For growing companies, outsourcing logistics to a 3PL can ensure resilience, scalability, efficiency, cost control and customer satisfaction. Whether you need your 3PL to handle inventory management, warehousing, fulfillment, packing and shipping, outsourcing these internal processes to an expert can optimize them and help you focus on core business activities.
However, outsourcing also comes with risks and challenges; the benefits or drawbacks will depend on the provider you decide to work with. In this blog, we'll explore the advantages and disadvantages of 3PL services and provide some helpful guidance on when outsourcing logistics could be the right choice for your business.
Potential advantages and disadvantages of 3PL services
There are benefits and drawbacks to consider when outsourcing fulfillment, so the decision to outsource logistics isn’t clear-cut for all companies. In fact, the disadvantages might outweigh the advantages in certain cases, complicating the decision even further. Below, we’ve compared some of the top factors a business should consider.
Advantages & disadvantages of 3PL services |
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| Advantages | Disadvantages | |||
| Scalability | Rapid scaling up or down as needed | May require long-term contracts that can be restrictive | ||
| Cost savings | Negotiated shipping rates can help reduce costs. | Outsourcing costs can potentially outweigh savings | ||
| Technology | Access to proprietary warehouse WMS/real-time tracking/ analytics | Potential integration challenges with legacy systems | ||
| Geographic reach | Nationwide or global fulfillment can reduce shipping time | Limited storage controls can lead to delays | ||
| Business support | Enables your business to focus back on core business activities. | Removes a level of direct control over fulfillment processes. | ||
| Expertise | Access to logistics professionals and corresponding network | Not all 3PLs provide the same level of service | ||
When the disadvantages outweigh the advantages
While outsourcing to a 3PL can provide several benefits, it's not the right choice for every business. Businesses that lack stability in order volume, have highly specialized needs or require complete control over their fulfillment operations might find certain challenges and disadvantages outweigh the benefits of outsourcing.
For example, startups with low order volumes may find outsourcing costs too high. Further, companies that offer highly customized, fragile or highly regulated products might face unexpected challenges if their 3PL can not support those unique requirements.
If a company is heavily invested in its own logistics infrastructure, switching to a 3PL might not provide enough cost savings to justify the move. Ultimately, the decision to outsource boils down to whether or not a 3PL provider can optimize the efficiency of your business's internal processes.
Is it time for you to outsource fulfillment logistics to a 3PL?
There are clear signs that indicate when it might be a good time to outsource to a 3PL provider. Below, we’ve listed some of the top challenges companies face when handling fulfillment in-house and suggest when it might be time to outsource some or all of your logistics operations.
When you should consider outsourcing logistics to a 3PL provider |
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|
Challenge |
Description |
When to act |
| Struggling with order volume | Excesses in order volume that lead to delays and bottlenecks in production | Once you recognize damages to the customer experience via reviews |
| Inconsistent shipping times | Packages arriving late or not at all due to inconsistent shipping methods | If you have >5% of orders ship late (or >1/10 in smaller operations) |
| Limited storage space | Running out of storage space or needing to rent additional space is costly | If you have >85% warehouse utilization rate |
| High shipping costs | Bottom-line costs affecting the overall operations | If you are losing customers at checkout or avoid selling to certain regions due to cost |
| Fulfillment errors | Incorrect items, quantities or missing items in an order | If you have an order accuracy rate <99% |
| Managing returns | Returns becoming a bottleneck due to lack of staff or poor optimization | If returns take longer than 3-5 business days to process |
| Omnichannel fulfillment | Errors stemming from differing customer experiences by marketing channel | If 20-30% of orders come from multiple channels |
Choose Cart.com
Outsourcing to a 3PL provider can lower costs, improve efficiency and give your business a competitive advantage. However, providers’ services aren’t created equal. Choosing the right service is crucial to maximizing benefits, reducing risks and navigating potential future challenges.
Cart.com provides best-in-class 3PL services, advanced fulfillment technology and access to a nationwide fulfillment network—all designed to support fast-growing businesses and brands. Whether you need scalable storage solutions to optimize your in-house fulfillment processes or to branch out into omnichannel fulfillment with fewer disruptions, our team of experts is ready to help.
Contact our team today to learn how you can expand and optimize your business operations.
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