Hiring a 3PL vs. Self-Fulfilment Shipping
Updated: Jul 12, 2021
When starting or growing e-commerce business, shipping can become the single most expensive and challenging element. If you are an online seller, you know how stressful it can be to handle the order fulfillment independently. A spike in sales comes with a spike in logistics requirements. You must have the following implemented when your sales grow: inventory management, large warehouse, partnerships with freight carriers, returns, shipping, packaging, and hiring employees to ship the orders.
What is Self Fulfillment or DIY Shipping?
The Self-Fulfillment model usually entails a business independently handling all the packaging, shipping, and reverse logistics for themselves. They must stock the warehouse, organize fulfillment, calculate shipping costs, and get the packages to the right carriers at the right time—all of these need to be managed without any complex supply chain issues. The benefit of self-fulfilling is that you have real-time access to inventory numbers. For larger companies with brick and mortar and online selling, it can also be easier to keep inventory in the store than hold it in a warehouse.
What is a 3PL?
3PL or third-party logistics is essentially a three-in-one -- fulfillment center, warehouse, and order management. These companies handle retailers’ and online seller logistics and distribution needs semi-autonomously. 3PL warehouses stock goods, then when an order comes in, they get a notification to ship, print, and pack the packages, promptly getting them to the right carrier. Usually, this means the e-commerce seller never needs to touch any part of the distribution, warehousing, or shipping logistics (both shipping and returning).
DIY Shipping: Is it right for your company?
DIY shipping is an excellent solution for many companies. The benefits outway the headaches, generally when the company ships less than 1,000 packages a month (33 a day). On top of that, it works for companies who sell smaller products that don’t require spending thousands a month on storage space.
Benefits of DIY shipping:
When you control all of the levels and aspects of order fulfillment, you tend to handle your supply chain better. Your company has full control and customization over the whole process. You can choose where to spend money and reduce costs within the process. Usually, DIY shipping is for the solopreneur to ensure they do not spend 90% of their time shipping.
If your order volumes are low, you might save money using a personal fulfillment process. 3PL’s can be expensive, and scalability is hard to navigate and generally requires skill and precision. If you plan on keeping your business in-house and small, then a 3PL is most likely not the correct move.
Once again, if you sell a small number of goods, you will most likely personalize your packages. Originating from Etsy sellers, writing handwritten thank you notes or adding a special gift is easier to control the process. It might take more time to add the personal touch, but those buying from small sellers usually expect personalized notes of gratitude.
Benefits of Outsourcing Fulfillment:
Scalability is one of the most obvious benefits of hiring a 3PL company. Even when your team is hard-working, there comes the point when you cannot handle incoming orders in-house any longer. Think about how long it takes for a single employee to package up your orders; if it takes 10 minutes to package up to one shipment, that is only six packages an hour. If you are shipping hundreds, nay thousands of packages a day, how will your one employee be able to keep up? That time projection does not include a potential problem to solve or a substantially large order to package. With a 3PL and their employees at your discretion, they can quickly and successfully scale your business. There are no limits to your ability to fulfill the influx of orders.
When fulfilling orders yourself, your warehouse location often determines the speed and cost of shipping. For example, if you need to ship something overnight from Oregon to New York, you’ll likely be stuck in a logistical nightmare to get it across the country overnight, paying way too much. When you hire a 3PL, then you will reasonably have your products spaced throughout the country. Though you’re headquartered in Oregon, when you receive an order for an address in NYC overnight, the fulfillment company warehouse in Pennsylvania will quickly send it for you and at a reduced cost. Now, think not just of overnight shipping but regular 3-5 business day shipping. You can exceed customer expectations by getting the package there in 3 days instead of 5 when using the multiple warehouse system of a trusted 3PL.
A recent report found that 75% of US consumers expect free shipping on all orders (even those less than $50). If you are shipping by yourself, you will most likely vary in shipping times and speeds --not to say that you do not try your hardest to keep up with demand, but a small company can only stretch itself so thin. Outsourcing to a nationwide 3PL allows you to realize consistent fulfillment and distribution costs allowing your budget to open up for free shipping. Give your company the upper hand and offer free shipping year-round with no minimum order requirement.
Being an online seller generally means you know merchandising, marketing, sales, and even accounting. It also can mean that supply chain management is not your strong suit. Don’t waste time and money to learn shipping and logistics. When you hire a 3PL, you hire a knowledgeable asset to your team, meaning you can spend more time and money doing what you do best.
Total Cost Savings
Although self-fulfillment is cheaper for the small-time seller than outsourcing to a 3PL, there is always a tipping point. When your company grows, then your infrastructure must grow. There comes the moment in every business when time becomes money. You will spend money to solve a problem so you can go out and bring in more revenue. Hiring out a 3PL is just one of those times when you have to spend money to save time.
How to hire a 3PL:
If you have fallen into the left side, it’s probably time to hire a self-fulfillment company. It can be hard to find a trusted 3PL who can fit your company’s needs. There are things to consider when searching for a fulfillment center:
Do they have multiple warehouses to help with quick and cheap shipping?
Do they price their shipping to ensure you’re getting the best pricing?
Is there an option to get more warehouse space when the time comes to grow again?
Do they work with any of your competitors?
Can you get a tour of the facilities?
Hiring out a 3PL is an expensive upfront investment, and it takes a lot of upfront work to build out. Once you get with a trusted 3PL, then you are likely to save money and time. It is essential to ask hard questions when looking for a 3PL. You are essentially hiring someone for your company. You are allowed to ask hard questions to make sure it’s the right fit for you.