Self-Delivery vs Third-Party Delivery: When Is In-House Delivery Worth It?
July 19, 2021
In-house or third-party delivery - that is the question.
Regardless of the industry you're in, there comes a time when you need to consider your delivery options. But before you even start thinking about same-day delivery or contactless delivery, you need to decide if you'll be outsourcing or handling delivery in-house.
Whether or not self-delivery is on the menu for you depends on a lot of things. The nature and maturity of your business, the size of your staff, the technology you're using, as well as the cargo you will be delivering among other things.
To fulfill your orders and delight customers with excellent delivery services, you need to know when you can handle in-house delivery and with what last mile delivery software.
Today, we take a close look at two types of delivery service - self-delivery vs third-party delivery company - to help you make the right decision and manage your deliveries cost- and time-efficiently.
In-house or self-delivery refers to the type of transportation handled solely using your business' own resources. It means you control your drivers, customer communication, vehicle tracking, Proof of Delivery, and everything that comes with managing a delivery operation.
Third-party delivery, on the other hand, refers to the type of delivery experience handled via outsourcing delivery services. In this case, you don't need to have drivers or even a fleet for that matter. When you partner with a business that provides a delivery service for you, you essentially delegate a part of the customer experience to a vendor.
Let's think in terms of the costs and benefits of each delivery process to see which businesses work best with which delivery options.
Self-delivery is a lot of work. But who said it doesn't pay off? Below are some of the reasons businesses opt for having their own delivery service.
Pros of self-delivery
➕ You control the entire delivery experience.
➕ You have access to all order data and can optimize costs.
➕You're in charge of and can therefore improve order fulfillment.
➕You can track all your drivers in real-time.
➕You handle customer communication independently.
➕You can make sure that your vehicles are being used efficiently.
➕You control fuel management.
➕You determine your delivery commission.
At the same time, handling all deliveries in-house comes with a number of challenges. Let's see what these drawbacks may be.
Cons of self-delivery
➖You need to sustain a staff of drivers.
➖You need a designated platform for delivery management.
➖Route planning & optimization are your jobs too.
➖Fleet maintenance and repairs costs can pile up.
➖You need to fulfill every order: from inventory management to Proof of Delivery.
As you can see, self-delivery has its ups and downs. We'll now consider the pros and cons of using a third-party delivery service.
First off, let's look at some of the key gains that businesses that use third-party logistics (3PL) services experience over time.
Pros of using 3PL
Third-party order fulfillment is not uncommon, especially among businesses like restaurants that resort to Uber Eats - or eCommerce merchants that use Amazon or Shopify order fulfillment services. The biggest reasons they do so are limited resources and geographic reach.
➕You don't need to employ and pay in-house drivers.
➕You don't need to sustain a fleet of vehicles.
➕You delegate routing and route optimization.
➕Your delivery fees are predictable.
➕You're delivering outside of your geographic area.
Naturally, we need to look at the downsides too. Below are the most common cons experienced by businesses that outsource delivery to third-party transportation companies.
Cons of using 3PL
➖You're not there to oversee customer experience end-to-end.
➖Delivery costs can be unclear.
➖You don't have first-hand performance data.
➖You can't control all drivers.
➖You have to trust in external resources.
➖You put your reputation in the hands of other companies.
The relationships you build with your delivery partner determine a huge chunk of customer experience and the overall customer-centricity of your business. Hence, you need to know the value of your delivery partners and focus on finding an arrangement that works for your customers and in-house staff.
Regardless of which pros and cons are your dealmakers and dealbreakers, it's important to understand that a lot of businesses handle in-house delivery efficiently thanks to technology and good processes. What follows is a self-delivery checklist with the corresponding tech that makes everything better.
✔️Routing & optimization.
To get started with in-house delivery as a restaurant, flower shop, or any kind of small business really, you need a minimum of one driver and a system that will help you plan and deliver orders. This system includes a courier app that enables driver tracking, hosts order data, and serves as a medium between your couriers and customers.
To keep your costs low and make the most of your delivery management platform, go for a tool that offers both a web dashboard and a delivery driver app + lets you pay per driver/vehicle. This kind of pricing model will cost you much less than similar platforms that price per number of orders a month.
Much like with your driver staff, you don't need a huge fleet of vehicles - even one truck, car, motorcycle, or cargo bike is enough to get things going. Make sure your in-house delivery management tool supports many types of vehicles - even if your fleet is one type of vehicle now, things are likely to change in the future and you want to remain flexible.
Routing & optimization
A route planner is a must-have tool for planning and dispatching orders. To keep your delivery process smooth, take your time researching route planning platforms to make sure you're happy with results. Among the features to look out for are dynamic estimated time of arrival (ETA), driver breaks, load & vehicle checks, and order priority.
As a fleet manager, you want to make sure you spend little to no time talking to customers about the quality of your service. For this, you need to find a delivery management system that lets you keep your customers updated on every stage of their orders through instant customer notifications.
Opt for a tool that offers email and SMS notifications to make sure your company is known for transparent user communication and excellent customer service.
To confirm that orders have been delivered, you need a reliable driver app that allows your customers to sign on glass and confirm a successful delivery service. Your couriers should also be able to take photos and add any notes that confirm a delivery. This requires an app that works online and offline and captures all order data to produce a Proof of Delivery (POD) note.
To keep the cost per delivery low and your customers happy, you need to continuously improve your model. For this, you need reliable delivery analytics that you can draw performance insights from. When you browse delivery management platforms, look out for reports and analytics with a breakdown into key performance indicators. This way, you can perfect your business model based on numbers and not hunches.
Choosing between self-delivery and third-party delivery services is a choice every company needs to make. There are many pros and cons to both, and you need to look at companies similar to yours, educate yourself on the key processes, and figure out an arrangement that works best for you. When is self-delivery worth it? When you have the tools to serve a decent delivery experience - simple as that.
I hope this article helps you gain insight into the way in-house and third-party delivery work. If you have doubts about your capacity to run self-delivery, don't hesitate to get in touch and we'll find a solution for your particular business goals.