3PL vs in-house logistics - 4 things you should consider

The ultimate goal for any business is to achieve profitability and then growth. However, as a business grows, so do its operational complexities. This includes the need to produce more product(s), the need for more staff, space, storage, and so much more. While many businesses face these new challenges, there’s no universal answer to overcoming them. Every business is unique and so is its growth path.

For a company dealing with freight and logistics, there are two clear routes a business can take. The first is to invest in expansion and in-house logistics, and the second is to outsource operations to a third-party logistics provider (3PL). Of course, both of these options have their pros and cons, but every business will need to weigh them up and consider several factors when deciding what’s right for them. For example, is your staff and product well-suited for in-house logistics management? Or, what are the additional costs associated with outsourcing to a 3PL provider?

In this article, we explain what both 3PL and in-house logistics are, as well as the benefits that come with each option. We also offer up four things you should consider when making your final decision so you have all the information you need to make a call that will catapult your business’ growth and success.

3PL and its benefits

A third-party logistics (3PL) provider typically offers several services regarding the logistics of the supply chain. They enable companies to outsource their operational logistics including warehousing, packing, order fulfilment, packaging, freight forwarding, delivery, and more. There is a range of benefits that can come with opting to outsource these tasks, which we discuss below.

There’s no need to invest in the necessary infrastructure or management

When you outsource your logistics to another partner, the amount of work required by your team is significantly reduced. Likewise, the amount of building space your company needs will dramatically decrease. Plus, this option can scale up and down with relative ease. By opting for a 3PL provider your business will avoid the need to purchase land or lease a warehouse space that meets your needs which can save a lot of capital. In addition, you won’t need to purchase any warehouse equipment such as forklifts, and conveyors, or licence any warehouse management systems technology. It will also mean your business won’t need to hire additional labour staff for the warehouse which often results in the expense of wages, benefits, and insurance. Ultimately, partnering with a 3PL provider removes the need to invest in infrastructure and the management of a warehouse.

Partner with experts in the logistics industry

A 3PL provider is an expert across the board in fulfilment operations which means you can generally rest assured that they will be able to handle your business with ease and efficiency. There’s a large volume of 3PL companies out there so finding one that fits in with your business’ retail supply chain should be simple. Also, since they’re very experienced and tend to deal with large volumes of stock, this can bring the added benefits of bulk discounts on shipping rates as well as a network of helpful partners.

Provides great connection to sales channels and high IT capabilities

Most modern 3PL companies have access to seamlessly integrated systems including real-time inventory tracking reports, automated order tracking, automated stock level alerts, and more. This can provide valuable and timely insight into how to keep your business moving and customers happy with the stock they desire.

When a company has a large geographical footprint, a 3PL provider can be more convenient and efficient

If you run a large enterprise, a 3PL can be beneficial as they can often store inventory at various fulfilment locations. In turn, this can reduce shipping costs and timeframes as a shipment’s travel distance is reduced. This could increase your business’ offerings in terms of making guarantees like a 3-day delivery timeframe.

In-house logistics and its benefits

Essentially, in-house logistics is the opposite of outsourcing to a 3PL provider. It’s when a company has the staff and facilities to handle its logistics in-house. While this can create a lot of work, there are a plethora of benefits that can come from keeping things in your business, which we explain below.

Complete control over inventory and warehouse operations

One of the best perks of handling your logistics in-house is that you have complete control over your fulfilment processes. You can select the ideal way for your product to be stored, picked, packed, and shipped to customers. In addition, since your company is the only one using your fulfilment warehouse, you can create the perfect space that offers optimum storage and efficiency. You can tailor your warehouse to align with your processes rather than having to tailor your process to conform with a standardised space.

No third party will know your business as well as you do

At the end of the day, you know your business and its needs best. This means that handling your logistics in-house ensures that every step in your fulfilment process will be aligned with your company’s processes, values, and ethos. Whereas, this genuine care and deep knowledge of your business often get lost when you take logistics to a 3PL.

It’s easier to resolve issues when you’re dealing with them in-house

Changes and adjustments are easier and faster to make when you're working with your trusted team. In-house logistics can make for a more agile business as any changes you need to make, or any issues you need to resolve, can be fixed relatively instantly as there’s no need for back-and-forth communication with an outside party who can’t understand the full picture.

Communicating with third-party providers can get difficult

While it can be a nice thought to simply leave your logistics to a 3PL and not worry about it, that’s rarely ever the case. Often there’s a lot of communication to ensure your fulfilment is happening efficiently, effectively, and to your company’s satisfaction. Also, if any issues arise this is a cause for additional communication. Since a 3PL is their own company, taking your call may not always be their priority, which can be frustrating. Communication is important but can prove difficult when involving a third-party provider, so it’s often easier to handle things in-house.

Provide your customers with a customised experience

If you want to give your customers that personal touch with every order, then opting to keep your logistics in-house can be advantageous. It allows you to continue any unique packaging or customisation on each order without encountering the large costs associated with getting a 3PL provider to do so. It offers your business the freedom and flexibility to personalise your customers’ experiences.

4 things to consider when deciding between 3PL and in-house logistics

There are four key things we recommend you keep in mind when you’re deciding between your fulfilment options. These include:

1. Do you notice seasonal fluctuations in demand for your product? If so, are you better equipped or is a 3PL provider better equipped to handle this?
   
   
2. Do you value potentially lower costs or the ability to be agile and have more control over your fulfilment processes?
   
   
3. Costs and contracts with 3PL providers are changing every year - is this something your business can handle or are you more suited to handle things in-house where you can set most of the costs?
   
   
4. Looking at both 3PL and in-house logistics while considering your company’s requirements, which option will best suit your shipping and order fulfilment needs?

While there are clear advantages to both options, the decision will come down to your business’s unique needs. If you’re interested in learning more about what the process of opting for a new, future-proofed, and growth-oriented warehousing and distribution facility looks like, feel free to get in touch with one of our expert team members.

Our warehousing and distribution buildings provide more space to keep your business moving. When your company requires scale, our team understands how to optimise storage space whether you’re after large-scale warehousing for in-house fulfilment or are a 3PL facility looking to scale. Discover more about our warehousing and distribution buildings by downloading our brochure.