In-House vs Third-Party Delivery – Which Way to Go

by Rakuten Super Logistics | eCommerce Fulfillment

This is a guest post by Agile SEO, a strategic search marketing company for technology brands. Agile SEO uses search data and a fine-tuned methodology to identify dozens of audiences within your market that represent big opportunities.

Technological advancements and service-oriented business models have turned the e-commerce market into a consumer-oriented experience. From simple and user-friendly e-shops, products customization, and convenient delivery methods—individual client needs and desires have a huge influence on purchasing decisions.

Consumers want fast, efficient, and convenient delivery services. In a 2015 research, 96% of surveyed shoppers attributed a positive delivery experience to choosing a repeat retailer, while poor delivery options led 51% of the shoppers to abandon a full cart. As consumers grow used to delivery models such as Amazon Prime, choices regarding last-mile delivery become increasingly important.

The demand for better delivery experiences has led to an increasing amount of third-party delivery solutions. E-commerce companies can now customize delivery models to fit their needs. While some companies opt to keep their delivery operations in-house, many digital-based e-commerce businesses partner with third-party logistics firms (3PL) for their entire last-mile delivery infrastructure.

What Is In-House Delivery?
Businesses using the in-house delivery model hire, manage and operate their own delivery infrastructure. They have a warehouse or a dedicated space for storing, managing, and delivering stock, and they operate a delivery vehicle fleet. This model gives the company ultimate control over all the delivery operational functions but requires expertise.

What Is Third-Party Delivery?
Companies that lack the funds or experience required to run an in-house delivery operation can outsource delivery logistics to a third-party company. Nowadays, third-party delivery services include an increasing variety of delivery solutions such as drop shipping, fulfillment, last-mile courier services, and digital management platforms.

What Are the Differences Between In-House and Third-Party Delivery?

The main difference between in-house and third-party delivery services is the entity responsible for the delivery operation. Businesses using the in-house model maintain control over the delivery operation. Outsourcing the delivery service to third-party companies means entrusting the contractor with the delivery. One model isn’t better than the other—each offers a unique set of advantages and limitations.

In-House and Third-Party Delivery – Pros & Cons

Both delivery models have advantages that can serve the unique needs of your business. There are no universal pros and cons, only the functions that fit your business best. The following questions offer prompts that may help you find the best delivery solutions for you.

Do You Have the Experience Needed for In-House Delivery?

Delivery logistics can take up a huge amount of time and require competent staff. From managing a warehouse, organizing stock in an effective manner, determining packaging procedures, operating a delivery fleet, and managing customer service and returns—you want to cover every aspect of the logistics in an efficient and cost-effective manner.

With in-house delivery, you retain control over the delivery experience provided to your customer. Control gives you access to valuable information about daily operations and consumer demand. You can use the data to generate optimization reports that may lead to better customer experience and overall growth.

If delivery logistics are beyond your scope, or you prefer to focus your time and energy on other areas of the business, consider partnering with a third-party delivery service. Couriers, fulfillment centers, and all-inclusive delivery service companies have the experience and resources needed to offer your customers flexible and cost-effective delivery options.

Can You Handle IT Requirements In-House?

Technology is the key to efficient operations. If you want to manage warehouse and delivery in-house, you’re going to need a smart IT infrastructure. While small retailers can run smoothly with only emails, spreadsheets, and dedicated CRM tools for purchasing and customer service, companies with high-volume shipping need to integrate a complex set of digital platforms.

If you have the funds to invest in intelligent systems, you could manage, monitor, analyze, and optimize every aspect of the delivery. A cloud-based warehouse management system (WMS) keeps an eye on every aspect of the fulfillment. An e-commerce store integrated with a customer management system, real-time inventory listings, and online tracking creates a seamless purchase experience that connects all parties involved.

Companies with low budgets or new businesses looking to scale slowly can take advantage of the digital platforms offered by third-party delivery services. If you outsource all delivery operations, the third-party company will take care of everything and provide you with APIs for seamless integration or dedicated online tools.

Alternatively, you can find many online tools for specific delivery functions such as customer rating and smart tracking. Online solutions can help businesses with an existing delivery operation integrate with last-mile tracking features or warehouse management systems (WMS) while keeping delivery staff and stock in-house.

Which Delivery Model Fits Your Budget?

The end goal of every business is to turn a profit. For that purpose, each business needs to find a budget that enables the distribution of the overall budget in a way that maximizes profits. Since delivery models cost can influence your company’s growth, make sure the models you choose can sustain your business for the long term. In-house delivery incurs many costs. Be sure to do the math before deciding one way or another. To get you started, here’s a list of some expenses involved:

  • Warehouse/storage space
  • Insurance
  • Equipment
  • Maintenance
  • Utilities
  • Software
  • Labor
  • Training
  • Employee benefits
  • Shipping
  • Shipping Supplies

Fast-growing startups and companies looking to scale quickly can leverage the existing infrastructure third-party companies offer, along with low overhead costs. Make sure you carefully select your third party delivery services because they’re going to become an extension of your business and will represent your brand with every shipment.

Which Delivery Model Is Best for Your Business?

In-house fulfillment can give some companies the control and freedom needed for highly customized delivery experiences. Other companies may find stability in long-term growth by joining forces with a third-party fulfillment partner. There is also an advantage in a hybrid approach to fulfillment by combining an in-house fulfillment center with a third-party fulfillment center closer to your customers to increase delivery speed.

Technological advancements and unique models support customized solutions for both in-house and third-party delivery services. Online retailers can consider their needs and decide which delivery model fits their business best.