Inhouse vs outsourcing? Find out the best dispatch practice for your business
While both in-house and outsourcing are efficient in their own ways, the best dispatch solution is the one that qualifies your business requirements. Here’s how.
The rising popularity of e-commerce and other online services has made dispatching one of the most crucial business decisions in recent times. A good dispatch system, in addition to fast delivery services, builds vital relationships by handling last-minute delivery requests along with several other exceptions. It aims at building a strong and loyal consumer base that sticks with the brand, no matter how tough the competition gets. Therefore, every business must aim for a dispatch system that qualifies all its unique requirements. But here is one more important decision to make. What best meets your business requirements and available resources- Inhouse deliveries or third party logistics? Which, amongst these two will maximise profits, save time and enhance customer engagement?
Not all organisations consider the need to integrate advanced software solutions; some already have the most relevant technology in-house. Some businesses may even consider third-party dispatch systems despite having the right in-house technology. So, how does one decide? To help you make the most sound dispatch decision, we will dig into the pros and cons of both the mediums of dispatching- In-house vs Outsourcing.
Do you have the most relevant technology in-house? Do you think outsourcing will benefit your operations? Why do you consider buying the software when you can establish one yourself? What’s the long term feasibility of the dispatch system in use? These are a few questions that must be addressed before making the right dispatch decision.
Why businesses consider the in-house approach
As the term suggests, in-house means building software within the organisation. After carefully accessing the dispatching needs, the top-level management might decide to build a system unique to their current and future dispatching requirements. Amazon Logistics is one of the finest examples of in-house dispatch management systems.
Amazon Logistics- The best in-house Dispatch system
Amazon Logistics is one of the finest examples of in-house dispatch management systems. The brand launched its own logistics management system in the year 2015, keeping in mind the rising demand for same-day delivery and other customised delivery requirements. Several studies have time and again proven the impact of satisfactory delivery services on customer retention. By having its own network for delivery, Amazon could now completely monitor the process while addressing different customer concerns at every step. It is one reliable, speedy and established dispatch system that saves cost and delivery more. No matter what day it or occasion it is, Amazon is always on toes for its customers.
Pros and Cons of In-house deliveries
In-house development depends on a number of factors such as availability of on-site developers, proper infrastructure, huge finances and the required project expertise. However, not every requirement is necessarily met, which leaves the options of buying or outsourcing open for delivery services.
The list of pros and cons of the in-house software development below will help you decide whether or not this approach is right for your business.
Pros of making In-house deliveries
1. On-site availability
The availability of on-site developers is a must for in-house development. Better coordination amongst departments leads to great team efforts and boosts efficiency. The on-site availability also minimises errors, enhances transparency and boosts productivity. This way, the teams are in great sync with the end organisational objectives.
2. Cultural Fit
Hiring a team of experts who share the same work culture and organisational goals always benefit the organisation. In-house development means hiring people who are well acquainted with the organisational values, which lead to improved company efficiency.
No outsider can dig enough into its customer’s needs and expectations than the organisation itself. The in-house developers with years of experience can therefore identify the right functionalities for the dispatch software. They will be well trained to build software that is best suited to the growing needs of the organisation.
4. Customer Database
The organisations are extremely particular when it comes to storing a useful consumer database. Outsourcing the dispatch services means losing data credibility as the third party system sometimes becomes careless in data handling which is a major loss for companies. Extreme cases of escalations is also one of the major problems faced in outsourcing.
Cons of In-house Deliveries
While in-house development benefits the organisation immensely by building the most efficient software, it comes with a heavy cost. In addition to the developers’ salaries, the company has to bear the infrastructure and the training cost along with other employee benefits which makes the overall operations really expensive. Other expenses are warehousing, delivery vehicles resources required for packaging, shipping and dispatching, maintenance cost, bills etc. The financial impediments usually become a major stumbling block for organisations when it comes to buying or building the software.
2. Lack of Talent
Well, we’re not always lucky to find the best in-house developers with the right IT skill set. Not every developer is passionate about changes or establishing the right dispatch solutions. It needs months of training and we aren’t completely confident that it would help. In this case, the only option left for organisations is to bring in the required talent by paying a significantly higher amount.
3. Low Retention Rates
There is no guarantee that the trained professionals will stay with your organisations forever until bound by a contract which may last a couple of years. The low employee retention rates are due to the rising scope for IT professionals and developers. This leaves them an option to work with a thousand different companies with lucrative offers. Therefore, in-house development is always exposed to the risk of developers switching organisations during the project.
Instead of building or buying the software, some brands hire organisations with specific skills set to fulfil their dispatch requirements. The process of hiring a third-party organisation to fulfil the delivery requirements is known as outsourcing. Unlike in-house deliveries, the outsourced staff works in a different location; hence proper training modules must be formulated to acquaint them with all types of customer requirements. Working remotely is completely different from in-house operations. While it is easier to find the right skillset outside, it sometimes gets difficult to match the company’s expectations. Let’s look at some of the pros and cons of outsourcing.
Pros and Cons of outsourcing deliveries
Outsourcing reduces the overall business cost. In this case, you won’t need to hire the workforce, build a warehouse, hire extra warehouse staff, settle bills, buy vehicles or manage fleets because everything will be done for you. Instead of renting an entire warehouse, you will only need to pay for the amount of storage space you require. The inclusive cost of storage and dispatch services will definitely be lower than what you would have had to bear otherwise.
Outsourcing takes away the burden of looking after the entire delivery process, right from warehousing, packaging to the distribution of orders. This saves a lot of time and cost which makes the operations more efficient. This also shifts the focus of in-house experts on core business functions, which increases the overall work productivity. According to the Deloitte 2016 Global Outsourcing Survey, 57% of companies believe that outsourcing helps them focus on core business functions.
3. Technical Expertise
The in-house developers may be trained to build the right dispatch management technology, but it might not be their core competency. Hiring an organisation that has already tried and tested its delivery software is a profitable business. Outsourcing brings in technical expertise which minimises errors and improves efficiency.
Cons of Outsourcing
1. Lack of Visibility and Control
One of the major concerns with outsourcing is the lack of visibility and control. Guiding the in-house team and tracking results is easier as compared to the outsourced projects. Hence, documenting all requirements, creating milestone charts and regular training modules are extremely important in outsourced deliveries. Keeping track of all activities helps brands analyse performance gaps to take necessary steps for improvisation.
2. Brand-Customer relationship
Customer engagement is one of the most important performance indicators for any brand. Brands demand a clear channel of communication in order to enhance customer engagement. Third-party dispatching can disrupt this communication channel in many ways, which consequently leads to bad business. Lack of real-time visibility into customers’ feedback, complaints or escalations also hamper the brand-customer relationship. Any negligence on the part of the third-party service provider might result in lost customer data which again becomes a major cause of poor relationships.
3. Communication & Quality constraints
Communication with the on-site team is always easier than the outsource partners. Lack of communication has major repercussions for the brand as it makes them incapable of addressing the customers’ concerns or guide the offshore partners for better performance. Regular meetings and team brainstorming sessions are a must for third-party dispatchers in order to gain a good understanding of the brand and how it must be represented in front of its customers. Quality of delivery service has become a key differentiator for customers. Hence, picking a reliable outsourcing partner and communication channel must be of prime importance.
In-house or Outsourcing?
The dilemma of developing vs outsourcing dispatch services is a tough one. However, picking either of them based on the business scale, finances and long term feasibility is the right choice. For instance, in-house dispatching can be profitable for online retailers operating at a massive scale globally. However, online retailers who are at their nascent stages still need to hire third-party logistics for courier dispatch. Similarly, while Uber, the leading on-demand taxi service provider has built its own taxi dispatch system, other beginners in the industry could launch their own Uber like taxi booking app with an Uber Clone App.
From making your own on-demand ride-hailing app to venturing the food-delivery business with Swiggy clone app, both third party dispatch systems and in-house deliveries have revolutionised operations globally. It must be noted that several in-house dispatch systems can later be made accessible as third party dispatchers, catering to all types of business requirements. Business requirements vary constantly and so will your dispatching needs. Hence, employing the right technology at the right time, whether it is in-house or outsourced, will be a wise choice.