Logistics outsourcing to a 3PL service provider: yay or nay?

When you run an online business, you face many important questions. They often involve fundamental and exciting decisions, such as:

1. What products will you offer?
2. What should your brand look like?
3. How should you design your customer journey?
4. Which e-commerce platform is right for you?

One question you might ask yourself later in your business cycle is whether or not to outsource your logistics to an external third-party logistics (3PL) service provider.

Very often, we see founders investing a lot of intense thought into the smallest aspects of their branding and products, while giving little consideration to the operational issues of product logistics.

Strategic planning

Strategic planning is crucial. The following questions are hardly relevant for most self-employed people in the initial planning process, as they may not seem particularly important or interesting:

1. What packaging should your product have?
2. What are the sustainable options in this regard?
3. What impression do you want to give your customers when they open your package?
4. Which values do you want to convey?
5. Do you want your customers to receive their products as soon as possible?

E-commerce fulfillment starts when a customer's order comes into your online shop and ends when your package arrives at the doorstep of your customer. Every e-commerce founder eventually must choose whether to rely on in-house logistics (self-fulfillment) in the long term or to outsource to an external logistics service provider.

What are the benefits of outsourcing to a 3PL service provider?

Outsourcing logistic services to an external 3PL service provider, such as MOODJA, can include the following services:

1. Outsource warehousing: You can use our warehouse just outside Berlin and experience much less stress thanks to our state-of-the-art warehouse logistics. This includes the use of our specialized teams, our dedicated storage facilities, and our user-friendly software.
2. Outsource commissioning: As soon as an item is ordered in your online shop, our software logs the order, and we initiate the packaging process for you.
3. Outsource packaging: We pack your goods for you. We are happy to take your special wishes into consideration and to add custom labels to your packages or to combine different goods (product "kitting") into one bundle.
4. Outsource shipping: After your order has been professionally packed, we also take care of the shipping for you. Through our software, you always have an overview of where your package is.
5. Outsource returns management: If one of your customers is dissatisfied with an order, we will gladly handle the logistics of returning the package.

Why outsourcing matters for companies large and small

1. Small companies: Fresh founders usually use any space they have to store their goods. Often, living rooms, garages, cellars, or relatives' unused plots of land have to serve as storage facilities for the first deliveries. Usually, a single person is responsible for the company's entire logistical infrastructure. This one person gathers the goods, packs them, addresses the packages to the customers, takes the packages to the post office, and deals with customer complaints or special requests.
2. Large companies: Established companies with many monthly orders often rent their warehouse, have in-house logistics staff, and work closely with forwarding agents to ship their goods.

Reasons for outsourcing to a 3PL service provider

Whether you run a large company or a startup, MOODJA understands the problems and needs of companies that want to grow in the fashion and lifestyle industry.

What are the reasons for outsourcing logistics to a 3PL service provider?

1. First, you no longer need your own warehouse, which means that goods are no longer stored on your company's premises. This saves costs for packaging materials, forklifts, or logistics staff. In case of short-term order peaks, a fulfillment provider can help manage the additional workload and handle market dynamics.

2. Second, you don't have to become an expert in packaging and postage. What sounds simple at first quickly turns out to be complex and difficult in day-to-day operations. If you or your team fail to determine the right packaging choices quickly and inexpensively, a 3PL service provider is exactly what you need. With all the intricate administrative aspects of your own fulfillment and shipping operations, processes that were initially thought to be simple can quickly become overwhelming.

3. Third, outsourcing to a 3PL service provider can save valuable time for tasks that really drive your business and are fun. Your personal time is your company's most valuable resource, and if you spend most of it worrying about fulfillment, you're wasting time that you should be investing in growing your customer base, producing new products, or marketing your existing products. As experts in the field of fulfillment, trust us to help you get back to the essentials of your business.

4. Fourth, outsourcing to a logistics provider can lower your costs. Fulfilling purchase orders yourself may seem like a cheap – and often free – alternative to a 3PL service provider, but once you start looking at your opportunity costs, you'll quickly realize that fulfilling orders is not the best-value use of your time. As a business leader, you should focus only on tasks that provide you with the highest value per hour.

5. Finally, rapid company growth is not a problem anymore. As your business grows, it can become difficult to keep up with an unprecedented volume of orders. A 3PL service provider is prepared to seamlessly grow with you in the most efficient way possible. We'll help you overcome any growing pains and scale faster than you ever could on your own. We eliminate manual steps by automating the entire fulfillment workflow and provide real-time insights into what's happening, driving sustainable revenue growth and turning previous guesswork into intelligent forecasting. Ultimately, this translates into faster modernization of your operations.

3PL disadvantages: Who should keep fulfillment in-house instead?

When might it be worthwhile to keep fulfillment in-house?

1. If you absolutely want total control over every step of the fulfillment process, it doesn't matter if you might have a problem with handing off responsibility or just want your own employees to handle everything. By handling logistics in-house, you can maintain complete control. If you sell particularly fragile or handmade items, for instance, this can be very helpful. Additionally, if you are a logistics expert or have already built a complex supply chain, outsourcing logistics services may not be relevant for you.
2. Your products have special requirements or are all unique
   Highly flammable, perishable, or hazardous products are often not suitable for every 3PL service provider. Also, if you manufacture highly customized products where each customer receives a unique product, in-house logistics might be more profitable for you. Varying product sizes make calculating standard logistics fees especially difficult and time-consuming.
3. Your sales volume is very low
   If your current sales volume is not going through the roof and you are trying to minimize costs, an in-house solution is recommended. At least for very small companies who are after short-term cash flow optimization. The money you save should first be used to increase sales, at least until the growing sales allow room for business decisions again.

Logistics outsourcing summary

Whether you're preparing to launch a promising product or are on the path to e-commerce growth, at some point, you'll have to ask yourself how you want to handle your order fulfillment.

The best solution for your business will always depend on several factors. In-house fulfillment, which was worthwhile early on, can quickly reach its limits due to growth. By thoroughly weighing the pros and cons of logistics outsourcing, you will ultimately be able to make an informed decision.

If you are unsure whether fulfillment makes sense for your business, don't hesitate to contact us!