In today’s fast-paced e-commerce world, supply chain efficiency can make or break a business. 3PL, or third-party logistics, means outsourcing your warehousing, transportation, and order fulfillment to specialists. In other words, a 3PL partner handles your products behind the scenes, receiving inventory, storing it, picking and packing orders, and shipping them, so you can focus on growing your business. This arrangement means you don’t need to own warehouses or fleets of trucks; instead, you rely on the 3PL to pick, pack, and ship your products for you. By turning to a 3PL provider, companies can leverage external expertise and infrastructure. 3PLs became popular in the 1970s and have since evolved into full-service logistics partners.
For example, many e-commerce brands depend on 3PLs to rapidly scale up fulfillment during peak seasons, without investing in new staff or facilities. In short, a 3PL acts as an extension of your supply chain, giving you greater flexibility and letting you focus on core business activities. With e-commerce growth and global markets, logistics is more complex than ever. A skilled 3PL can simplify this complexity by managing shipments across regions.
What is 3PL (Third Party Logistics)?
A 3PL (third-party logistics) provider is an external company that manages another business’s logistics operations. This includes warehousing inventory, transportation of goods, and order fulfillment (picking, packing, and shipping). Instead of handling these tasks internally, a company contracts a 3PL to do them. Effectively, outsourcing to a 3PL means handing over the “how” of logistics: the storage, handling, and distribution of products.
Importantly, a 3PL is not a manufacturer or retailer; it doesn’t make or sell products. Its role begins after your products are made. Unlike a 1PL (doing everything in-house) or 2PL (using a single carrier), a 3PL handles multiple logistics functions under one roof. It serves as a bridge between your business (manufacturer or retailer) and the end customer, ensuring products reach buyers efficiently through professional logistics management.
For instance, an online retailer might use a 3PL to store clothing inventory and ship customer orders rather than renting its own warehouse. This is how 3PLs have become the backbone of many growing businesses’ supply chains.
How 3PL Works?
When you work with a 3PL, here’s how the process typically unfolds step by step:
1) Receiving Inventory
The 3PL receives your products at its warehouse, inspects shipments for accuracy, and logs the inventory into a warehouse management system (WMS).
2) Warehousing
Goods are sorted and stored on shelves or racks in the warehouse. The 3PL keeps track of stock levels and locations, often using real-time tracking tools in its WMS.
3) Inventory Management
A key benefit is that 3PLs use advanced warehouse management systems to maintain real-time visibility of your inventory. Many 3PLs provide client portals or dashboards that show stock levels and order status.
4) Order Processing
When a customer places an order on your website or store, the order details are transmitted to the 3PL’s order management system. The 3PL processes these details to determine which items to pick.
5) Systems Integration
Modern 3PLs often integrate directly with e-commerce platforms and marketplaces. Orders automatically flow into the 3PL’s system (via APIs or EDI), reducing manual entry and speeding up fulfillment.
6) Picking & Packing
Warehouse staff at the 3PL retrieve (pick) the ordered items from storage and pack them securely for shipping, following your packing guidelines or specifications. They label the packages and prepare shipping documentation.
7) Shipping
The 3PL arranges transportation to deliver the packages. This involves coordinating with carriers, selecting shipping options, scheduling pickups, and ensuring all compliance paperwork is in order. The 3PL also tracks the shipment until it reaches the customer.
8) Returns Management
If a customer returns a product, many 3PLs handle the returns process. They receive the returned item, inspect it, update inventory records, and process refunds or exchanges.
This full-service workflow (sometimes summarized as receiving, storage, order processing, picking/packing, shipping, and returns) means your orders move through the supply chain seamlessly. Using a 3PL is often much simpler and faster than doing all fulfillment in-house. You avoid building new warehouses or hiring logistics staff. Instead, you rely on the 3PL’s established systems and expertise, which brings speed and scale to your operations.
Types of 3PL Providers
3PL providers vary based on their structure and capabilities. The two main categories are asset-based 3PLs and non-asset-based 3PLs. They can also be categorized by specialty: some 3PLs focus mainly on warehousing and fulfillment, others on transportation, and some on information services and freight auditing:
1) Asset-Based 3PL Providers
An asset-based 3PL owns physical logistics infrastructure, trucks, warehouses, forklifts, and other equipment. These providers operate like “one-stop” shops because they control the entire supply chain process directly. For example, an asset-based 3PL can guarantee consistent service levels since it uses its own assets. Owning the warehouse and vehicles means they schedule and price services internally, which increases reliability. The major advantage is reliability and control. A unified company culture and leadership often means smoother operations.
However, the downside is flexibility. If your needs change (for example, you suddenly need extra warehouse space in a new region), an asset-based 3PL might be limited to its existing infrastructure. They may have higher fixed costs and less geographic reach compared to non-asset providers.
2) Non-Asset-Based 3PL Providers
In contrast, a non-asset-based 3PL doesn’t own transportation or warehousing assets. Instead, it acts like a broker or travel agent, tapping into a network of carriers and warehouses to service your needs. This model offers great flexibility and scalability.
For instance, if one partner lacks capacity, the 3PL can quickly switch to another carrier or warehouse. This often leads to cost savings and broader service options, as the 3PL can negotiate with multiple partners to find the best fit. The trade-off is less direct control. Because they rely on partners, service levels can vary. You essentially trust the 3PL’s network to handle your products.
However, many non-asset 3PLs excel at customizing solutions and can cover vast geographic areas by leveraging numerous partnerships. They are especially useful if your shipping needs are unpredictable or if you want access to many different transportation options.
3PL vs 4PL vs 5PL
The logistics industry uses terms like 4PL and 5PL to describe higher levels of supply chain outsourcing:
| Model | Primary Focus | Services Offered |
| 3PL | Executes logistics operations (“how”) | Warehousing, fulfillment (picking/packing), transportation, and inventory management |
| 4PL | Manages entire supply chain strategy (“how and why”) | All 3PL services plus end-to-end coordination, strategic planning, and analytics |
| 5PL | Manages networks of supply chains with advanced tech | Integration of multiple supply chains, often using AI and big data for optimization |
In brief, a 3PL is a hands-on partner that handles specific logistics tasks for you, while a 4PL acts as a supply chain integrator that oversees and coordinates those tasks across multiple providers. A 5PL goes further by managing complex, global supply network relationships using cutting-edge technology. For a deeper dive into how 3PL and 4PL differ, see our 3PL vs 4PL guide.
Benefits of Using 3PL
Partnering with a 3PL offers several key advantages:
1) Cost Savings
3PL providers leverage economies of scale. They own the warehouses and transport, which lowers per-unit costs. Outsourcing eliminates the capital expenditure of building your own facilities and buying equipment.
2) Expertise & Technology
3PLs specialize in logistics. They bring advanced systems (warehouse management, routing software, data analytics) and deep know-how to the table. This means more efficient operations and compliance (for example, with shipping regulations).
3) Scalability & Flexibility
You can ramp operations up or down without delays. A 3PL can add warehouse space, labor, or trucks during busy periods, then scale back when things slow. This flexibility is hard to achieve in-house without overpaying for idle resources.
4) Global Network
Many 3PLs have extensive carrier and fulfillment networks. They can help you ship internationally or expand into new markets quickly. You gain instant access to overseas warehouses, import/export expertise, and a variety of shipping options.
5) Focus on Core Business
Perhaps most importantly, outsourcing logistics frees you to concentrate on what you do best (like product development or marketing) rather than warehouse management. You avoid the daily headaches of fulfillment. As Red Stag Fulfillment notes, a 3PL reduces the operational burdens of running a supply chain, letting you focus resources on growth activities.
6) Risk Management
Many 3PLs also help manage logistics risks. They carry insurance and ensure compliance with regulations (like customs requirements and safety standards), which can reduce the chance of delays, fines, or damages that a small team might miss.
In practice, companies often find that faster shipping, fewer stockouts, and professional fulfillment translate to happier customers and higher sales. The overall efficiency gained can outweigh the cost of 3PL fees, leading to better profitability.
Top 3PL Companies
Many prominent companies specialize in 3PL services. According to industry rankings by revenue, the largest 3PL providers include Amazon Logistics, DHL Supply Chain & Global Forwarding, and Kuehne + Nagel. Others in the top tier are DSV, DB Schenker, CEVA Logistics, Nippon Express, C.H. Robinson, and Maersk Logistics.
- Amazon (Logistics Division), known for Fulfillment by Amazon (FBA), offers end-to-end e-commerce logistics using Amazon’s vast network.
- Rite Prep Fulfillment is a fast, reliable 3PL and prep center specializing in Amazon FBA, DTC, and wholesale/e-commerce fulfillment with transparent pricing and quick turnaround. They offer end-to-end services, including receiving, inspection, prep, bundling, kitting, storage, and fast shipping, tailored for growing eCommerce brands and sellers. With a customer-first approach, accurate processing, and scalable operations, they position themselves among the top 3PLs for Amazon and online businesses.
- DHL Supply Chain is a global leader providing warehousing, transportation, and freight services worldwide.
- Kuehne + Nagel, Swiss-based, specializes in sea and air freight and contract logistics globally.
- C.H. Robinson is an American company focusing on freight brokerage and supply chain consulting.
- XPO Logistics, A top U.S. 3PL known for technology-driven solutions, freight brokerage, and LTL services.
- Expeditors International, specializes in international freight forwarding and customs solutions.
This list is not exhaustive. For more, check our Top 3PL Companies page, which details leading providers and their specialties. These leaders demonstrate the breadth of the 3PL market, serving businesses of all sizes with services from global freight forwarding to e-commerce fulfillment services.
FAQs
What is the difference between 3PL and 4PL?
A 3PL (third-party logistics) provider executes specific logistics functions (warehousing, transportation, fulfillment) for a business. A 4PL (fourth-party logistics) provider goes further by managing the entire supply chain strategy and coordinating multiple 3PLs. In essence, 3PL handles the operational “how,” while 4PL handles the strategic “how and why.”
Why should my business use a 3PL?
Using a 3PL brings efficiency and focus. A 3PL can significantly reduce costs through economies of scale and bring specialized logistics expertise and technology to your operations. It allows you to focus on your core business (like product development or marketing) rather than warehouse management. Many companies find that outsourcing fulfillment leads to faster delivery and better service, without the need to build new warehouses or hire extra staff.
What types of services do 3PLs provide?
A typical 3PL offers warehousing, inventory management, and order fulfillment (picking, packing, and shipping). Many 3PLs also handle transportation arrangements (like booking freight and tracking shipments) and returns processing. In summary, any logistics task from receiving your goods to delivering orders can be covered by a 3PL.
When is it time to hire a 3PL?
Common triggers include rapidly increasing order volumes, expanding into new markets, or experiencing seasonal demand spikes. If managing fulfillment overwhelms your team or distracts from core activities, it may be time to partner with a 3PL. Businesses often turn to 3PLs when scaling up operations or when in-house solutions become impractical.
Are there any downsides to using a 3PL?
Outsourcing always involves trade-offs. You give up some control and must communicate closely with the provider. There are also fees for 3PL services. However, by carefully selecting a reputable 3PL and setting clear expectations, these concerns can be managed. Most companies find that the benefits (cost savings, flexibility, expertise) far outweigh the potential downsides.
