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When Is Outsourcing to 3PLs the Right Call?

by Simon Eskow
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Whether or not a company outsources its warehousing and logistics frankly comes down to one question: Is it more cost-effective to manage your own warehouse or let a 3PL warehouse your inventory and fulfill your orders for you?

Many retailers and wholesalers outsource to a 3PL at a pivotal stage in their growth. Whether it’s a startup eCommerce company, a growing brand or large enterprise, nearly every business relies on 3PLs at one point or another.

Factors to Consider: Warehouses, 3PLs or Both?

What you decide will depend on the nature of your business and your product. And that can change as your sales grow and fulfillment becomes more complex.

Capital Costs

It makes sense to partner with a 3PL if you need capital to develop products, market your brand and grow your sales. A growing percentage of total logistics cost is progressively shifting to eCommerce. So, startups and expanding businesses may be taking advantage of 3PLs to avoid the costs of investing in their own warehouses as they grow online.

Fulfillment Costs

This is not to suggest that all businesses start off using a 3PL. In fact, for some businesses, their growth is steady enough to manage fulfillment themselves using a small in-house staff. Furthermore, they may need to maintain direct control of kitting or batching products. But, as orders increase and fulfillment gets more complicated, that impacts their operational costs. At some point, they will have to compare  fulfillment, labor, shipping and technology costs with the setup, receiving, storage and rental costs associated with 3PLs.

Entering New Markets

Fulfillment can get even more complex when you want to broaden to a new region or overseas market. Again, it’s a question of cost-effectiveness. Do you have the capital to spare to run your own warehouse in a far-off region? Even more important: Do you have the resources or even the need to manage your own warehouse as you start doing business in another area? 3PLs can be a cost-effective way to support your campaign to expand to new geographies. That’s especially true if your new market is overseas.

Common Requirements

Whether you run your own warehouse or outsource to 3PLs, you will need the technology to get your orders picked, packed and shipped. Cin7 gives you that control with built-in warehouse management features and integrations to 3PLs around the globe.