When Is It Time to Use a Warehouse or 3PL? An Essential Guide for Small Businesses

If you’re a small business owner who started out packing orders in your garage or back room, you’re not alone. In the early stages, handling shipping and fulfillment yourself (known as in-house fulfillment) is a cost-saving necessity. But as your business grows, there comes a point when doing it all yourself becomes overwhelming. How do you decide when it’s time to move up to using a warehouse or a 3PL (third-party logistics provider) instead of handling shipping on your own? This guide will walk you through the key signs and considerations so you can make an informed decision.

In-House vs. 3PL Fulfillment: What’s the Difference?

In-house fulfillment means you manage every step of logistics with your own resources; storing inventory, packing orders, shipping, and handling returns all by yourself or with your team. This offers full control, but it can grow increasingly complex and costly as you scale. On the other hand, a 3PL (third-party logistics) service lets you outsource storage and fulfillment to a specialized company. A 3PL will warehouse your products and take care of receiving stock, picking and packing orders, shipping, and even returns on your behalf. Essentially, the 3PL handles the operational load while you focus on growing your business. The trade-off is giving up some direct control in exchange for efficiency and expertise.

Many businesses start as a “do-it-yourself” operation (sometimes called 1PL, first-party logistics) because it’s cheapest at low volumes. But as orders ramp up, you’ll face challenges like limited space, slower shipping, and too many hours spent on packing. That’s where either leasing your own warehouse (expanding in-house capacity) or partnering with a 3PL warehouse comes in. Both options can handle larger scale, but they differ in cost and flexibility: owning or leasing a warehouse requires heavy up-front investment and ongoing management, whereas using a 3PL usually has minimal startup costs and is pay-as-you-go for space and labor.

Signs It’s Time to Outsource Fulfillment (Warehouse or 3PL)

Not sure if your business is ready for a warehousing solution or third-party fulfillment? Look for these common signs that your current in-house setup is at its limit. If several of these scenarios sound familiar, it’s a strong indication that outsourcing logistics could be beneficial.

• Order Volume Is Overwhelming Your Team: One of the clearest signs is when order volumes shoot up beyond what you can comfortably handle. Perhaps you or your staff are working late just to pack boxes, or mistakes and delays are creeping in because you’re rushing. If you’re feeling overwhelmed by order volume and struggling to keep up with demand, it’s time to rethink your approach. For example, industry experts often say that when fulfilling orders starts taking so much time that it eats into running your business (some suggest if it’s over ~20% of your work hours), outsourcing is likely overdue. A 3PL can absorb high volumes with ease, using their scalable staff and systems to ship orders out on time even during busy seasons.  

• Running Out of Space for Inventory: Are your living room or office corners piled high with products? Outgrowing your storage space is a classic pain point for growing businesses. When every spare room turns into a stockroom (or you’re paying for expensive self-storage units), it might be more cost-effective to use a warehouse service. 3PL warehouses let you store inventory in a shared facility, so you only pay for the space you need, and you can scale up during peak season or scale down later. This avoids the major expense of leasing your own full warehouse before you’re ready. If rising storage costs or cramped space are an issue, a 3PL or on-demand warehouse can instantly give you breathing room.
  
• Fulfillment Is Eating Too Much Time (and Hurting Growth):Your time is valuable. If packing and shipping orders are eating up most of your day, leaving no room for marketing, product development, or customer service, it’s a warning sign. When logistics keep you from focusing on growth, outsourcing to a 3PL can help. They handle storage, packing, and shipping so you can get back to running and expanding your business.

• Rising Shipping Costs and Slow Delivery: Another sign is when your shipping process isn’t keeping customers happy or is getting too expensive. Maybe you’re noticing more complaints about slow deliveries, or you can’t offer 2-day shipping because doing it yourself from one location is impossible. 3PL providers specialize in logistics,  they often have multiple warehouse locations and carrier partnerships to help achieve fast, affordable shipping. In fact, outsourcing can grant you access to discounted bulk shipping rates that you likely can’t get on your own. If your shipping costs are unpredictable or higher than you’d like, or you wish you could ship faster to compete (e.g. offer 2-day delivery), a 3PL can be a game-changer. They position inventory closer to your customers and use optimized shipping routes, reducing transit times. The result is happier customers and possibly lower shipping expenses for you.
  
• Frequent Errors or Operational Headaches: When a DIY fulfillment operation grows, errors and logistical headaches often follow. Signs include increased packing mistakes, lost track of inventory, or trouble handling returns promptly. Perhaps you’re juggling too many carriers and suppliers, which gets confusing and inefficient. If manual processes or outdated systems are causing errors,  for example, inventory counts don’t match or orders slip through cracks, it indicates your current system is at capacity. A good 3PL will bring in modern warehouse management technology and streamline these processes. They centralize and automate tasks that might be giving you grief, from inventory tracking to coordinating shipments. Similarly, if managing returns or customer exchanges has become a drain, 3PLs can handle reverse logistics smoothly so that returns don’t bog you down. Don’t let back-end issues tarnish your customer experience,  if mistakes are mounting, it may be time for expert help.
  
• Scaling or Expanding Feels Impossible: Think about your future plans. Do you want to launch new products, enter new markets, or handle seasonal spikes in sales? If right now you feel you “can’t keep up with demand” as you grow, or you hesitate to scale because your current setup would buckle under the pressure, that’s a sign you need a more robust fulfillment solution. A 3PL offers built-in scalability and flexibility – you can ramp up during peak season and not worry about hiring a whole new warehouse staff or renting extra space; the 3PL handles that for you. Likewise, if you want to sell into other regions or countries, a 3PL likely has warehouses and networks to distribute your product there without you having to physically set up new shipping centers. When your growth is constrained by logistics, it’s definitely time to consider using a warehouse or fulfillment partner to break through that ceiling.
  

Weighing Your Options: Rent Your Own Warehouse vs. Using a 3PL

Once you’ve decided to upgrade from your current DIY approach, there are two main paths: getting your own warehouse or partnering with a 3PL warehouse provider. How do you choose? It often comes down to resources, expertise, and flexibility.

• Leasing/Buying a Warehouse (In-House Expansion): This route means you continue doing fulfillment yourself but on a larger scale. You would secure warehouse space (with all the associated costs like rent or mortgage, utilities, insurance), purchase equipment (shelving, forklifts, software systems), and hire and manage staff for picking, packing, and shipping. The benefit here is complete control,  you set all the processes and can customize everything to your needs. Long-term, if your operation is large and stable enough, owning a warehouse can potentially be cost-effective (you’re not paying a 3PL’s margins) and gives consistency. However, the upfront investment is high and it requires significant logistics expertise. For most small businesses and startups, running a whole warehouse in-house can be very demanding. It usually only makes sense if you have specialized requirements that an external provider can’t meet, or if you’ve reached a scale where you can afford an entire warehouse operation efficiently.
  
• Outsourcing to a 3PL Warehouse: For many growing businesses, especially those short on capital or logistics experience, using a 3PL is the more flexible and cost-efficient choice. With a 3PL, you don’t have to lease a huge space or manage warehouse employees,  you typically pay only for the pallet space and services you use. This dramatically lowers the startup costs and risk of scaling up. A 3PL also comes with expert teams and technology in place, so you gain instant access to best-in-class warehousing, shipping software, and know-how without developing it all yourself. Another advantage is agility: if you double your order volume, a 3PL can quickly add more capacity; if you have a slow month, you’re not stuck paying for idle warehouse space,  you can scale with demand. The downside is less direct control over the day-to-day handling of products. That’s why it’s important to choose a reputable 3PL partner that you trust and that communicates well. But overall, for small businesses hitting that growth spurt, outsourcing fulfillment is often the faster and smarter way to go so you can focus on your core business.

Conclusion and Next Steps

Making the leap from in-house shipping to a warehouse or 3PL is a big milestone for any small business. There’s no universal “right time,” but by watching for the signs we’ve covered and being honest about your current challenges, you can make a decision that truly supports your goals. Outsourcing fulfillment isn’t just about moving boxes, it’s about freeing up your time, cutting per-order costs, and delivering a better experience for your customers.

If you’re spending late nights surrounded by packing tape and shipping labels, and your growth is stalling because of it, it might be time to bring in some help.

OLIMP Warehousing Services offers flexible, on-demand warehousing and 3PL solutions designed for small and growing businesses. From secure inventory storage to fast, reliable shipping across multiple regions, we handle the logistics so you can focus on building your brand. Reach out to OLIMP today  and see how we can help streamline your supply chain and set you up for your next stage of growth