In the business world, how you’re getting your product to your customers can be just as important as what you’re selling. Whether you’re distributing household products, food and beverage items, pharmaceuticals, or some other type of product, you need to make sure that these goods are being transported, stored, and fulfilled as safely and efficiently as possible, as this impacts everything from product quality to customer satisfaction to your bottom line.
But as companies grow, the logistics for these processes become increasingly complex, which begs the question: What is the most effective supply chain solution for your business? Does it make sense to invest in growing and improving your internal processes and resources, or should you enlist the help of a third-party logistics (3PL) company?
Every business is different, so you will need to take a look at your company’s unique needs and circumstances to determine which type of solution is right for you. To make the evaluation process easier, here’s a quick overview of how in-house logistics and third-party logistics compare.
3PL stands for third-party logistics and refers to outsourced supply chain services, which can include services such as:
A 3PL company will often provide warehousing locations, a diverse range of services and equipment, and even logistical planning and management in order to remove the burden from the business and deliver a more streamlined process.
With a 3PL provider handling supply chain logistics, a business can divert their attention to other important business needs such as product development, marketing, sales, customer support, and so on.
In contrast, businesses that choose in-house logistics maintain complete ownership and responsibility of the supply chain process, which means they own or lease their own storage facilities, provide their own equipment, hire and train their own staff, package and ship their own orders, and more.
When determining whether 3PL services or in-house logistics are right for your business, there are numerous factors to consider. Here is a 3PL vs. in-house logistics side-by-side comparison to help you make an informed decision.
In-House
Brands and businesses that manage their own logistics have a higher level of control over their processes, from where their warehouses are located to the staff they hire to their shipping timelines and more. This may be desirable to businesses that prefer to be in charge in every step of the process.
3PL
Brands and businesses that work with 3PL companies can provide some direction, but actual day-to-day execution of their warehousing and fulfillment will ultimately be in the hands of the contracted logistics partner. For businesses that work with a 3PL, they should be sure to do their research and choose a reputable provider they can trust.
In-house
When a business brings their warehousing and distribution logistics in-house, they will need to have one or more experts on their team who specializes in these areas so they can plan effectively and implement processes that are needed for establishing facilities and processes that meet regulatory compliance. Most brands are good at selling, producing their product, and advertising their product. High level logistics is usually not a core competency and the larger a business gets the more complex their operational requirements.
The in-house logistics director’s responsibilities may include overseeing land or lease procurement, equipping facilities with the proper racks and shelving, purchasing or leasing equipment, hiring and managing staff, managing warehouse operations and operational expenses (like supplies, utilities, taxes, and insurance), and more.
3PL
Instead of finding and hiring their own in-house experts, a business can find a third-party company that specializes in the areas of warehousing and fulfillment logistics within the business’ specific industry. This should be a partner that has certifications and affiliations with various governmental and third-party safety oversight agencies as needed for compliance purposes.
An example might be a provider of food-grade-certified and HAZMAT-certified warehouses that is prepared to assist with all types of import and export logistics, from ocean ports to rail terminals. With a 3PL, all the responsibilities that come with warehousing and distribution logistics lie with the third-party company, which may allow the customer to dedicate more time and focus on other areas of their business.
In-House
With an in-house solution, logistical efficiency is only as good as the business’ existing resources. If demand suddenly goes up, the business may need to find and secure additional warehouse space (which is typically a long-term investment). If demand suddenly goes down, the business may be stuck maintaining space they are not using. Heavy overhead, from real estate to employees can be a burden on a business that has a dip in sales or is quickly growing.
3PL
Third-party logistics providers already have numerous warehouse spaces available, which clients can tap into as needed. This can make it easier for businesses to scale up or down when their inventory and output are impacted by factors like seasonality or rapid business growth (which may cause inventory overflow issues). The model is transactional, meaning that cost scales linearly up and down with demand.
3PL companies also tend to have a diverse range of logistical services available and deep experience in the sector. Good 3PL warehouses can easily supplement any new needs that arise, whether it is a different type of product storage (such as cold storage) or added layer of logistical support such as freight brokerage.
In-House
The brand or business will need to invest in logistics software and tools for managing warehouse inventory and fulfilling orders and is responsible for keeping their systems up-to-date. One benefit of in-house logistics is that the business will have the freedom to choose their preferred software system.
3PL
The provider may offer their own proprietary technology or have established tech partners that clients can leverage. If you have a specific logistics platform you would like to use but you want to work with a 3PL provider, make sure to choose a company that can integrate with your desired system.
So, as you consider how to proceed with your company’s warehousing and distribution strategy, be sure to think about how much time and resources you want to dedicate internally to planning and managing those logistics. In making your decision between 3PL vs. in-house logistics, you should think about your business’ short-term and long-term goals and any variables that may cause fluctuation in your product volume. Some businesses like the appeal of owning their own warehouse properties and having control over every aspect of the process whereas others are happy to pass over the responsibilities to an external party that already has expertise in these types of logistics and flexibility to adjust capacity as needed.
Porter Logistics is a provider of omnichannel 3PL services that integrates and simplifies the supply chain process for manufacturers, retailers, brands, and direct sellers across a wide range of industries.
With our dedication to impeccable service and seamless process, we offer fully-staffed, food-grade-certified and HAZMAT-certified 3PL warehouses that come with a full scope of logistical services (including warehousing and distribution, order fulfillment, transportation brokerage services, and more). We serve as the supply chain experts so you and your team can focus on what you do best — producing and sourcing your products and serving your customers.
We also offer our own API-enabled technology that automates order and inventory management workflows, and our system has pre-built integrations with more than 50 shopping cards and marketplaces.
Learn more about how Porter Logistics can help your team.
