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What is a 3PL & Why a 3PL Might Be Just What Your Business Needs?

Ngoc Lee
What is a 3PL & Why a 3PL Might Be Just What Your Business Needs?
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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.


3PLs can take care of many aspects of transportation. When working with one, a 3PL will help you engage carriers so that your items and goods can be consolidated. They can also help you keep track of your freight payment, and insurance documents, and work with other asset-based carriers. 

All of this practice will help you lower your cost while also maximizing your efficiencies and help you figure out the right solution for your supply chain. Throughout the various phases of your supply chain, a 3PL will also provide you with much greater visibility so that you know exactly where your goods and inventory are at any given moment.

freight transportation
Freight transportation

When you move your goods and products on a global level, the whole logistic part can be quite complicated and can take up a lot of your bandwidth. Things like customs, freight forwarding, and consolidation can be offloaded to a 3PL so that you have more time and money to deal with other things. Not only do they handle these processes, but a 3PL can also represent your business to make sure that all trade compliance requirements are met, but the costs are also spent effectively and managed well, and everything goes as planned.

Information technology

A 3PL may often utilize information technology to take care of all operations relating to e-commerce, customer relationships, transportation, and warehouse operations. 3PL most often favors the use of electronic data interchange (EDI), application programming interface (API) as well as cloud-based systems to get these jobs done. All of these tools are used to provide visibility to your supply chain procedures as well as all the occurring shipments. 

Why would you want to work with 3PLs?

Some businesses would do just fine without the help of any 3PL. However, certain companies would benefit from this model of fulfillment. What are some of the reasons why anyone would work with a 3PL? Some of the most often cited reasons why somebody would use a 3PL is: they start to have too many orders, they run out of inventory space and they want to upgrade the shipping time and customer experience.

No matter what reasons led you to investigate alternative order fulfillment methods, we believe that you should investigate all the relating numbers and factors to arrive at the most suitable solution. Be sure to ask about pricing models, research top companies with experience in your niche as well as understand the technology stack that a 3PL may come with will be a great start for picking out the one that fits you the best.

👉 Read More: 3PL Cost: All Fees And Why You Need To Pay (Update 2023) 

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.