When Does It Make Financial Sense to Outsource to a 3PL?

Understanding the Right Time to Outsource Fulfillment and Save Costs

Now that you understand the key questions to ask and the importance of finding the right 3PL provider, the next big question is: When does it make financial sense to make the leap? After all, outsourcing your fulfillment to a third-party logistics provider is a significant decision—one that requires careful consideration of both your business needs and your budget.

In this post, we’ll walk through the signs that indicate it’s time to transition to a 3PL from a financial perspective. We’ll also explore how to calculate the potential costs and savings to help you determine when outsourcing is a financially sound move for your wholesale business.

1. When You’ve Hit a Growth Plateau

When your wholesale business begins to scale, you may find yourself facing operational bottlenecks. This might be due to inventory management, order fulfillment, or shipping times. If your current in-house fulfillment process isn’t keeping up with demand, you could be losing customers and missing out on opportunities for growth.

A 3PL can help you break through this plateau by offering:

• Faster fulfillment and shipping (thanks to their distribution network and technology)

• Better scalability to handle increased order volume

• Efficient inventory management that minimizes stockouts or overstocking
  

While it may seem like an upfront cost, transitioning to a 3PL can unlock the next level of growth for your business, helping you meet demand more efficiently and even expand into new markets.

2. When You’re Spending Too Much on Fulfillment

If you’re still managing fulfillment in-house, it’s important to take a close look at the costs involved. Often, businesses underestimate how much it actually costs to handle fulfillment themselves, especially as the order volume increases. These hidden costs can include:

• Labor costs: Hiring and managing employees for packing, labeling, and shipping orders.

• Warehouse space: Renting additional space for inventory storage and handling overflow stock.

• Shipping fees: Rising costs of shipping (especially if you’re shipping internationally) or not taking advantage of bulk rates.

• Operational inefficiencies: Time spent managing inventory, tracking orders, or dealing with fulfillment errors.
  

When you outsource fulfillment to a 3PL, you often gain access to discounted shipping rates due to the 3PL’s volume-based partnerships with shipping carriers. You can also eliminate labor and storage costs because the 3PL already has a warehouse and dedicated staff to handle your products.

By crunching the numbers, you’ll likely find that outsourcing to a 3PL saves money on operational overhead and offers better pricing for shipping—making it a financially viable solution in the long term.

3. When You Need to Focus on Core Activities

If you’re spending more time dealing with order fulfillment, inventory management, or handling returns than you are growing your business, it may be time to think about outsourcing.

Handling fulfillment in-house, especially as you scale, takes a lot of time and resources. From packing orders to making sure every shipment goes out correctly, it can take you away from the critical tasks of growing your brand or working on marketing and sales.

Outsourcing to a 3PL lets you focus on what you do best—whether that’s designing products, marketing to your audience, or managing customer relationships—while the 3PL handles the logistics. This shift can help you increase your revenue and profitability by letting you direct your energy to high-impact activities.

4. When You’re Struggling with Seasonal Fluctuations

For many wholesale businesses, demand fluctuates throughout the year, whether it’s due to seasonality, promotional events, or product launches. This can create inventory management nightmares, as you might find yourself with excess stock during slow periods or unable to meet demand during peak seasons.

A 3PL can help by offering flexible storage solutions that allow you to adjust your inventory levels based on demand. Some 3PLs even offer seasonal warehousing, where you can scale up or down without having to commit to long-term storage fees.

By outsourcing fulfillment to a 3PL, you can smooth out the seasonal peaks and valleys of your business, ensuring you only pay for the space and services you need.

5. When You’re Ready to Expand to New Markets

If you’re planning to expand your wholesale business to new regions—whether it’s a new state, country, or continent—working with a 3PL can make it easier to manage these transitions. International shipping can be complex, with various customs requirements and logistics challenges.

Many 3PLs have global fulfillment capabilities or strategic warehouse locations in key markets, which helps reduce shipping costs and delivery times. Additionally, some 3PLs handle international fulfillment and customs clearance for you, which can make entering new markets much easier.

If you want to expand beyond your current market, a 3PL can be an affordable, efficient way to do so without having to invest in building your own global infrastructure.

How to Calculate the Financial Impact of Outsourcing to a 3PL

To determine when outsourcing to a 3PL makes financial sense, let’s consider the financial impact using a simple breakdown.

We’ll assume the following scenario:

• You have 1,000 orders per month with an average of 15 line items per order.

• Your in-house fulfillment cost (for labor, warehouse space, shipping, etc.) is about $22,500 per month.

• You’re considering a 3PL with the following pricing:

  • Storage: $1,500 per month

  • Pick and Pack: $16,000 per month (based on $1 per line item and $1 per order)

  • Shipping Discounts: Estimated savings of $3,000 per month from the 3PL’s bulk shipping rates.

In-House Fulfillment vs. Outsourcing to a 3PL

Cost	In-House Fulfillment	Outsourcing to 3PL
Labor Costs	$10,000/month	$0 (covered by 3PL)
Warehouse Costs	$2,500/month	$1,500/month
Pick and Pack	$0/month	$16,000/month
Shipping Costs	$10,000/month	$2,000/month (after discount)
Total	$22,500/month	$19,500/month

Savings:By transitioning to the 3PL, you could potentially save $3,500 per month. This savings comes from lower labor costs, reduced warehouse overhead, and shipping discounts. And a lot LESS STRESS.

Is It Time for You to Outsource to a 3PL?

When does it make financial sense to outsource fulfillment to a 3PL? If any of the following apply to you:

• You’re seeing growth and can’t keep up with order volume or fulfillment efficiency.

• You’re spending too much on fulfillment—both in terms of time and money.

• You want to focus on growing your brand rather than managing logistics.

• You’re facing seasonal fluctuations or planning to expand into new markets.

A 3PL can help your wholesale brand save money, improve efficiency, and unlock new growth opportunities. By calculating your current fulfillment costs and comparing them to the pricing of a 3PL, you can determine when outsourcing becomes a financially savvy decision.

Outsourcing isn’t just about passing off tasks—it’s about creating a more scalable, profitable, and stress-free business model. By evaluating your current needs and future goals, you can make an informed decision that supports the long-term success of your wholesale brand.

Key Takeaways:

• Outsourcing to a 3PL can make financial sense when you're struggling with inefficiencies, high fulfillment costs, or seasonal fluctuations.

• The costs of in-house fulfillment may be higher than you realize. A 3PL can save you on labor, storage, and shipping.

• Flexible storage, shipping discounts, and scalable services from a 3PL can support your growth as you expand into new markets or handle increased order volume.

Make sure to evaluate all costs and benefits carefully and please, whatever you do, get multiple referrals before transitioning to a 3PL, and consider both immediate savings and long-term scalability.