In-House vs. Third-Party Order Fulfillment for E-commerce: Pros & Cons

In-House vs. Third-Party Order Fulfillment for E-commerce: Pros & Cons

As an e-commerce business owner, there are a lot of different factors to consider to maximize the profits and efficiency of your business at its current size while also planning for the future. Around 625,000 new businesses start each year in the US, so it is crucial to make the right choices to get an edge over your competitors.

Order fulfillment is a critical component to consider at any point, whether you are just starting out or you are looking to scale up. Getting your product into customers’ hands as quickly as possible and for an affordable price is integral to customer satisfaction and retention. We at Phase V are experts in order fulfillment and can help you make the right decision for your business.

Thus, if you’re debating between in-house and third-party order fulfillment, this article is for you.

What Is In-House Order Fulfillment?

In-house order fulfillment means that a business keeps its order fulfillment processes centralized with the rest of its operations and employees. 

With most direct-to-customer companies, this practically means that the business oversees and stores its stock, picks and packs its orders, and arranges the shipping from its own premises. In-house fulfillment is recommended for business processing between 1 and 10 orders per day.

Advantages of In-House Order Fulfillment

In-house order fulfillment certainly has advantages, particularly for new or very small business ventures. Keeping your e-commerce order fulfillment in-house allows greater oversight of your stock levels and access to the stock itself whenever necessary. It can also be cheaper for small businesses with relatively few orders to fulfill to use existing staff for this task instead of outsourcing the labor.

Disadvantages of In-House Order Fulfillment

The disadvantages of in-house order fulfillment usually start showing as soon as your business starts to grow. As orders shoot up, it can be challenging to ensure they are packed quickly and correctly, as you need to increase the amount of stock you have on your premise and speed up the picking process.

A small business can quickly become overwhelmed by an unexpected increase in orders, and it can take time to coordinate timely and efficient shipping. It can also become costly to pay shipping costs on an individual basis as opposed to centralizing those costs using a third-party order fulfillment service to streamline your logistics. 

What Is Third-Party Order Fulfillment?

Third-party order fulfillment is when you use a company such as ourselves at Phase V to manage the logistical side of getting your products to your customers. We offer a range of order fulfillment services, from product storage and cataloging, packing and picking, and shipping services to order support, should things go wrong. 

Advantages of Third-Party Order Fulfillment

Third-party order fulfillment can be highly advantageous for any e-commerce business as it grows. Outsourcing your order fulfillment can allow you to focus on the true purpose of your business and your products while a specialist company deals with the logistics.

Third-party order fulfillment can automate the fulfillment process and track and control your stock levels more efficiently. It also can keep labor costs down as you expand, store all your order data in one place, reduce errors, and provide logistical support for customers if mistakes occur. 

Another benefit of third-party order fulfillment is that it allows you greater flexibility around holidays, sales, and other such sales-boosting occasions.

Likewise, a fulfillment company can handle the burden of processing returns, which are at least 30% of all orders for e-commerce businesses.

Disadvantages of Third-Party Order Fulfillment

Third-party order fulfillment can be an unnecessary expense for particularly specialist businesses or trade with a smaller stock of high-value items. In this case, it can be more appropriate to keep order fulfillment in-house to ensure it is suitable for your business, products, and customer base.

You also do not have direct access to your stock or contact with your customers if you entrust it to a third party. And yet, this might have its benefits because you won’t have to worry about storage space or the hefty overheads that come with it.

Not sure how to choose the best provider for third-party e-commerce order fulfillment? Check out our article, where we share our top tips.

Which Option Is Better?

There is no right or wrong approach when it comes to in-house vs. third-party order fulfillment. Each business is different, and running every company is a balancing act. Yet, choosing the best option for your business is a significant decision when trying to maintain customer satisfaction and manage overheads.

Suppose you wish to retain ultimate control over your stock and your interactions with your customers. In that case, it is probably a better idea to keep your e-commerce order fulfillment in-house.

Third-party order fulfillment, however, is often faster, more effortless, and cheaper when you centralize all the different steps of the fulfillment process. It also scales easier as your business grows, meaning you can take advantage of better prices and flexible service.

At Phase V, we have a 99.9% order accuracy rate and are the number one platform for order fulfillment. We can guarantee a standard of service that will ensure customers view your business as reliable.

The Bottom Line

As your small business grows, it is inevitable that your demand will surpass your ability to pack, pick and ship on your original premises. Let us free up your space, time, and mind so you can focus on what you do best​​—running your business.

At Phase V, we provide no-hassle order fulfillment services that integrate seamlessly with your supply chain. We have a solution for every industry and budget, whether you are an e-commerce retailer, an Amazon seller, or running a subscription box business.

Contact us for a quote today!

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