Internalization or outsourcing logistics is a real question for merchants. The choice is a strategic one, involving many issues and challenges. Which model to choose for the best customer experience? What techniques should be adopted for e-commerce logistics management? ? We tell you all about it in this article…
If I outsource, I can free up my time and concentrate on my core business, but in return I lose control of my customers’ delivery experience. If I internalize, I retain control over logistics processes and the delivery experience, but in return I don’t have the guarantee that my orders will be executed as well as by a logistics professional. So how do you strike the right balance between financial and human investment, time savings, mastery of logistics processes and speed of execution?
In short, both models have their advantages and disadvantages. Choosing one over the other is a personal choice, but also a strategic one for your business. But what if we told you that it’s possible to take advantage of both models? What if you didn’t have to choose between in-house and outsourced logistics?
First and foremost, as a merchant, it’s important to ask yourself the right questions before deciding on a logistics model. You need to ask yourself:
- What is my annual order volume?
- What stage of development is my business at?
- How much do I know about logistics?
- What budget and how much time do I want to devote to this activity?
- And above all, which players can I rely on for maximum growth?
Are you hesitating between the two models and need guidance in your choice? You can view the replay of our webinar “Internalize or outsource: which e-commerce logistics management model for the best customer experience”.
The benefits of in-house e-commerce logistics management
Above all, insourcing allows you to develop your business skills. It’s not just marketing knowledge that will enable an e-tailer to master his subject. In fact, there are many parameters to take into account, and it’s important to know :
- Master logistics processes to perfect your agility in launching new products,
- Mastering the customer experience (quality, preparation, lead times, etc.) Companies often want to understand the consumer as a whole, i.e. what he prefers and what he doesn’t, and this knowledge is sometimes easier to obtain when adopting an internalized logistics model.
- Easy implementation with the right technologies. In today’s ultra-connected world, owning and operating a technology capable of bringing together the functionalities of several software packages not only gives you a considerable advantage, but also makes your operations easier.
However, there are a few points to watch out for when a company opts for an in-house logistics model:
- The human, material and financial investment depends on the size of your business. Indeed, when you’re just starting out in e-commerce, logistics are often handled from a small office, a small warehouse, and little by little the e-retailer and his business grow.
- The substantial investment in terms of time
- The right methodologies: When a company starts up, it has a small volume of orders to process, but as it grows, the challenge quickly becomes more and more imposing. So it’s essential to have the right people with the right skills to build a solid foundation of logistics knowledge.
Internalization enables us to master and control logistics processes, while remaining closer to our products. This is not the case when different products are dispatched to a logistics provider’s warehouse, for example.
Nevertheless, this model requires considerable human, material and financial resources. It’s worth pointing out that insourcing is important because it serves as a “laboratory” for the first products to be launched. In this way, you can split up the market and assess risks more easily.
The benefits of outsourcing
Outsourcing, on the other hand, also raises many questions. When a retailer sells products over the Internet, the customer’s first contact with the product is when they unpack their order. For this reason, the entire chain leading up to unpacking is extremely important. The first questions the customer will be faced with are: “How did I get my package delivered?” and above all, “In what condition did I get my package back?”
The shopping experience depends directly on the logistician who creates the link between payment and receipt of the product.
That’s why outsourcing logistics also means delegating responsibility. The choice of a logistician will guarantee your customer’s satisfaction, and must therefore be carefully selected according to several criteria:
- Its logistics skills ,
- Its transport promises,
- And, the technology it offers: Does its technology enable me to address all the markets I want and achieve the best possible customer satisfaction?
You can find out more about how to choose the most suitable logistics provider in the replay of our latest webinar: “Internalize or outsource: Which logistics model should you choose to deliver the best customer experience?”
Not all logistics providers can meet your specific requirements. That’s why your choice of service provider must be adapted to your business and the type of products you carry, such as storage type, product morphology, etc…
That’s why we’ve drawn up three indicators to help you check that your service provider’s skills match your expectations:
- Quality : Is it able to meet consumer expectations, or even surprise them?
- Speed: Can it ensure that orders are carried out correctly, both in terms of quality and deadlines?
- Agility : Can it adapt to peaks in activity, special requests, unforeseen events, etc.?
Remember that the transport contracts proposed by your logistics provider must be consistent with the level of service you require. So that the logistics provider can :
- Offer your own transport contracts: pooled with all your merchant customers, you can offer competitive contracts.
- Managing relations with the carrier : Follow-ups, claims and disputes are sometimes handled by a specialized department.
- Demonstrate agility: By letting you deploy your own transport strategies, whether by mobilizing your own contract, that of your logistics provider, or even that of a sales channel.
If you choose to outsource your logistics, you can :
- Rely on the know-how of an expert in e-commerce logistics,
- Benefit from the logistics provider’s transport contracts,
- Focus on developing your business,
- Cancel the additional cost in terms of human resources,
- And you won’t have to invest in mobilizing equipment.
Despite this, outsourcing also requires a number of points to be borne in mind, including the following:
- Logistics delegation does not mean less control over the preparation process,
- Losing contact with your products can be quite anxiety-provoking for a new e-tailer,
- You need the right methodologies to succeed
Hybrid logistics
And what if the best strategy for increasing sales wasn’t to rely on hybrid logistics?
Rather than choosing between them, hybrid logistics will enable you to dispatch your stock to different warehouses: your own, a logistics provider’s or a Marketplace’s fulfillment platform (e.g. Amazon FBA).
So, for example, you may decide to keep in-house all products for which you wish to retain control, or test the market. On the other hand, for “best seller” products that sell well and en masse, you may decide to outsource them to your logistics provider. Finally, you may also choose to place your products in a marketplace warehouse for reasons of visibility.
Shippingbo will enable you to implement this hybrid logistics solution, allowing you to orchestrate your orders and manage your e-commerce inventories distributed across these warehouses, by connecting them directly to your sales channels. The aim is to :
- Enhance the value of your stock: pool the value of your stock for other sales projects (e.g. Amazon and Cdiscount offer to ship orders from other sales channels (other marketplaces, websites….).
- Open up your warehouses to all sales channels (no more warehouses dedicated solely to shipping orders from a single sales channel).
- Keep control of your product distribution!
Internal or external logistics: why choose?
With Shippingbo, you don’t force yourself into a choice, but gain agility and can decide, according to your prerequisites, which stock to place where, when and with whom.
