What is a 3PL? A Complete Guide to 3PL in 2024

Ngoc Lee
What is a 3PL? A Complete Guide to 3PL in 2024
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Whether you are a startup whose business solely relies on an e-commerce platform or an established business with a range of brick-and-mortar stores, order fulfillment should be an indispensable part of your whole operation. As you're witnessing the growth of your business, you may start identifying problems when fulfilling customer orders all by yourself. 

You may start realizing that focusing all of your manpower and capital on fulfilling orders at your home base might be not sustainable in the long run. If you find yourself in this position, the natural option would be seeking and partnering with a third-party logistics (3PL) company.

If you are in charge of your company's fulfillment strategy, then you must have a working knowledge of 3PL. What is a 3PL? What are the benefits? How do they work? By having a firm grasp on the nature of 3PL, you will have a much easier time picking a partner that can provide solutions that work best for your situation.

What is a 3PL (third-party logistics company)?

Most 3PL’s bread and butter lie in offering logistics services to your company. Then can support only a part of or the entirety of your shipping operations. Normally, 3PL companies would be integrated into the company's warehouse and transportation processes.

As a service provider, most 3PLs would strive to best meet your needs by scaling and customizing their offering. This means that as a service user, you can choose how much they are integrated into your workflow. You can have a 3PL provide only one single service or they could help you by offering a service suite that spans your whole supply chain. Prominent 3PLs also can create added value to your business by upgrading your operational and customer satisfaction metrics.

👉 Read More: What is e-logistics? Benefits and Challenges 

👉 Read More: What is Reverse Logistics: Example and Process

3PL Warehouse service
3PL Warehouse service

3PL vs 4PL

4PL definition

If you are familiar with a 3PL, you may have heard of a 4PL. So what exactly is a 4PL? Fourth party logistics, or 4PL for short, is a type of company that specializes in integrating systems. They can help your business by bringing together different suppliers, resources, and technologies so that you can work with a streamlined supply chain.

A 4PL will be in charge of your warehouse 3PLs, your transportation 3PLs as well as other warehouses and carrier services. Their surveillance of the whole process will make sure that your goods and products are moved smoothly through the fulfillment steps. 

4PL tends to work to address the whole supply chain progress. They can be involved in every step of your fulfillment strategy and are the contact person whenever issues arise.

Similarities and differences between 4PL and 3PL

3Pls and 4Pls are similar because they are both logistics services that aim to help a business in these domains. They can plan and/or implement these services by themself.

Their main difference lies in each of these companies’ specialties. A 4PL may focus on designing and executing a supply chain process as well as supervising all of the steps and processes in a client’s supply chain. A 4PL can work with multiple 3PLs, asset-based carriers, and warehouses to get their job done. While a 3PL’s scopes will be more limited as they only focus on all the distinct functions they can provide for your operation.

What are the benefits of partnering with a 3PL?

Benefits of partnering with a 3PL
Benefits of partnering with a 3PL

There can be so many benefits when you choose to work with a third-party logistics company. Handling over the logistics aspects of your business would mean that you can concentrate on growing your customer base and product development. Not only there is more time and resources available to you, but there are also many more benefits that you should not overlook:

  • Bring a better customer experience: Customers these days expect very fast shipping and next-day delivery has become the standard waiting time. When you use third-party logistics services, you will be able to fulfill this expectation and offer fast shipping no matter where your goods come from. The wide distribution network of a 3PL will help you revamp your logistics operations and next-day shipping will start to become the norm for your company. 
  • Reduce Cost: 3PLs as a logistics company can get better transportation rates from freight companies. As an individual shipper, your rate would not be as attractive as a 3PL who works on behalf of many customers. Working with a 3PL will also help you free up the time and money to invest in other facets of your business.
  • Optimize flexibility: It is quite natural to go through times of peak and trough. As a business owner, we are sure that some of you have experienced this firsthand. The fluctuation in demand throughout the year and season will make you feel like you are wasting time and money with forecasting, investment, and labor cost. Having a 3PL as a partner will help you manage these fluctuations much better without putting forth a big investment when you don’t have to. You can just scale up or scale down following the demand of your market.
  • Test new markets: If you are wondering whether your product will do well in a certain market, what would you do? Would you build out a new warehouse close to the location of said market, start hiring staff in your own fulfillment center, and then start pouring in the marketing budget? That can be a lot of risks to take on for a single market. With a 3PL, you can start testing the waters without putting down a major sum. This is one of the smart ways you can manage and mitigate your risk.
  • Streamline your international logistics process: If you are selling internationally, 3PLs can help you in many things like customs, documentation, duties as well as other issues that may come up when your goods transit through the borders. If you don’t know how to take care of the matters, the mistake can cause serious delay as well as a lot of additional costs. With a 3Pl at the helm, you might be able to avoid researching complicated rules for different countries and focus on what you do best.
  • Make use of industry expertise: As a business owner, you may not be very familiar with all of the details of shipping and logistics. Neither do you have the time or bandwidth to become the expert in fulfillment strategy? That’s where a 3PL may fill in the gap. Behind these companies are logistics experts who are well-learned and always up-to-date with the latest trends. They understand the complexities and nuances of the business and can explain to you in layman's terms so that you can make the right decision.

3PL companies also have the technical know-how and a network of partners who can provide you with the right solution. These added-value services and the liaison that 3PL companies provide can allow us to improve our supply chain quickly and boost our success as an online business.

The third-party logistics process

When you outsource your fulfillment to a 3PL, your goods will go through a rather different route when compared to when you are doing it in-house. However, the steps of the third-party logistics process remain unchanged. 

The first step that a 3PL needs to get done is to provide a seamless eCommerce platform integration. The orders from various sales channels should be sent directly to the warehouse and available for you to see. Before the customer sends out their order, your 3PL will organize shipping and receiving activity. This is how goods get to your 3PL warehouses and also how they travel between them. Once the goods arrive, they will be inventoried. Your 3PL will also help you manage your inventory and provide you with the much-needed consultation.

Once the system logs an order, the 3PL will pick, pack and ship such orders and then contact a carrier to ship out your products. Depending on the service they offer, the orders can be shipped out on the same day. Some 3PL also handle reverse logistics where they process returns.

The third-party logistics process
The third-party logistics process

What are some major functions that a 3PL plays?

3PL can play many functions in your day-to-day operation but here are some of the major functions that a 3PL can play within your operation.

3PL logistics services, aside from shipping orders, might differ based on the provider you hire. Here are some of the most useful features and logistical services that 3PLs often provide.

Inventory management

Inventory management is not simply storing your goods. By using a 3PL, you should be able to seamlessly sync inventory with your online shop, check actual-time inventory levels at each 3rd party fulfillment warehouse, and actively reorder goods to avoid stockouts.

You may inspect the quantity on hand and check the units sold each day for each item when your 3PL receives and stores your stock. This allows you to see exactly which items you have ready to ship to your consumers. You even can transmit real-time stock numbers directly to your store's website, based on your 3PL's software and workflows, so your customers know right away if goods are out-of-stock.

2-day shipping

When you consider that the majority of big online merchants provide two-day shipping and free shipping, it's obvious that customers expect both timely and cheap shipment at the click of a button. Moreover, the location of the 3PL warehouse will help you boost the delivery process to meet customers' expectations. To do that, you should keep goods closer to the shipment destination.

Partnering with the suitable 3PL will assist you to provide affordable 2-day delivery to your consumers. The biggest expense savings for 2-day shipping arise from distributing your inventory across fulfillment facilities in different regions. Third-party logistics providers often contact shipping carriers that enable them to strike a deal at discounted rates for their customers.

 2-day shipping
 2-day shipping

Distributed inventory

When dealing with a 3PL warehouse system with different warehouse locations, you can distribute inventory among fulfillment centers. As a result, each order is delivered from the warehouse nearest to your client. This is referred to as a distributed inventory model. 3PL logistics services with the proper technologies can streamline the order fulfillment process by utilizing strong algorithms that direct each order to the best fulfillment facility.

If customers' addresses are spread out throughout the country, splitting your goods among the many fulfillment locations will be more optimal. This brings your inventory closer to your delivery destinations, allowing you to provide guaranteed two-day ground shipment. Furthermore, you can save a lot of money over expedited air shipment. In fact, distributing inventory is not the most cost-effective option for all businesses, especially when the shipment volume is not too high.

However, if your online business expands, a network of fulfillment centers will enable you to reach out to more clients more efficiently. Distributing inventory in the 3PL warehouse system also allows you to ready if one of your fulfillment centers is unable to fulfill your orders in some bad conditions. Inventory management is helped by distributing inventory: if you keep things in different locations, you'll have a backup supply if one runs out.

B2B and DTC fulfillment

If you're using a multichannel logistics strategy, hiring a 3PL that can take both B2C and B2B fulfillment will make things easier. This allows retailers to sell throughout the full B2B ecosystem, including retail dropshipping and wholesale shipping. You may choose one 3PL to consolidate multichannel inventory management as well as fulfillment, operating as your back-end logistics center, whether selling on your websites or selling in brick-and-mortar stores.

Returns management

Processing returned purchases and integrating with returns software is what 3PL suppliers can assist your returns management in improving the customer experience. While acquiring visibility into eCommerce returns, you may decide to have them refilled, quarantined, or disposed of.

Kitting & customization

Creating a remarkable unpacking experience for your business can help it stand out in a crowd and create a lasting impression. 3PLs can assist with this by providing the following services:

Custom gift notes

You may use 3PLs to give customized, personal gift messages to your customers, and have them printed, allowing customers to write sincere remarks to their recipients.

Custom packaging

With custom packaging, you can make a purchase stand out. 3PL logistics services can easily identify the proper custom package size for every order combination, including custom boxes, custom mailer packing options, and even customized inserts.


Kitting refers to a value-added service given by most 3PL suppliers for some tasks such as attaching a sticker to every item, inserting your branded dunnage to the order, creating boxes, packaging goods, sealing items, and more. This service allows you to customize how your inventory is prepared for consumers.

Custom sender labels

Using shipping labels with your brand name can increase brand awareness during order delivery. Moreover, you can also assist create a best-in-class delivery experience from the time your order hits your customer's door when you put your brand's name instead of 3PL suppliers on the outside of the package.

Advanced data analytics

To brands, data has become a competitive advantage in this technology ere. Free analytics solutions with statistics and detailed insights are available from 3PLs to assist you with everything from year-end reporting to enhanced supply chain decision-making.

International fulfillment

Expand your brand globally with a 3PL with physical locations in many countries and even cross-border solutions. You get a full worldwide fulfillment solution with one account to control all warehouses, orders, inventory, and more, when all of a 3PL's fulfillment centers run on the same warehouse management system, use the same SLAs, and use the same support staff.

👉 Read More: 3PL Cost: All Fees And Why You Need To Pay

Why would you want to work with 3PLs?

Outsourcing fulfillment to a third-party logistics provider has several advantages. While various 3PL suppliers offer various capabilities, they all provide solutions for inventory management, packing, and shipping, resulting in trustworthy logistics systems and aiding a business to optimize profits.

Save time and money

Partnering with a 3PL will help you avoid looking for warehouse space for purchasing or renting, logistical operations, staff, and equipment for in-house fulfillment. Fulfilling orders by yourself costs more expensive once your firm expands. Warehouse space, forklifts, other infrastructure, warehouse management software (WMS), hiring and labor costs, workers' compensation, and liability insurance are all included in these costs.

👉 Read More: All Cost To Rent A Warehouse In 2024

- Read More: Order Fulfillment Cost: All of the Fees You Need to Pay

3PL helps save time and money
3PL helps save time and money

Leverage industry expertise

Working as an eCommerce specialist probably takes all your time to learn about shipping and logistics. That's time for 3PL logistics services to come in. Your 3PL warehouse system will be informed and up-to-date on the newest industry trends and complexities by eCommerce logistics experts.

Besides, 3PL suppliers also connect with the technical resources and partner network, such as marketing agencies and bespoke packaging suppliers to continuously optimize and enhance supply chain efficiency to assist boost eCommerce growth.

Expand your reach

Your business's growth will be limited if you only sell in one region. One of the effective solutions is to find 3PL suppliers and partner with them. Therefore, you can expand your business to other regions. In-house fulfillment lacks the extensive network of fulfillment facilities that 3PL businesses provide.

A third-party logistics provider with fulfillment facilities in main US cities can help you cut shipping costs and order transit times. Indeed, shipments that go across many shipping zones might be more expensive if they are shipped from a single location. Working with a 3PL will avoid this situation occur.

How to choose the best 3PL company

Choosing a 3PL provider you can trust to manage your inventory, and surely help you expand your business is critical. Nevertheless, finding out a 3PL warehouse that is most fit for you might seem endless. Here are three crucial criteria to discover a good match for your company.

Do your needs require more than basics?

Consider searching for a strategy that extends further than the standard pick, pack, and ship model when outsourcing order fulfillment. This implies that the 3PL collaborates with all components of the retail supply chain, rather than just helping one portion of the fulfillment process. This contemporary approach to fulfillment will help your company make better supply and demand decisions and provide a better overall experience for your consumers.

How does their technology work?

Technology is one of the most crucial aspects of choosing a fulfillment solution. To check, there are two primary technological aspects to consider: 3PL's technology that works with your online store and the software of the 3PL warehouse system to leverage data.

A technology-enabled 3PL, which is made up of these two aspects, is a company that specializes in developing efficient, integrated shipping and fulfillment solutions for eCommerce companies.

Besides available fulfillment services including warehousing, picking, packing, and shipping, the 3PL's technology assists with automation, order, and inventory management, to manage orders and handle eCommerce returns.

Where are their 3PL fulfillment centers located?

When it comes to 3PL's location, not only their headquarters or offices are mentioned. The number of fulfillment centers that they own, and their locations are the information you need to gain. As a result, this information will enable you to identify if you can provide your consumers with the quickest service and most cost-effective 3PL shipping options.

The number and location of 3PL warehouse also help you with the development of your shipping plan, which may include distributed inventory and two-day shipment.

EFEX - one of the best 3PL Warehouse Services

How does EFEX work?
How does EFEX work?

EFEX provides multichannel order fulfillment services for thousands of companies globally. You can integrate your sales channels and configure your shipping options within EFEX's system. Once setup is complete, EFEX can start fulfilling your orders right away. EFEX handles picking, packing and shipping orders as soon as they are placed, so you don't have to worry.

You have full visibility and control over your orders, tracking them in real-time as they go through the fulfillment process, and monitoring inventory levels, overall costs, and opportunities for improving your fulfillment strategy through EFEX's advanced OMS and WMS software.

EFEX utilizes a network of micro fulfillment warehouses strategically located in Vietnam near population centers, enabling quick nationwide order delivery.

After reading our article, you might have the answer to the question of What is a 3pl. If you find it helpful, do not forget to follow us via our fanpage or website to get more useful information!

Ngoc LeeNgoc Lee is an Content Creator Manager at EFEX. She wields her long-term expertise in Logistics and Supply Chain, harnessing her top-notch writing and research skills to bring incredibly valuable content. Whether you're a small startup or a well-established enterprise, Ngoc Lee is here to equip you with the essential knowledge of e-commerce, fulfillment, and all things business-related.