Logistics Outsourcing VS In House Fulfillment: which is cheaper?

Definition of Logistics Outsourcing and In-House Fulfillment

Definition of Logistics Outsourcing

Logistics outsourcing refers to transferring all or part of the logistics process to an external supplier. In a typical model, once an order enters the operator's system, picking, packing, and shipping are automatically completed. The customer only sees the result—timely delivery of the order and notifications about its status. Essentially, a professional logistics fulfillment provider like ChinaDivision ☞https://chinadivision.com/ will handle all steps after an order is placed on your website or marketplace platform: receiving and storing goods in warehouses; picking and packing; labeling (including FNSKU, barcodes, and tags); arranging delivery; processing returns; and providing technical integration with sales channels. China Division also offers additional value-added services—customized warehousing and logistics services, from customized holiday packaging to fragile item protection packaging and transportation services, effectively enhancing brand influence and improving customer experience.

Logistics outsourcing allows companies to delegate control and management of certain parts of their supply chain to third parties. Because supply chains involve numerous collaborative steps to ensure goods and materials reach their destinations smoothly, many companies face challenges in managing the entire process from raw material procurement to final delivery. Typically, companies hire third-party logistics (3PL) providers to handle aspects they cannot or are unwilling to manage themselves. Large enterprises, with sufficient revenue to support outsourcing, commonly collaborate with 3PL providers, but this model is becoming a common trend across all types of businesses. Its widespread adoption has led to the global logistics market being valued at $9.41 trillion in 2023, and is projected to grow to $14.08 trillion by 2028.

Definition of In-House Fulfillment

Self-operated logistics is a logistics model where the company manages its own supply chain operations. This means the seller is responsible for all aspects of order processing—from product storage to packaging and delivery to the customer. This model allows for complete control of the supply chain without the involvement of external logistics providers. All processes take place internally—whether in an office, warehouse, home, or rented space. For companies with specific needs or proprietary processes, self-operated logistics is often preferred to ensure the supply chain is managed according to their own standards.

Logistics Outsourcing vs. In-House Fulfillment: Pros and Cons

Logistics Outsourcing： Pros and Cons

Pros：

• Reducing Operating Costs

Businesses typically reduce operating costs by outsourcing logistics. These processes are time-consuming and labor-intensive, incurring additional labor costs in addition to service fees. By having a third-party logistics (3PL) provider handle logistics, businesses can eliminate these labor costs. Outsourcing transportation logistics can also reduce fleet maintenance costs, leading to savings on fuel and maintenance expenses.

• Enhancing Logistics Flexibility

By outsourcing logistics management to a professional logistics service provider, your company can quickly and efficiently adapt to demand fluctuations and market changes, flexibly handling orders ranging from small to large batches. Simultaneously, the responsiveness of your supply chain will become a competitive advantage, enabling your company not only to flexibly respond to market pressures but also to support continued growth and expansion. In short, logistics outsourcing not only allows you to effectively address current needs but also helps you anticipate and seize future opportunities.

• Focusing on Core Operations

Outsourcing logistics enables companies to focus on their core business operations, thereby avoiding the creation of additional logistics tasks and positions that could consume valuable time and resources, ultimately hindering core business development. Many companies choose to outsource logistics to rid themselves of labor-intensive tasks that are not part of their core competencies. By entrusting these tasks to companies that specialize in specific parts of the supply chain management (such as transportation or warehousing), you can focus on critical production-related tasks that contribute to business growth.

• Improving Customer Satisfaction

Professional logistics companies offer reliable delivery times and reasonable shipping costs. Furthermore, customer service will handle any issues promptly and efficiently during transit, all of which help businesses enhance customer service and the overall experience. Creating a positive first impression is crucial after a customer's initial purchase, and outsourcing logistics helps ensure efficient order management, thereby improving the customer experience.

Cons：

• Loss of process control

Outsourcing logistics means a decline in day-to-day logistics control. Companies may not be able to track logistics processes in real time as they would with an internal logistics system. Furthermore, differences in organizational culture, time management, or language between shippers and third-party logistics service providers can lead to delays or communication breakdowns, resulting in potential adverse effects.

• Reliance on third-party suppliers

By outsourcing these processes, your company will depend on third-party logistics (3PLs) to ensure operational continuity. Any disruption to 3PL services can cause your supply chain to stall, delay order fulfillment, and ultimately lead to customer dissatisfaction.

• Difficulty in choosing a suitable logistics service provider

Currently, there are various logistics service providers on the market, each with its own characteristics and advantages. You need to clearly understand your company's core needs and match them with a suitable logistics company to achieve a win-win situation. ChinaDivision is a professional cross-border logistics service provider in the industry, offering not only basic logistics services but also customized packaging services and various value-added services☞ https://chinadivision.com/valueadded to comprehensively meet your needs.

• Data Breach Risk

Third-party logistics providers have access to sensitive data (such as payment details and customer information), increasing the risk of data breaches. A data breach could result in legal penalties and damage to your company's reputation.

In-House Fulfillment： Pros and Cons

Pros:

• Greater Control

Companies that can autonomously manage their supply chain logistics have complete control over the entire process. They can choose the mode of transportation and storage locations for their goods.

• Customized Solutions

Because in-house logistics ensures companies have complete control over their operations, they can also implement innovative, customized solutions specifically designed for their supply chain.

• More Efficient Communication

For critical services such as transportation and warehousing, companies choosing in-house logistics typically require only one contact person, resulting in a better overall communication experience. This reduces the risk of operational disruptions due to misunderstandings or misaligned objectives.

Cons:

• Higher operating costs and resource requirements

In-house logistics operations lead to higher administrative expenses. The team needs to be trained and handle all maintenance and upkeep. Hiring a team to manage in-house logistics increases headcount and may require additional training or onboarding time. In short, in-house logistics places a heavy resource burden on the company due to the need for comprehensive oversight and control.

• Limited scalability

Expanding internal operations as the business grows may present challenges and may require additional investment in infrastructure and personnel.

• Low transportation efficiency

A lack of experience in logistics and transportation, as well as specialized logistics knowledge and technology, leads to inefficiency in developing suitable logistics solutions, potentially impacting delivery timeliness and thus affecting the customer's shopping experience.

Logistics Outsourcing vs. In-House Fulfillment: Which is cheaper?

When choosing between outsourcing and building their own logistics network, companies primarily consider cost. At first glance, it might seem that building their own logistics is cheaper, but in reality, it incurs huge hidden fixed costs: warehouse rental, staffing, professional knowledge and skills training, equipment, utilities, software, and continuous troubleshooting. Moreover, these expenses do not guarantee 100% utilization. To avoid insufficient warehouse space, companies need to rent a relatively large warehouse, but this does not guarantee that the warehouse will always be fully utilized. Furthermore, as order volume increases, unless you are prepared to expand your infrastructure at the same pace, the costs of expanding equipment, personnel, and warehouses will follow. At this point, outsourcing logistics to a third-party logistics provider (3PL) becomes not only convenient but also more financially sensible.

Logistics outsourcing consolidates many of these costs into a predictable service fee that includes all labor costs. You gain access to a well-trained, professional team without the hassle of human resources. For warehousing, you can share the costs of large, specialized warehouses with other brands, paying only for the specific storage space your inventory occupies—whether it's a few boxes or dozens of pallets—and the space can be flexibly adjusted to your needs. Furthermore, third-party logistics (3PL) providers offer complete technology solutions. Most importantly, 3PL ships hundreds of thousands, even millions, of packages annually. This massive volume allows them to secure substantial shipping discounts, which they then pass on to their customers. Individual small businesses, on the other hand, ship relatively small volumes and therefore have limited bargaining power when negotiating with carriers like FedEx, UPS, and USPS. Furthermore, 3PL's price comparison technology automatically finds the most cost-effective shipping method for each order, saving you costs that you couldn't achieve with your own shipping.

How to outsource logistics to the China Division's work?

ChinaDivision is a cross-border logistics service provider that leverages digital and intelligent technologies to offer diversified global transportation resources, global warehousing facilities, and a smart and efficient order fulfillment experience. We help clients deliver goods to buyers worldwide, realizing the vision of "goods without borders." China Division provides one-stop global logistics services, covering all order fulfillment stages from front-end order management to last-mile delivery.

We store goods supplied by our suppliers in domestic warehouses or ports, providing comprehensive warehouse inventory control services to ensure accurate tracking and verification of product quantities and details. We will carefully verify the information you provide, and will notify you promptly of any discrepancies. With our inventory control system ☞https://chinadivision.com/warehousing, you can easily track every movement of your inventory. We also offer customized warehousing and logistics value-added services, from customized holiday packaging to fragile item protection packaging and shipping services, designed to enhance your brand influence, improve customer experience, and provide added value. Then, based on your needs and the details of the order, we will customize the most suitable logistics method for you, finally shipping to the destination and providing last-mile delivery to the buyer.

Conclusion

Whether to choose internal or outsourced logistics depends not only on cost but also on flexibility, scalability, and strategic priorities. Selecting the appropriate logistics method after fully understanding your order volume, growth statistics, and operational priorities will help you find the optimal profit points, optimize logistics operations, thereby improving efficiency, reducing costs, and enhancing customer satisfaction.

FAQs

1、Which 3PL is best for e-commerce order fulfillment?

We are committed to enhancing the shopping experience for all customers through fast and accurate last-mile order fulfillment solutions. ChinaDivision ☞https://chinadivision.com/about is a global cross-border logistics service provider dedicated to serving the cross-border businesses of all sizes. With digital and intelligent technologies at our core, we offer diversified global transportation resources, global warehousing facilities, and a smart and efficient order fulfillment experience, helping clients deliver goods to buyers worldwide and realize the vision of "goods without borders." China Division ☞https://chinadivision.com/fulfillmentprovides  global logistics services, providing end-to-end logistics solutions, ensuring goods reach customers' doorsteps while reducing costs.

2、What is the main reason that some companies choose to outsource fulfillment?

Businesses choose to outsource logistics primarily to reduce logistics costs. By entrusting the complex task of order fulfillment to professional logistics service providers, they can dedicate more time, energy, and funds to the development and growth of their core business, focusing on product development, marketing, and customer interaction.

3、Who benefits the most from outsourcing?

The companies that benefit most from logistics outsourcing are those with limited funds, unable to invest in internal logistics, lacking logistics operation experience and expertise, limited access to technology, and limited flexibility to adjust operations to fluctuating demand. Of course, this also includes companies in a growth phase with gradually increasing freight volumes.

Reference：

1、In-House Fulfillment: When It’s Better to Keep Fulfillment In-House and How to Maximize Performance
https://www.warehousingandfulfillment.com/resources/in-house-fulfillment/