In this “What Happens When You Click Buy” episode, we discuss the process of fulfilling customer orders and whether to use a third-party logistics provider (3PL) or operate your own warehouse.
When starting, you might handle order fulfillment yourself by shipping products from your garage. As the business grows, however, managing fulfillment becomes more challenging, and 3PLs can help with warehousing and storage.
There are pros and cons to using 3PLs versus operating your own warehouses. One significant factor is the additional fees charged by 3PLs for value-added services, like gift wrapping or kitting, while having an internal staff and setting up your own warehouse gives you more control over these processes.
The decision between using a 3PL service or running your own warehouses depends mainly on costs associated with value-added services and maintaining flexibility in operations that customers appreciate about your brand.
We also touch upon warehouse management systems (WMS), which are useful when operating your own facility. A WMS helps allocate inventory efficiently based on factors like expiration dates or product attributes. If you solely rely on 3PLs, an inventory management system (IMS) may be more suitable as it manages inventory globally instead of focusing on specific warehouse activities.
Our recommendation: consider implementing a WMS early because tracking real-time inventory accurately can provide many advantages (including cost savings and revenue-generating opportunities) and capabilities, including barcode scanning and improved space utilization metrics.