Shipping vs Fulfillment Cost Calculator
Compare In-House fulfillment against Outsourced 3PL warehousing, evaluating fixed facility leases, labor payroll, packaging, and commercial volume shipping discounts to find your break-even order volume.
In-House vs Outsourced 3PL Economics
Cheaper Option
Outsourced 3PL
Save $3,100 / mo
Break-Even Volume
3,050 orders
Threshold for in-house
3PL Total (1,500 orders)
$18,150
$12.10 / order
In-House Total (1,500)
$21,250
$14.17 / order
In-House vs 3PL Break-Even Formula
\text{Break-Even Orders} = \frac{\text{In-House Fixed Costs} - \text{3PL Fixed Costs}}{\text{3PL Variable Cost/Order} - \text{In-House Variable Cost/Order}}- In-House Model: High fixed overhead (warehouse lease, full-time staff salaries) with lower per-unit incremental costs.
- 3PL Outsourced Model: Minimal fixed overhead (storage and account fees) with variable per-order pick and pack fees.
- Postage Rates: 3PLs often command Tier-1 carrier volume discounts (10% to 25% lower than individual small-brand rates).
- Break-Even Point: The monthly order threshold where the total cost lines intersect.
Step-by-Step Worked Example
Calculation Steps:
- In-House Total = \$7,000 + (1,500 × \$9.50) = \$7,000 + \$14,250 = \$21,250.00 (\$14.17/order)
- 3PL Total = \$900 + (1,500 × \$11.50) = \$900 + \$17,250 = \$18,150.00 (\$12.10/order)
- Monthly Savings with 3PL = \$21,250 - \$18,150 = \$3,100.00 / month
- Break-Even Orders = (\$7,000 - \$900) / (\$11.50 - \$9.50) = \$6,100 / \$2.00 = 3,050 orders/month
How to Use This Calculator
- 1Enter your projected monthly order volume.
- 2Input In-House fixed monthly costs (facility rent, full-time fulfillment labor) and variable cost per order.
- 3Input 3PL fixed monthly costs (pallet storage, account fee) and variable fulfillment fee per order.
- 4Review cost comparison, monthly savings, and the exact break-even monthly order threshold.
Assumptions & Limitations
- Assumes consistent order profile and packaging requirements across both models.
- In-house fixed costs remain stable until facility capacity expansion is required.
Frequently Asked Questions
When does it make sense to switch from In-House to a 3PL?
Switching to a 3PL makes sense when order volume is fluctuating seasonally, fulfillment is consuming founder/management focus, or shipping volume is between 300 and 3,000 orders per month where leasing a dedicated commercial warehouse is uneconomical.
When does it make sense to bring fulfillment back In-House?
Bringing fulfillment in-house makes sense once monthly order volume exceeds 3,000 to 5,000+ orders, where dedicated warehouse rent and full-time labor amortize down to less than the 3PL’s per-pick markup fees.
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