12 Reasons Why You Don’t Want To Tackle Fulfillment In-House

Many small e-commerce businesses opt to keep fulfillment in-house for several reasons.

It makes sense that for small e-commerce businesses, it is more cost-effective to handle fulfillment internally. This approach can be especially appealing for startups or businesses with low order volumes. Outsourcing fulfillment may not be financially viable when you first launch your venture. And while this is an excellent and reasonable strategy, you want to ensure you’ve sorted out your fulfillment services before you plan for growth. 

One primary advantage is the perceived control over the entire fulfillment process, which can be reassuring when starting in the industry. You can directly oversee inventory levels, packaging quality, and shipping timelines by managing operations internally. As a result, you can have more direct control over customer satisfaction. This power level can be particularly appealing to entrepreneurs who are deeply invested in the quality and presentation of their products.

Additionally, in-house fulfillment allows for greater customization and branding opportunities. As a small business, you may be able to tailor packaging materials, insert personalized notes, and create unique unboxing experiences that reflect your brand identity. This customized touch can foster stronger customer connections and encourage repeat purchases and word-of-mouth referrals. However, weighing some elements contributing to customer loyalty is essential. Is a handwritten note more critical than fast delivery when 4 in 10 shoppers decide not to order if the delivery takes over a week? 

For some businesses, especially with niche or specialized products, in-house fulfillment can provide flexibility to accommodate unique requirements or order customization requests. So, if you manage fulfillment internally, you can swiftly adapt to changing customer preferences and market trends without relying on third-party providers. Yet, here again, is it realistic that a small business could adapt faster than specialist fulfillment experts? 

If you are still undecided, here are 12 reasons why you shouldn’t keep in-house fulfillment in the long term. 

Limited scalability

How do you grow? You do not just get more revenue from the order as demand increases. You also have more responsibilities when managing inventory, packing, and shipping. This can rapidly become burdensome without the infrastructure and resources of third-party fulfillment providers. 

Scaling your operations can be challenging and costly. And, regarding In-house fulfillment, you may need help making the investments required for additional warehouse space, equipment, and staff. 

High overhead costs

You can’t do it all yourself. So, if you are not outsourcing to a fulfillment service company, you must invest in building up the resources and infrastructure that in-house fulfillment requires. So, you must be prepared for expenses such as leasing warehouse space, buying packing materials, investing in shipping equipment, and hiring and training staff.

There are also ongoing overhead costs such as utilities, insurance, and maintenance. So, with this in mind, is managing the day-to-day expenses of fulfillment operations still cheaper than hiring a third-party provider? 

Time-consuming logistics

Let’s be realistic. Logistics can be time-consuming, and this can be a tricky challenge for small businesses. Even with a strategic plan, you’ll find that managing inventory, packing orders, and coordinating shipments requires a lot of time and attention. 

The excellent news: Streamlined processes and specialized software can help. The bad news is that you must have the budget in-house to implement those. 

Your team may spend substantial hours on logistical operations instead of core business activities such as marketing. Besides, the manual nature of in-house logistics tends to create delays in order processing and shipping and can increase the risk of human errors. 

Lack of expertise

Here’s an honest question: Do you have specialized logistics, inventory management, and shipping knowledge? If the answer is no, you are likely to find optimizing processes effectively challenging and stressful. There’s no denying that lack of expertise is the number one cause of errors in inventory forecasting, warehouse organization, and order fulfillment. 

Ultimately, order fulfillment requires logistical expertise to maintain operational efficiency and positively impact the overall success of your e-commerce venture.

Seasonal fluctuations

Order volumes can spike dramatically during peak holidays or promotional events. It’s no surprise that Christmas, for instance, strains internal resources and processes. 

Third-party suppliers can scale up accordingly, but small businesses need help to meet the increased demand efficiently. 

As a result, order processing and shipping delays will likely occur, and your customers will be dissatisfied. Besides, you may not be prepared to manage inventory levels and accommodate seasonal fluctuations as precisely as a fulfillment partner with more market experience. 

Geographic limitations

How far can you deliver? How far do your goods travel? With in-house fulfillment, you may only be targeting local customers. Without the widespread network of distribution centers and shipping partners of third-party providers, it can be tricky to reach customers in distant or international markets efficiently. 

Besides, it’s worth mentioning that shipping costs and delivery times can vary significantly based on geographic distance. So even if you try to expand your reach, the high prices will likely deter international or cross-regional customers. 

Finally, you may face new logistical challenges you must familiarize yourself with, such as customs regulations and import/export restrictions when shipping internationally. These geographic limitations can restrict growth opportunities.

Reduced flexibility

Third-party providers offer diverse shipping options and delivery speeds. However, your internal operations cannot adapt to changing customer demands or market conditions.

You can’t access multiple fulfillment centers or carrier networks, so you struggle to offer fast same-day or next-day shipping or other alternative delivery options. This lack of adaptability frequently leads to missed sales opportunities because customers prefer to buy from e-commerce businesses that adapt to their needs. 

Risk management

When you decide to manage order fulfillment yourself, you tend to depend on a single location for storage, packing, and shipping, increasing your vulnerability to various risks, including natural disasters, theft, and equipment failures. 

As a small business, it’s clear that you can’t open multiple packing and storage locations to manage yourself. This means that you may face severe disruptions to your operations. Of course, implementing comprehensive risk mitigation strategies is essential. It will safeguard your assets and processes in the face of potential threats, but here again, the matter of costs can’t be ignored. It is expensive to do those things well by yourself. 

On the other hand, third-party fulfillment providers can and will offer these services. 

Quality control

Funnily enough, many small businesses claim they manage fulfillment in-house for quality control. But, in reality, with the oversight and expertise of third-party providers, it can be easier to maintain consistent order quality and accuracy. 

Implementing rigorous inspection processes to detect and address fulfillment issues is essential. These could be damaged goods, incorrect shipments, packaging errors, etc. Failure to maintain high standards will affect customer satisfaction, drive high returns and negative reviews, and damage the brand’s reputation. 

But can you afford to implement reliable quality control strategies? 

Opportunity costs

The time and resources you invest in managing internal fulfillment operations will eventually detract from other essential business activities, including marketing, product development, and customer service. So, while it is clear that in-house fulfillment may seem cost-effective, the potential revenue lost by diverting attention away from strategic initiatives can outweigh the perceived savings. 

Ask yourself: Where should you be investing your budget right now? Is in-house fulfillment truly the way to growth? 

Competitive advantage

Fulfilling your orders yourself can put you at a competitive disadvantage as a small e-commerce venture. Ultimately, for small businesses on a limited budget, the key to growth is to focus extensively on your strengths, which would be your unique products. So, while outsourcing can be, at first, a drain on your budget and, ultimately, why you may be against the idea of reaching out to fulfillment companies, it also means that your internal operations may struggle to match the efficiency and cost-effectiveness of third-party providers. 

On the other hand, competitors can leverage outsourcing fulfillment to offer faster shipping, lower shipping costs, and a more comprehensive range of fulfillment options, which can attract more customers and help them gain market share. So, the initial cost advantage of DIY brings a significant competitive disadvantage. 

Legal liabilities

What could be the legal liabilities of managing fulfillment in-house? They could be various, ranging from being involved in a collision to mishandling products in transport. 

There’s also the risk of taking on last-minute fulfillment rides when you were not planning to. For example, you could receive an order notification with a same-day delivery request when enjoying a night out with friends. If you are weighing the costs of not meeting the delivery deadline vs. the costs of drinking and drinking, here’s the thing. You could be charged with DUI, even if you don’t cause any accident, and this could end with requesting bail bonds to get out of jail. While this may sound like an extreme case, it is a frequent occurrence for small businesses trying to tackle too much by themselves. Is going to jail genuinely worth the risk? 

The bottom line is that it is worth investing in specialist fulfillment rather than trying the DIY approach. The benefits of professional services outweigh the initial costs.