether to choose outsourced fulfillment or an in-house warehouse and fulfillment center. Here are some questions to consider:

Type of product and packaging

Is your product packaging relatively complex? Are your products custom-made or very fragile? If the answer to either of these questions is yes, you may want to consider fulfilling orders in-house.
Most third-party logistics providers are unlikely to be able to handle high levels of customization. Having the ability to package fragile or custom items yourself will give you the reassurance that the order is correct and that your customers will receive exactly what they expect.
On the other hand, if your product uses basic packaging without extra customization, or if products can be packaged quickly in large quantities, it may be more cost-efficient to choose to outsource to a 3PL.

2. Business size and order volume

If your business has a low order volume, the most logical and cost-efficient option is to keep your fulfillment on site, rather than outsourcing.
However, if you’re expecting an increase in order volume, outsourcing fulfillment is a better bet for scaling your business. Just make sure your 3PL is large and advanced enough to accommodate your expected growth.

3. The location of your business

Your location plays an important role in your business fulfillment strategy. Because customers are living in an Amazon-dominated shopping culture, they expect to receive their products as quickly as possible — many will even cancel orders if the shipping takes too long. To ensure that your business can meet these expectations and remain consistent with competitors, consider fulfilling your orders from warehouses closer to your customers to limit the number of shipping zones your typical product will travel. This can decrease both shipping times and costs, which will keep your customers satisfied.

Should you invest in a warehouse or outsource fulfillment?

Whether you’re considering opening your own warehouse or outsourcing fulfillment to a 3PL, unprecedented growth requires an updated fulfillment strategy.
Managing your own warehouse means you’ll have complete control over your inventory and operations. This means you decide how to store, package, and ship your products to customers, as well as how to operate your team and facilities.
If you choose in-house fulfillment for your growing business, start with a carefully researched strategy. Create a scalable budget for investing in the warehouse infrastructure, including staffing, security, and purchasing of all equipment and supplies.
When you outsource your fulfillment, you can reduce your shipping and operational costs. This means quicker delivery times, which translates to happier customers. Partnering with a 3PL like ShipBob also gives you better inventory management, so you can focus on selling your product. With so many benefits to outsourcing, the decision for your business can be an easy one.

Ready to move your business forward?

Subscribe to Fundbox Forward for expert insights and tips every week so you can grow.