In-house Logistics Solutions vs. 3PL – Which is the Best Choice for Your Business? 

shipsy

Delivery orchestration is one of the most consequential steps in the entire logistics journey. While highly efficient and optimized deliveries can help businesses offer highly satisfying customer experiences, even a single process that is not managed effectively can harm the bottom lines like nothing else. Among multiple key considerations that the brands need to keep in mind while strategizing for deliveries, arriving at a solution for inhouse logistics vs 3PL service providers is one of the most crucial ones. 

Between in-house logistics solutions vs 3PL, making a measured and correct choice allows businesses to flourish. Stats reveal that the global contract logistics (in-house and outsourced) market is forecasted to reach US$ 329.7 billion in 2026. Having in-house logistics operations offers businesses the benefit of self-reliance, transparent operations, and better visibility of assets utilized. On the other hand, partnering with smart and agile 3PL allows brands to scale promptly and flexibly, diversify their delivery offerings, and increase their serviceability.

For niche brands and small businesses, any negative fluctuations in the order volume turn in-house logistics solutions into a costly affair. In contrast, 3PL service providers allow businesses to use resources relevant to the current logistics needs. However, engaging multiple 3PL partners creates potential difficulties in the availability of information and decision-making. 

So, how to pick the right choice when it comes to in-house logistics vs. 3PL service providers? Also, how to manage multiple 3PLs efficiently so as to keep the operational costs minimum and confusion at bay? We explore a detailed analysis of inhouse logistics solutions vs 3PL in the following blog and also explore the answers to all these questions. 

Two Most Common Ways of Handling Logistics 

Businesses handle their logistics operations in-house or outsource them to a third-party logistics service provider. The former requires a business to have adequate resources, capital, and infrastructure. Besides, they also need a logistics management system to look after their logistics operations. 

In the latter case, businesses don’t need to have anything in-house as they outsource complete/partial logistics operations to a third party, or they can have 3PL service providers in addition to their dedicated resources to amplify their delivery offerings. A 3PL looks after end-to-end logistics requirements. A business must monitor 3PL’s performance and check customer experiences. 

What Is In-House Logistics Management?

In in-house logistics management, a company manages, plans, monitors, and executes all the logistics operations and processes, such as warehousing, inventory management, transportation, and distribution of goods on its own. The entire supply chain and logistical distribution are managed internally. The fleet and assets, such as riders, vehicles, etc., are self-owned, and the number of assets owned and the extent of logistics processes managed to vary as per different business models.

It is also known as self-fulfillment as well as internal fulfillment. From optimizing routes to managing incoming orders and tracking inventory to the delivery procedure, organizations with in-house logistics control all their logistics operations.

Such companies and brands have warehouses, logistics managers, and an internal fleet of vehicles and drivers.

Why Set Up an In-house Logistics Team

Whether businesses call it internal fulfillment, DIY logistics, self-fulfillment, or in-house logistics, taking on order fulfillment internally often becomes tedious. However, it does have certain advantages that we share below.

To Have Complete Control Over Warehouse and Inventory Operations

When businesses handle order fulfillment in-house, they have complete control over how the products are stored, picked, packed, and delivered to customers. Suppose someone on the team is an experienced fulfillment expert. In that case, the distribution network also becomes a core competency. This makes it far easier for businesses that have built their eCommerce supply chain to oversee the order fulfillment procedure themselves.

Since the company will be the only one using the fulfillment warehouse, they can tailor space and processes as per the preferences and needs. It eliminates the need to adhere to a standardized operation shared by many businesses, industries, and products. Businesses can even perform warehouse audits as and when required.

Keeping in mind the comparison of in-house logistics solutions vs. 3PL, here it is clear that in certain aspects, self-fulfillment is superior compared to the other available option.

To Deliver a Personalized Experience 

If companies offer unique packaging and personalization on every order, 3PLs may be unable to handle that level of customization or end up charging exorbitant fees for the same. Packing items in-house gives companies the freedom, flexibility, and assurance that everything will be perfect every time.

Suppose a company runs a subscription box business and sells items that are made-to-order, fragile, hand-crafted, or require special care. In that case, in-house fulfillment can be extremely beneficial. It also ensures that companies maintain customer satisfaction that is compatible with the existing workflows and logistics systems.

To Communicate Directly With Your Customers 

If businesses want to give their customers a personalized touch with every order, keeping the logistics in-house can be the perfect answer. It enables them to utilize any unique packaging or customization on each order without incurring the high costs associated with enlisting the services of a 3PL provider. 

Furthermore, in-house logistics helps businesses seamlessly communicate and resolve all customer issues. This gives companies the freedom and flexibility to tailor services as per customers’ experiences. 

How Can Businesses Manage Self-Fulfillment or In-house Logistics Efficiently?

Efficient management of self-fulfillment and in-house logistics requires a well-planned strategy that helps businesses manage, monitor, plan and control all the key stakeholders as well as processes in an integrated manner. Thus, logistics automation comes as the very first step. 

Automation can help businesses streamline the process of managing self-fulfillment or in-house logistics. This can be done through the use of systems such as Warehouse Management Systems (WMS), which can help organize, store, and track inventory, as well as automate the process of packing and shipping orders. Some other examples include OMS (Order Management Systems), Transport Management Systems (TMS), etc. 

TMS helps businesses optimize their on-road movements in an efficient manner. Businesses should optimize their routes and delivery schedules to ensure that goods are delivered on time and that resources are used efficiently. This can be done by utilizing route optimization software, which can help optimize delivery routes and schedules to reduce time and cost.

Further, smart technology-based offerings, such as cloud-based order management systems, inventory management software, and real-time tracking systems, can help businesses manage self-fulfillment or in-house logistics more efficiently. Thus, businesses can track orders, store data, and provide real-time insights into inventory, delivery, and other logistics operations. 

Hence, managing self-fulfillment in an efficient manner requires multiple resources and is a massive task, especially for brands and businesses with large-scale operations. This is where 3PLs come into the picture. 

What is 3PL Logistics Management? 

Third-party logistics, also known as 3PL, refers to the use of third-party businesses to outsource elements of an organization’s order fulfillment process, like distribution, inventory management, warehousing, and delivery services.

Third-party logistics providers specialize in integrated warehousing and transportation operations that can be scaled and customized to customers’ needs based on market conditions to meet their product demand and delivery service requirements.

When to Choose a 3PL Company?

A third-party logistics (3PL) provider typically offers a range of supply chain logistics services. They enable businesses to outsource operational logistics such as warehousing, packing, order fulfillment, labeling, freight forwarding, delivery, and other services. And this allows brands to focus on core business activities with an assured overview of the fulfillment process.

Next, we discuss the various use cases where 3PL emerges as the best choice. 

Limited Resources, Capital, and Infrastructure.

Businesses will not be required to purchase warehouse equipment such as forklifts and conveyors, nor will they be required to license any warehouse control technology. By using a 3PL provider, companies can avoid buying land or leasing warehouse space that meets their needs, saving them a lot of money. 

The in-house team’s workload is significantly reduced when logistics is outsourced to 3PL partners. Similarly, the company’s required space for storage would be reduced considerably. Furthermore, the services of 3PL can be scaled up and down relatively easily. 

Greater Order Volume and Expertise

A third-party logistics provider brings expertise in operational fulfillment processes and inventory management, including receiving, picking, packing, shipping, labeling, carrier pickups, returns, and more. Hence, this allows businesses to get started quickly with a 3PL that already handles large volumes of deliveries and fits seamlessly into retail supply chains.

With volume comes bulk discounted shipping rates. The network of partners helps ensure faster and more effective service and the ability to scale and handle any surges in volume to help ensure a smooth fulfillment process.

Excellent IT Capabilities 

Most modern 3PL firms have access to seamless integration systems, which include real-time inventory tracking updates, automated order monitoring, automated inventory level alerts, and other functionalities.

Alongside this, the effortless synchronization with existing systems like ERP allows for holistic integration and overview. This allows meaningful and timely insight to keep businesses running and customers satisfied.

Seamless Communication System 

Shipping and customer solutions for eCommerce businesses are available from any modern tech-enabled 3PL. This entails seamlessly integrated systems that connect to all online stores and automatically send orders to the 3PL after they are placed.

Businesses can also manage inventory in their 3PL’s fulfillment center and set up alerts to reorder more when product levels are low.

Better Customer Outreach Potential

Businesses expanding into new markets and targeting more customers can rely on a 3PL to help them grow in new geographical areas. With constant improvements to supply chain aspects, 3PLs have the tools and technologies needed to make changes that would be difficult for businesses to make on their own.

To eliminate inefficiencies, logistics management software can analyze and monitor supply chain procedures. This results in cost savings and increased efficiency throughout logistics processes.

Faster Deliveries

Most 3PLs, with wider networks, allow enterprises to place stocks closer to the customers via multiple fulfillment locations. This reduces the distance between shipment travels to its destination, saving money and time in transit. 

Since 3PLs run their fulfillment centers and have visibility into what’s happening inside their warehouses, this reduces the cost of faster shipping options, such as 2-day or same-day delivery. This is further helped by using ground-based delivery rather than expedited air and shipping from fulfillment centers in urban areas near larger pockets of the general population.

Multiple Delivery Options to Customers

As the e-commerce industry is expanding, consumers expect faster, more affordable shipping services for their online orders. However, dealing individually with multiple carriers and distribution channels can take time and effort. 3PLs provide various time-saving solutions, such as access to multiple providers and service options via a single interface. 

Businesses can easily provide various delivery options for customers at the most competitive prices by outsourcing their logistics to 3PL companies. This increases customer satisfaction while saving time to optimize other areas of business that will benefit customers.

Beneficial eCommerce Integrations

Many 3PLs have their transportation management system (TMS) that allows businesses to manage all aspects of their shipping from one simple online system. Numerous eCommerce integrations are available to help connect the businesses’ TMS with their e-commerce website, thereby improving the site experience.

Focus on Critical Functions and Logistics Experience

Many third-party logistics providers have decades of combined industry experience. When businesses hire a 3PL company, they gain access to this knowledge to assist them in navigating obstacles such as transport documentation, shipping regulations, and other logistics issues.

It takes time and money to run an in-house logistics division. Hiring a 3PL company enables businesses to concentrate on core business processes and competencies rather than dedicating internal staff or resources to running an in-house logistics division.

This makes it clear that in comparing in-house logistics solutions vs. 3PL, third-party logistics solutions provide a greater range of benefits.

How Do 3PL Companies Manage Logistics?

Shippers nowadays expect better order visibility, faster shipping times, and increased efficiency from 3PL providers. So, 3PLs increasingly depend on smart management software that can improve shipping times. This is made possible with route optimization, increased efficiency through automation, last-mile visibility through real-time tracking, faster information exchange, and data visualization.

Artificial intelligence, machine learning, and smart management software replace manual data entry and processes to improve last-mile delivery. For industry leaders, automation is a step in the right direction. Using the software, 3PL companies can manage multiple eCommerce clients and retailers and ensure more efficient logistics operations.

These days, an ideal 3PL solution must have a wide range of features and functionality to help businesses keep up with new customer demands. This includes flexibility for last-minute changes, fluctuating volumes, and a desire for more insight into the process from beginning to end. 3PL software enables businesses to do all of this while successfully integrating with the technology of other stakeholders as needed.

In-house Logistics vs. 3PL 

The table below lists the differences between in-house logistics solutions vs. 3PL across multiple core functionalities:

BasisIn-house3PL
Process of PackingComplex packing for customizationSimple packing with no customization
Operations ManagementLimitations in smooth functioning of current operationsNo limitations to smooth functioning of current operations
Transportation CostsHigher costs due to customization optionsLower costs per mile
Production ProcessIdeal for small warehouses with less productionHigher production due to higher storage space
PreparationPreparation in smaller quantitiesBulk preparation of items
Customer ExpectationsEnables higher customer satisfaction through pickup accommodationsGreater scope of increasing customer satisfaction with timely deliveries

Leveraging Shipsy’s Intelligent Platform to Optimize Logistics Operations  

By automating operations and ensuring intelligent 3PL management, Shipsy’s AI-powered platform seamlessly connects cross-border and local logistics. Shipsy’s user-friendly platform provides complete visibility of first, middle, and last-mile operations, unlocking operational efficiency and making informed decisions using real-time analytics.

Features like shipment reports, multimodal visibility, and workflow automation help brands to move ahead in an increasingly competitive market. Advanced communication suite allows for sharing of live updates and ETA with the customers. Moreover, geofencing and digitized PODs significantly reduce fake delivery attempts.

Shipsy is changing the entire dynamics of logistics with its industry-leading must-have features and unparalleled expertise.

  • 64% increase in customer satisfaction
  • 18% increase in delivery NPS
  • Auto-allocation of more than 99.7% of delivery tasks
  • 12% reduction in mid-mile costs
  • 23% reduction in last-mile delivery costs
  • 28% reduction in customer complaints

Book a call with our experts and explore Shipsy’s logistics management platform to select the most appropriate choice between in-house logistics solutions vs. 3PL. Request a customized demo today to optimize all logistics operations and stay ahead of the competition!

Share

Related Posts

3PL Logistics 101: A Comprehensive Guide to 3PL Management in 2022

The global eCommerce is booming and 3PL Logistics is experiencing the ripples of its growth. Explore various challenges related to 3PL logistics in modern retail & how smart 3PL management rids them.

shipsy

How to Choose the Best 3PL Service Providers: 5 Questions to Ask Before You Decide  

Explore how partnering with the right 3PL can help you manage inventory & eCommerce logistics, get supply chain visibility, and improve business processes. Also, read how to choose the right 3PL.

shipsy