In-House Fulfillment Guide
If you’re an entrepreneur launching an ecommerce business, you might find yourself doing it all, from product development to fulfilling and shipping orders.
To get your ecommerce business up and running, it’s important to understand how to manage an in-house fulfillment strategy that meets customer expectations while keeping fulfillment costs low.
This article covers how to get started with fulfilling online orders, tips for how to fulfill orders yourself, and how to know when it’s time to outsource fulfillment to the experts.
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What is in-house fulfillment?
In-house fulfillment is when an ecommerce business manages the order fulfillment process (including inventory management as well as picking, packing, and shipping orders) themselves, rather than outsourcing fulfillment to a third party.
Common issues & challenges with in-house fulfillment
Taking care of fulfillment in-house makes sense when you’re first starting out, but since it’s a complex and time-consuming process, relying on your time and energy solely to take care of a high volume of orders can lead to a number of issues and headaches.
Here are some of the most common challenges that relate to in-house fulfillment:
1. Slow delivery times
When you’re flooded with orders and rely on just yourself and/or your team to fulfill them, delays are bound to occur. Though the last-mile delivery is out of your hands once an order has been shipped, you are forced to control how quickly you fulfill and ship an order, which is hard enough to keep up with on its own, making taking a day off nearly impossible.
Not only does slow fulfillment and delivery impact supply chain efficiency, it ultimately leads to lower customer satisfaction. When orders are delayed due to slow fulfillment, customers lose trust with your brand, you’ll face more support questions on why an order hasn’t shipped yet, and it can feel like a never-ending cycle.
2. Inaccurate orders
The only thing worse than a late delivery is a delivery that arrives with the wrong item(s). Unfortunately, an order accuracy rate can decline quickly when a business is struggling to keep up with orders and fulfillment operations become disorganized.
Taking small steps to continuously improve your order accuracy rate can yield massive benefits for your business that are absolutely worth the extra effort. But in many cases, optimizing the fulfillment process on your own takes a lot of support and time, and sometimes an investment in technology is necessary.
“We’ve been very impressed by ShipBob’s high accuracy as well as their ability to meet their SLAs. Before we migrated to ShipBob, this was a challenge due to limited resources and time, and we used to frequently make shipping mistakes ourselves.”
3. Disorganized inventory management
Successful in-house fulfillment requires you to have a well-coordinated inventory management system and processes in place that help you keep inventory organized, as well as track inventory effectively. You need to continuously make sure you have enough inventory to meet demand and fulfill orders on time.
Without implementing such a system, inventory management can easily get out of hand and disrupt your entire ecommerce supply chain, leading to stockouts, backorders, and other inventory issues.
4. Lack of storage space
As your ecommerce business grows, you will need to consider if you have enough space to store inventory to meet demand. Although leasing a warehouse is an option, it is often an expensive one, as warehouse management involves a number of costs, such as insurance, equipment, utilities, and labor (read more here for a comprehensive list).
5. Higher overall costs
It’s not uncommon for new ecommerce brands to think that sticking with in-house fulfillment saves money in the long run, but this can’t be further from the truth. In fact, there are hidden costs to self-fulfillment. Once the orders start rolling in, your ecommerce store will be overwhelmed, and you will need to implement a proper fulfillment system to keep up with orders on time.
Attempting to replicate the fulfillment infrastructure and shipping speed of giants like Amazon or even more mature brands will exponentially increase your shipping rates, lead to inaccuracies, and ultimately suck up your time and energy.
In other words, implementing your own technology and managing a warehouse can quickly add up. In fact, most logistics warehouse tenants are expecting a 10% rate hike starting in 2021. That’s why many brands outsource fulfillment to a 3PL, which allows them to utilize a well-established fulfillment infrastructure and advanced technology to get the job done right, without having to manage fulfillment in-house.
6. No time for order fulfillment optimization
With continuous improvement, which is necessary to achieve scalable growth, your focus is on making small incremental improvements in a consistent manner to reduce inefficiencies and save on overall fulfillment costs.
With all of your in-house fulfillment processes at full speed, there is little time to assess the current process or find more efficient ways to fulfill orders. This leaves your business at a disadvantage, and the recurring costs of poorly strategized fulfillment systems can make it hard for your business to scale.
7. Not using the best order fulfillment software
Order fulfillment software can automate time-consuming tasks, such as automatically processing orders and generating picking lists.
There is an abundance of fulfillment software to choose from, and it can be easy to choose the wrong one — especially when you’re figuring it out all on your own. Fulfillment software could include inventory tracking, order management, automatic order processing, and much more.
Fulfillment software should also easily integrate with your existing tech stack, including your ecommerce platform, which offers real-time updates and tracking information to simplify the fulfillment process for you and your customers.
8. Lack of industry knowledge
Experts in logistics operations cultivate knowledge and best practices that benefit companies at all sizes, from startup to established brands.
You might learn a thing or two when you’re fulfilling orders in-house, but as your business grows, you will most likely want to spend less time on logistics and more time on business and/or product development.
3PLs are trained and highly skilled logistics experts, and many of them like ShipBob work with thousands of direct-to-consumer (DTC) brands in a number of verticals.
By working with a logistics expert like a 3PL, they can work with you to find ways to optimize the supply chain, save money, and improve efficiencies.
When in-house fulfillment makes sense
While in-house fulfillment has its challenges, there are certainly circumstances in which it’s better to manage picking, packing, and shipping orders yourself instead of outsourcing fulfillment.
“I’ve talked to people who think they save money by fulfilling themselves. Their first question is always ‘is a 3PL worth the extra expense?’
We see outsourcing fulfillment as a cost-savings and believe it will save you money in the long run. 3PLs negotiate rates, give you back all the time you’d spend stuffing mailers, and reduce the errors you’d make messing up addresses.
Most of all, those are hours we’d spend on tasks that are not scaling our business when we could be using those resources for growth.
You should spend time doing what you do best, and fulfillment is an easy task to take off your plate.”
Gerard Ecker, Founder & CEO of Ocean & Co.
Here are a few signs that in-house fulfillment is the best choice for your ecommerce business (at least for now).
Your order volume is low
For businesses still in the startup phase, it might not make sense to invest in a fulfillment provider quite yet if order volume is still manageable. If you have a low sales volume, then it should be both easier and more cost-effective to manage fulfillment in-house.
You want every order to be a custom order
Some small businesses, especially artists and creators, pride themselves on custom, individual products and even curated packaging for each order. For instance, a shop on Etsy might offer a customized or made-to-order gift and then ship the order with a handwritten note.
Although many 3PLs allow for custom packaging and other ways to custom brand an order, it can be a challenge if your brand’s image is based on custom items and personalization that’s unique for every customer.
You prefer to manage the entire order fulfillment process
It’s common for ecommerce store owners to prefer to keep a close eye on the order fulfillment process from start to finish — and while it is impossible to maintain total control or visibility past a certain point of growth (or control the package once it’s in the carrier’s hands), in-house fulfillment allows merchants to manage inventory and order fulfillment entirely on their own.
However, that’s not to say that if you decide to outsource fulfillment, you lose control. Many 3PLs offer full transparency and visibility into the entire process and work with you to deliver the experience you want for your customers.
Tips for fulfilling orders yourself
Before you push your online store live, be sure you’re prepared to fulfill orders yourself.
Since you’re taking on fulfillment in-house, taking the time to establish a fulfillment strategy can help you stay on top of orders, reduce human error, and ensure you meet customer expectations.
Here are some tips on how to manage an in-house fulfillment operation.
1. Create a shipping strategy and policy
When it comes to shipping, the good news is there are so many different shipping options to choose from. The bad news is there is no one-size-fits-all shipping strategy. So you will need to weigh your options and develop your own shipping strategy and policy.
However, there are some universal best practices, such as offering a combination of fast and affordable shipping methods, which can help you reduce shopping cart abandonment and increase sales.
Though shipping incentives such as free shipping are proven to increase conversions, make sure you can cover the costs of shipping and handling before you offer them to ensure profitability.
To get started, take a look at your budget, the products you sell, and what markets you’d like to sell to, then decide on the right shipping options based on these factors. Over time, you can review your shipping strategy and make improvements as you grow your business.
Once you’ve established your shipping strategy, the next step is to create a concise shipping policy that’s easy to find on your store’s website.
A shipping policy sets expectations with your customers and should always include:
- Shipping rates and costs
- Shipping methods and estimated delivery times
- Shipping restrictions (e.g., certain countries)
- International shipping information and costs
- Returns and exchanges
2. Use fulfillment software
Speed is important, but accuracy is critical. Maintaining a high order accuracy rate (between 96-98% or higher) will help you reduce returns rate, avoid negative customer reviews, and establish brand loyalty.
To create an effective fulfillment process that is fast and accurate, technology is key as it can reduce human error and speed up processes.
There are so many great options out there, but the right fulfillment software will help you automate time-consuming fulfillment tasks, such as:
- Tracking real-time inventory levels
- Generating picking lists for efficient picking
- Optimizing shipping
- Sharing order tracking with customers
You don’t need to invest in the most expensive solution on the market at first, but as you expand, supply chain technology will continue to play a huge role in how you keep your operations running.
Since technology and fulfillment automation is so important, many brands eventually partner with a 3PL like ShipBob that offers both a logistics network and premium technology, rather than needing to invest in the infrastructure, automation, and labor needed to effectively expand their supply chain.
3. Keep inventory organized
Many fulfillment software solutions also integrate with inventory management tools, so you can keep track of inventory levels as you fulfill more orders.
These types of inventory tracking tools can be as complex as an ERP inventory system or as simple as an inventory app that offers essential features.
An additional option is to invest in an inventory scanner that is integrated with your inventory tracking system. They work by scanning an item’s barcode to pull up related information on the item (location, stock availability, etc).
At the end of the day, the best way to keep inventory organized is to ensure inventory is categorized by SKU number, and that you have a system in that place that enables real-time inventory management.
3. Keep a dedicated fulfillment space
When you fulfill orders in-house, you have a couple options on where to set up operations: your house or a rented space. If you decide to rent and manage a warehouse (small commercial space or storage unit), keep in mind that it will come with additional costs.
Whatever you choose, it’s important to keep things organized and your workflows consistent to keep operations running smoothly and to reduce mistakes.
Make sure you have all your packing materials in one place and that it’s well-organized. Your dedicated fulfillment space and established workflows should make it easy for you (or your team) to fulfill orders quickly and accurately.
4. Choose a simple packaging solution
The possibilities on how to utilize packaging to enhance the unboxing experience is endless. But don’t get too caught up on packaging at first.
The most important thing upfront is to make sure that your packaging solution enables safe delivery and reduces the risk of shipping damages.
Remember — packaging is an expense, and if you want to provide fast, affordable shipping (which is more important), be sure you can cover the cost of standard packing materials, including poly mailers, boxes, tape, packing paper, etc.
Branded packaging is a great way to stand out from competitors and delight your customers, but be sure to start small and only invest in inserts, stickers, and fancy packaging if you can afford it upfront.
If part of your branding is offering eco-friendly products, then it might be wise to consider eco-friendly packaging sooner than later. Moral of the story — focus on the essentials first and invest in stand-out packaging as you become more profitable.
5. Develop a returns management process
92% of shoppers say they will buy again if the returns process was an easy and fast process.
Though you can do everything you can to avoid them — ecommerce returns are inevitable.
But rather than looking at returns as a lost opportunity, returns can be seen as a way to enhance the customer experience.
As you think through your in-house fulfillment strategy, make sure to also think about how you will handle returns sooner than later by developing a proper returns management process.
As you build out your process to ensure efficiency, you might also want to use this opportunity to collect product feedback from customers, so you can get insights on how to improve your customer experience as well as product quality.
The alternative to in-house fulfillment: outsourcing order fulfillment
If your business is struggling to find storage space, manage inventory, and ship orders out on time, it’s a good sign that your ecommerce business has outgrown in-house fulfillment.
Outsourcing retail fulfillment can be an intimidating process at first, but once you make the transition, you’ll be able to spend less time on logistics and enable your business to grow.
Here are some of the benefits of outsourcing your fulfillment operations to a trusted 3PL like ShipBob.
Get access to real-time inventory management
ShipBob’s best-in-class fulfillment technology with a built-in inventory management software lets you access real-time inventory tracking updates across all ShipBob fulfillment centers from one dashboard.
You can also view the status of inventory on hand, easily replenish inventory and set automatic reorder point notifications, check on individual order status, and send tracking info back to customers.
ShipBob’s inventory management tools also make it easy to bundle your products for promotions, transfer inventory, and much more.
“We utilize ShipBob’s Inventory API, which allows us to programmatically retrieve real-time data on how many units of each product are currently stored at ShipBob’s warehouses.
We currently use this API to generate custom reports to tie this inventory data into our accounting platforms.”
Provide faster shipping with distributed warehouses
ShipBob’s global fulfillment network continues to expand with fulfillment center locations across the globe. By splitting inventory across multiple warehouses, you can expand your customer reach geographically, simplify cross-border shipping, reduce shipping costs, and speed up deliveries.
Since ShipBob’s proprietary technology operates across its entire distribution network, you can track inventory levels across all locations from one dashboard and make informed decisions on inventory allocation and ideal distribution using our data and analytics reporting tool.
“Now we’re at two fulfillment centers, and being able to have the analytics and see how everything is working together has been extremely helpful for me on the operations end.”
Dana Varrone, Director of Operations at Organic Olivia
Reduce logistics costs
When you outsource fulfillment, you’ll benefit from lowered logistics costs related to warehousing, labor, transportation, and shipping by paying for what you need, whether your volume spikes or slows down.
Rather than needing to invest in a warehouse and technology yourself, ShipBob takes care of the entire fulfillment and shipping process for you. That way, you can leverage our established fulfillment infrastructure and software, saving you time and money in the long while optimizing your retail supply chain.
We also automate shipping for you and have partnerships with major shipping carriers to offer you discounted shipping rates, so you can optimize your shipping strategy without lifting a finger.
“I’ve talked to people who think they save money by fulfilling themselves. Their first question is always ‘is a 3PL worth the extra expense?’ We see outsourcing fulfillment as a cost-savings and believe it will save you money in the long run.
3PLs negotiate rates, give you back all the time you’d spend stuffing mailers, and reduce the errors you’d make messing up addresses.”
Gerard Ecker, Founder & CEO of Ocean & Co.
Scale faster and save time
With a partner like ShipBob, your order fulfillment can work at its maximum efficiency, and you can focus on scaling your ecommerce business.
Time that would have been taken up by processing orders, picking and packing boxes, and taking multiple trips to the post office or local UPS store can now be devoted to other tasks that require your attention, such as marketing, product development, and overall business strategy.
“Last time we shipped our own packages, it took us 3 weeks. It took ShipBob less than 2 days. I couldn’t wait to delegate this business over, because the stress level was through the roof. I am just so grateful for ShipBob.”
Andrea Hamilton, founder of The Finer Things 1920
Benefit from higher order accuracy rates
Working with a 3PL means that you can count on higher order accuracy rates. ShipBob’s pickers and packers are experts at what they do and are driven by ambitious goals to keep order accuracy rates as low as possible.
Whether it’s assigning pickers optimized routes, opening more fulfillment center locations to cut down on shipping times, reduce dimensional weight, or improving our warehouse picking and packing processes, ShipBob is constantly looking for ways to improve and achieve higher levels of order accuracy.
No matter what your fulfillment needs are, ShipBob is ready and able to help your ecommerce business scale quickly and move away from the inefficiencies of in-house fulfillment.
“I shipped everything myself and made a lot of trips to the post office. It was intense and pretty tough. You quickly reach that breaking point, where you cannot do it any longer, and it’s not worth the compromised quality of life. I found ShipBob. The pricing was competitive, but most importantly, the services were excellent. Everything just works.”
Sergio Tache, CEO of Dossier
As a trusted third-party logistics company and fulfillment provider, we harness best practices to offer warehousing, order fulfillment capabilities, premium technology, and support to our partners.
Our growing international fulfillment network allows you to scale your business without restraint, and ShipBob’s technology integrates with leading ecommerce platforms and software to create an end-to-end ecommerce solution.
Whether you’re a new business going through growth pains or a fast-growing brand looking for the ideal 3PL partner, click below to learn about how ShipBob works.
In-house fulfillment FAQs
How do you outsource fulfillment?
When your in-house fulfillment strategy is creating more problems than efficiencies or profits, it’s time to start looking into fulfillment solutions. Research third-party logistics service providers like ShipBob, contact those that offer services that meet your logistics needs, request pricing quotes, build a scorecard, and identify a partner that’s mutually beneficial and will fulfill your needs.
How much does outsourcing fulfillment cost?
The cost of outsourcing fulfillment depends on the provider you choose to outsource to. Ideally, your 3PL will have a clear, transparent, and fixed pricing structure upfront, so that you can avoid surprise fees. ShipBob, for example, has a fixed inventory receiving fee along with a flat rate for each bin, shelf, or pallet your inventory uses, and only charges the cost to fulfill an order after that.
How does order fulfillment work?
Order fulfillment begins when a business processes an order that was placed online. If you work with a 3PL, then the order is then forwarded on to a fulfillment center, where pickers pick the items included in the order, package them up, and the carrier picks up shipments from their fulfillment center. Orders are then shipped to the customer, and shipment tracking is forwarded to them.
What are the warning signs that it’s time to move from in‑house fulfillment to a fulfillment partner like ShipBob?
Warning signs it’s time to outsource fulfillment include:
- Order volume consistently growing MoM
- Fulfillment tasks consuming a considerable portion of your team’s time
- Warehouse space constraints are limiting inventory growth
- Shipping costs exceeding industry benchmarks due to limited carrier options
- Increasing error rates during busy periods
- Difficulty scaling staff for seasonal spikes
- Shipping speeds falling behind competitor offerings
- Excessive time is spent on logistics, instead of focusing on product development and marketing initiatives
If your business is facing any of these challenges, it’s time you consider outsourcing fulfillment to an expert provider like ShipBob or adopt a warehouse management system like ShipBob WMS.
How do ShipBob’s pricing and labor costs compare to self-fulfillment overhead?
For some merchants, ShipBob’s outsourced pricing model can result in massive cost savings when compared to self-fulfillment (when accounting for all expenses).
While per-order fees may appear higher than direct labor costs alone, self-fulfillment requires significant overhead, including warehouse leases (which can be very costly), equipment (forklifts, racking, packaging stations), salaries, benefits, training, insurance, utilities, maintenance, and technology systems.
ShipBob’s model eliminates these fixed expenses, converting them to predictable per-order costs that scale with your business.
How can brands use ShipBob’s analytics to forecast order volume and shipping fees?
ShipBob’s analytics provide historical order patterns, seasonal fluctuation data, and geographic distribution insights that power accurate forecasting.
Our platform shows average shipping costs by destination region, package weight trends, and other shipping patterns that help predict future expenses. ShipBob’s technology also provides inventory forecasting tools that account for historical sales velocity and lead times.
What operational challenges come with scaling in-house logistics?
Scaling in-house logistics presents significant challenges, including warehouse space constraints that force frequent relocations, difficulty hiring, training, and retaining staff, increasing management complexity as team size grows, and technology limitations.
Additional challenges include maintaining consistent processes during rapid expansion, managing carrier relationships without volume leverage, implementing adequate security and insurance, and developing standard operating procedures that support quality control as new staff onboard.
What metrics should brands compare when evaluating in-house vs outsourced fulfillment?
When comparing fulfillment options, evaluate:
- All-in cost per order (including labor, facilities, materials, shipping)
- Order accuracy rates
- Average processing time from order receipt to shipment
- Shipping costs as percentage of order value
- Perfect order percentage
- Inventory carrying costs
- Peak season capacity and flexibility
- Geographic coverage for 2-day delivery
- Technology integration capabilities
- Returns processing efficiency
- Management time allocation
Create a comprehensive TCO (total cost of ownership) analysis that includes both direct expenses and opportunity costs.
What advantages does outsourcing fulfillment to ShipBob have over in-house fulfillment?
ShipBob offers significant advantages over in house operations, such as:
Distributed network: Reduce shipping costs and improve shipping speeds by leveraging multiple fulfillment centers
Negotiated carrier rates: Access to discounted shipping rates
Advanced technology: Unlock real-time inventory visibility and analytics
Scalability: Flex capacity up or down without lease commitments or hiring
Expertise: Fulfillment specialists handle logistics while you focus on growth
Want to keep a portion of your fulfillment in-house while using some of ShipBob’s fulfillment centers? Our hybrid fulfillment model gives you flexibility and control while accessing enterprise-level infrastructure. Keep some inventory in-house while leveraging ShipBob’s network for overflow and geographic expansion.
What is the benefit of giving up my business carrier accounts if I work with a 3PL?
Switching to ShipBob’s carrier rates typically provides substantial benefits:
- Better pricing: Our collective shipping volume secures rates individual brands can’t negotiate
- Simplified operations: One invoice instead of managing multiple carrier relationships and contracts
- Reduced administrative burden: No rate negotiations, billing disputes, or account management
- Access to multiple carriers: Flexibility across USPS, UPS, FedEx, and regional carriers
- Technology optimization: Our system automatically selects the most cost-effective carrier per shipment
While established brands may have competitive rates, ShipBob’s aggregated volume often delivers equal or better pricing with significantly less operational overhead.
Does ShipBob offer in-house fulfillment software?
Yes! ShipBob offers our proprietary warehouse management software to brands managing in-house operations. With ShipBob WMS, you get access to the same powerful technology that runs our fulfillment network (inventory management, order routing, real-time tracking, and analytics).
You can even keep some inventory in your own warehouse while using some of ShipBob’s fulfillment centers. This enables a true hybrid model where you maintain control over some fulfillment while leveraging our infrastructure for geographic expansion or overflow capacity.
Our software integrates seamlessly with major ecommerce platforms, providing unified visibility across all fulfillment locations and sales channels in one dashboard.
