Introduction
Supply chain pros are continually faced with new challenges. These include supporting new growth opportunities, building resilience to potential risks, and increasing competitiveness and efficiencies, among others. Each challenge presents a range of possible solutions, many of them costly. In many cases, the first question a supply chain executive must consider is whether to build the required logistical capabilities or partner with providers that have them? With that in mind, this paper will offer seven considerations to weigh when making that decision.
The Outsourcing Alternative in Fulfillment
According to the 2023 Third Party Logistics report from the Council of Supply Chain Management Professionals, 55% of companies surveyed expect to increase their use of outsourced fulfillment partners. This isn’t surprising, considering third-party logistics providers, or 3PLs, have built robust physical networks and invested in sophisticated information technology, allowing them to provide services efficiently and to respond quickly to market conditions.
But outsourcing is a big decision, particularly for manufacturers that have managed their own product receiving, storage and shipping in the past. Many logistics managers at manufacturing companies that are expanding into new markets are being asked by senior executives for the pros and cons of outsourcing versus expanding their in-house fulfillment operations.
This white paper is designed to concisely summarize the key issues manufacturers will want to consider as they make this important decision. We’ll look at seven questions that many manufacturers will want to consider:
- Cost: What will it cost to build and manage additional fulfillment operations versus outsourcing those operations to a third-party logistics provider, or 3PL?
- Expertise: Do we have the internal capabilities to meet the demands of a new type of customer, or would a 3PL do it better?
- Control: What would it take to ensure a 3PL provides the level of customer service I expect and the flexibility my company will need as our business evolves?
- Geographic reach: If new sales channels require fulfilling orders nationwide, are we better off taking on that ourselves or turning to a provider with an existing national distribution network?
- Infrastructure and labor: What new capabilities do we need to service new sales channels? What would it cost to acquire those capabilities, versus using a 3PL with existing equipment, labor, and facilities?
- Information technology: With data playing an ever-bigger role in efficient fulfillment, what are the IT requirements of an in-house fulfillment operation for a new sales channel? What integration challenges might we face if we work with a third party?
- Seasonality: If we expect sales peaks in a new sales channel, will we be as able to handle those order surges as well as a 3PL could?
Let’s look at each of these questions.
