The e-Commerce Conundrum: In-house vs. Third-party Shipping

As the e-commerce industry shifts from global to international, efficient shipping processes become vital for business success and continuity. If you’re looking to expand your shipping and delivery infrastructure, choosing the right e-commerce shipping model can help you lay a steady business foundation that promotes a positive customer experience.

In-house Shipping vs. Third-party Shipping

In-house shipping is a delivery model that places all shipping responsibilities on the business. Any task that relates to the delivery infrastructure is managed in-house by the personnel of the company. Often, companies that opt for the in-house shipping model operate their own storage facilities and vehicle fleets.

Third-party shipping is a delivery model that enables companies to delegate some or all delivery tasks to a third-party provider. From delivery fleets, fulfillment centers, packing and storage, to technological solutions—third-party delivery companies provide products and services designed to make shipping operations easier for business owners.

If you are equipped to handle in-house shipping, you may reap the sweet fruits of your labor. Otherwise, you might benefit from delegating the responsibility to those that can make it profitable for you.

Know Your Supply Chain

Supply chains are the foundation of the delivery ecosystem and can either make or break a business. Unfortunately, supply chains are also very complex to create. The supply chain contains every aspect of making a sale, from the raw material of the product, the design process, the storage facility, the wrapping, delivery and any stage in the process until the product reaches its ultimate destination—the consumer.

Delivery is present at many stages of the supply chain. Any delay in the delivery, even the smallest, may disrupt the entire process and the supply time. To keep customers happy, supply time should be as promised with an emphasis on fast and scheduled delivery.

In-house Shipping—Control Your Supply Chain

Pro: Ultimate Control

Keeping shipping in-house enables companies to create their own delivery infrastructure. When you create every aspect of your supply chain, you are better able to improve business operations. You can continually improve deliveries and ensure that logistics are managed in accordance with the needs of the company.

Con: Operational Complexity

There are many things that can go wrong with in-house shipping. Inadequate delivery personnel can cause delivery losses or bad customer experience—which often result in monetary loss for the company. Inefficient management can turn daily delivery operations into a nightmarish mess in which orders get lost, forever buried in a poorly managed email account or incompatible CRM software.

Third-party Shipping—Monitor Your Supply Chain

Pro: Increase Efficiency

Prioritizing tasks can help you ensure each aspect of the business is run at capacity. You can do that by evaluating the company resources. If you don’t currently have the experience and skills needed to run a delivery operation in-house, you can hire an expert or choose among the many third-party service providers.

Nowadays, there is a third-party solution for almost any delivery need—from drop shipping, fulfillment centers, delivery trucks and storage facilities.

Con: No Flexibility

Most third-party shipping services come at fixed models and fixed prices. You have no control over the design of the delivery infrastructure, and you’re paying to use the service as is. While this model provides a solution for companies looking to scale slowly without incurring setup overhead, it doesn’t allow for much modification, if any.

Know Your Tech

It is almost impossible to run a business efficiently without the use of advanced technology. The technology you choose should fit your company’s unique business processes. Your ERP software should support you and not the other way around. Technology, after all, is intended to make life easier for people.

In-house Shipping—Design Your Tech

Pro: Ultimate Flexibility

One of the pluses of an in-house shipping model is the ability to customize the delivery technology solution according to your current IT infrastructure, or to choose a suite of solutions that integrate well with your existing ERP systems.

When you have control over the technology, you have control over the data. Data can be analyzed and turned into insights that improve business continuity and drive more sales.

Con: IT Overhead

Technology doesn’t manage itself. It needs professionals who understand it and have the skills to monitor, maintain and manage it. While IT talent doesn’t come cheap, it’s often an investment that pays off in the long term. Outsourcing IT often results in long wait lines to get proper support and fixed solutions that may not be right for your company.

Third-party Shipping—Use Their Tech

Pro: Enhanced Functionality

The technology provided by third-party shipping services usually comes with all the bells and whistles. These companies have a lot of experience and have spent substantial resources on efficient technologies. From delivery route optimization for faster delivery to smart tracking and live alert for customer convenience, third-party shipping services provide the full delivery experience.

Con: Fixed Infrastructure

While many third-party shipping providers can integrate with existing systems, they are usually ready-made technology products. You can’t make any changes to the system or customize it to fit the needs of your company. For better or worse, you can only use the system as it is offered by the third-party provider.

Know Your Budget

The budget is the heart of the company. It’s in every company’s best interest to ensure the budget supplies money efficiently to all departments. The importance of a budget for delivery purposes can be determined according to the type of business and the volume of deliveries the business is estimated to draw or currently sustains.

In-house shipping is a hefty undertaking that adds lines over lines to the delivery budget. The total monthly expense of in-house shipping is made up of many variables—from vehicle costs such as insurance and maintenance, employees costs such as wages and training, and storage facility costs such as space and equipment.

In-house Shipping—Govern Your Budget

Pro: Cheap at Scale

By managing shipping operations in-house, you gain full control over your budget. Yes, there’s a level of control in choosing a third-party provider. The difference lies in the ability to make changes at every level of the delivery infrastructure.

If a certain vehicle is proving to be expensive in lease and maintenance, you can replace it with another model to reduce costs. For example, a vehicle running on a hybrid engine can reduce fuel costs. In-house shipping enables you to improve every aspect of the delivery budget and continually reduce costs.

Con: High Set Up Costs

Before you can get to a point in which you’re running a profitable and efficient delivery machine, you need to set it up. As with every endeavor, the initial costs of getting the operation up and running can be expensive. The exact sum varies from business to business, so be sure to create a comprehensive estimation of the initial capital needed to set up your delivery operation. While online research is always good, it doesn’t replace an individual evaluation of the numbers as they apply to your company.

Third-party Shipping—Maintain Your Budget

Pro: Scalable Costs

If you have no experience in delivery operations or no desire to take part in that aspect of the business, you can take advantage of the services offered by third-party shipping providers. Often, third-party delivery providers help e-commerce owners start small and scale slowly by eliminating the need for setup capital. Often, third-party delivery services help e-commerce owners run a one-person business, further reducing the costs usually allotted for staff.

Con: No Transparency

When you outsource delivery tasks, you aren’t able to control how the budget is handled. You pay a monthly fee for the use of the service. You can’t know how much of the money goes towards training the drivers, vehicle costs or administration. You forfeit that right in favor of using a pre-existing infrastructure. Be sure to choose a third-party provider that can be a trusted partner for the long term.

Bottom Line—Know Your Business

Choose a delivery model that fits your business. Consider your business resources—including talent, tech and money. If you’re running a one-person e-commerce show, third-party providers can help you clear time for more important priorities. If you’re looking to improve your existing delivery ecosystem, you can integrate to a third-party solution. You can also go with a hybrid model that incorporates the strengths of both.

Panorama’s ERP consultants can help your company determine a delivery strategy that continually improves your bottom line.

Written by Limor Wainstein. Limor is a technical writer and editor at Agile SEO, a boutique digital marketing agency focused on technology and SaaS markets. She has over 10 years’ experience writing technical articles and documentation for various audiences, including technical on-site content, software documentation, and dev guides. She specializes in big data analytics, computer/network security, middleware, software development and APIs.

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