What is 3PL? A Third Party Logistics Guide

As your business scales, delivering products quickly and efficiently becomes a core competitive advantage—not just a back-end task. Whether you’re running a startup or managing high-volume orders, logistics can no longer be an afterthought. Enter: 3PL, or third party logistics.

But what is the real 3PL meaning, and why are so many growing companies outsourcing logistics to external providers? This guide breaks it down for you—clearly and comprehensively.

TL;DR

3PL (third party logistics) involves outsourcing warehousing, fulfilment, and transportation to an external provider—giving businesses faster shipping, lower costs, and scalable logistics solutions. Whether you're a growing ecommerce brand or a large enterprise, 3PLs help manage inventory, improve customer satisfaction, and simplify complex supply chain operations. From picking and packing to returns and API integrations, 3PLs offer the flexibility and infrastructure that in-house logistics can’t. With trends like automation, green logistics, and hybrid models reshaping the industry, 3PLs are now essential partners in modern supply chain management.

Yet, despite its popularity, many businesses don’t fully understand what the actual meaning of a 3PL is or how you can utilise one to improve your logistics operations.

So, let’s break down four of the most common questions we get asked about 3PL!

Understanding the Meaning of 3PL

3PL stands for third party logistics, which refers to outsourcing key logistics services—such as warehousing, order fulfilment, and transportation management—to an external partner. Rather than managing your logistics department in-house, a 3PL provider steps in with the tools, expertise, and infrastructure to handle specific or end-to-end operations.

The goal is simple: to improve efficiency, reduce costs, and create a more scalable supply chain solution.

A third party logistics 3PL company essentially becomes an extension of your business. They take care of day-to-day logistics functions, from storing goods in a fulfillment center, to picking, packing, and shipping customer orders. The best providers go further—offering tech integrations, data visibility, and customer support aligned with your brand.

What Is a Fourth Party Logistics Provider (4PL)?

A 4PL manages the entire logistics process, including multiple 3PLs. Acting as a logistics architect, they design, implement, and manage supply chain solutions across networks. Ideal for large businesses needing end-to-end control and operational efficiency.

Why Businesses Are Turning to Third Party Logistics

The rise of ecommerce businesses and multi-channel sales has transformed supply chain expectations. Consumers demand next-day delivery, real-time tracking, and seamless returns. For small- to mid-sized businesses, managing this level of operational complexity in-house can be overwhelming—and expensive.

That’s why more businesses are embracing outsourcing logistics to 3PL partners. By handing over logistics functions to a trusted provider, you can focus on your core business—product development, marketing, and customer acquisition—while letting the logistics experts take care of the rest.

Here are a few common challenges that lead companies to partner with 3PL providers:

• Limited internal resources for shipping, warehousing, or inventory tracking
• Missed delivery targets or poor customer reviews
• Rapid growth requiring a scalable logistics model
• International expansion involving customs and cross-border shipping
• Need for cost-effective fulfillment services without large infrastructure investments

How 3PL Providers Support the Supply Chain

Third party logistics providers serve as critical support for modern supply chain systems. Instead of investing heavily in your own logistics department, a 3PL gives you instant access to:

• A national or international fulfillment center network
• Real-time order and inventory visibility
• Established relationships with freight forwarders, carriers, and customs brokers
• On-demand warehousing, labour, and transport
• API integrations with eCommerce platforms like Shopify or WooCommerce

In essence, they offer an outsourced logistics engine built for speed, flexibility, and scale.

Core Logistics Functions Offered by a 3PL

A third party logistics (3PL) provider handles a wide range of day-to-day logistics operations on your behalf. These core functions are designed to optimise your supply chain processes, reduce manual effort, and ensure smooth order fulfilment from start to finish.

Here’s a breakdown of the key logistics functions typically managed by a 3PL:

Inventory Management

Managing inventory effectively is at the heart of successful 3PL services. Providers often use advanced warehouse management systems (WMS) to:

• Track inventory levels in real-time
• Store inventory across strategically located warehouses
• Minimise excess inventory costs and prevent stockouts

This improves inventory accuracy and ensures products are available when customers expect them.

Order Fulfilment

From the moment an order is placed, 3PLs manage the entire order fulfilment process. This includes:

• Picking and packing items efficiently
• Using barcode scanning for accuracy
• Coordinating last-mile delivery through trusted freight forwarders

Integrated 3PL systems can sync with eCommerce platforms like Shopify or WooCommerce to automate the process.

Transportation Services

3PLs offer transportation management as part of their logistics operations. This includes:

• Scheduling pickups and deliveries
• Managing shipping costs through economies of scale
• Providing real-time tracking for a better customer experience

Some providers also offer freight brokerage and access to global carrier networks.

Returns and Reverse Logistics

Efficient handling of reverse logistics is critical to customer satisfaction. 3PLs simplify this by:

• Managing returns and restocking
• Handling product inspections or repackaging
• Updating inventory systems accordingly

This ensures a seamless experience for both the customer and the business.

Value Added Services

Beyond the basics, many 3PLs also offer value added services, such as:

• Custom kitting and bundling
• Labelling and compliance checks
• Packaging personalisation
• SLA tracking to maintain performance

By managing these essential logistics functions, a 3PL helps businesses reduce overheads and improve operational efficiency across the entire supply chain.

The Benefits of Outsourcing Your Logistics Department

Outsourcing your logistics department to a third party logistics provider can unlock a wide range of operational and financial benefits, including:

• Faster fulfilment: Orders can be picked, packed, and shipped faster using optimised systems.
• Reduced costs: You avoid fixed overheads like warehouse rent and labour.
• Lower shipping rates: Thanks to carrier partnerships and volume discounts.
• Improved visibility: Real-time tracking and analytics help you manage performance.
• Scalability: Need to fulfil 1,000 orders this week instead of 100? A 3PL can flex without you hiring more staff.
• Focus on growth: Free your team to focus on marketing, product, and customer success—not logistics firefighting.

Is 3PL Only for Large Companies?

Not at all. While global enterprises use 3PL partners to power their entire supply chain, 3PLs are increasingly accessible to small ecommerce businesses too. Many providers now offer flexible contracts, month-to-month plans, or pay-as-you-go pricing that fits early-stage brands.

If you're spending too much time on packaging, tracking, or managing couriers—it's time to consider a third party provider.

Core Services Offered by 3PL Providers

While logistics functions describe the tasks 3PLs handle, their service offerings refer to the structure and depth of engagement. Not all third party logistics providers operate the same way—some deliver basic services, while others offer deeply integrated, end-to-end solutions.

Here are the common types of 3PL service models available:

Standard 3PL

These providers focus on basic logistics services like warehousing, transportation, and order fulfilment. It’s a great fit for businesses that need help with day-to-day tasks but want to retain control over the rest of their supply chain.

Service Developer

This tier offers additional tools like warehouse management software, data analytics, and real-time inventory visibility. These providers enhance efficiency and scalability through advanced technology integration.

Customer Adapter

A customer adapter steps in to manage all logistics activities for a single client. You still define the strategy, but the 3PL handles execution—ideal if you want to reduce internal staffing or close down your own warehouse.

Customer Developer

This is the most integrated model. The 3PL becomes a strategic logistics partner, managing your entire supply chain operations. They develop custom solutions, oversee multiple service layers, and act as an extension of your logistics department.

When to Partner With a 3PL

You might be ready for a 3PL if:

• You’re constantly running out of space in your own warehouse
• Order errors or delays are affecting your customer satisfaction
• You’re spending too much time on fulfilment instead of growth
• You need to support multiple sales channels or markets
• Your shipping spend is too high—and you’re not getting good service in return

In-House Logistics vs 3PL: Key Differences

Choosing the Right Third Party Logistics Provider

With so many third party logistics providers in the market, choosing the right one can feel overwhelming. The best approach is to treat the process like hiring a key team member—because in many ways, they are.

Here’s what to consider:

Industry Experience

Look for a third party logistics company with experience in your sector—whether that’s retail, manufacturing, or ecommerce businesses. Familiarity with your product types and shipping needs makes onboarding faster and reduces errors.

Range of Services

Do they offer comprehensive logistics solutions or just basic logistics services? If you expect to grow or need flexibility, opt for a provider that offers scalable support and can grow with you.

Technology Stack

Ask about their warehouse management software, real-time tracking, and order automation. Providers using outdated systems can create bottlenecks. The best partners offer seamless integrations with platforms like Shopify, Amazon, and your ERP.

KPIs and Reporting

Choose a provider that tracks and shares key performance indicators. Without transparency, it’s hard to hold your logistics partner accountable. You’ll want visibility into everything from delivery times to error rates and return processing.

SLAs and Customer Support

A professional provider will commit to service level agreements (SLAs) and be responsive when things go wrong. Your logistics partner should support—not hinder—your customer experience.

Reputation and References

Always check reviews or request references. A reliable fulfillment company will have a history of strong client relationships and consistent service delivery.

How 3PLs Enhance Supply Chain Management

A quality 3PL enhances supply chain management at every level—not just through faster delivery, but by improving strategic operations.

Visibility and Forecasting

With real-time inventory tracking and analytics, you can plan better, avoid stockouts, and improve inventory management across your entire supply chain.

End-to-End Integration

Modern 3PLs offer integration across all supply chain processes, from purchasing and receiving through to order fulfillment, shipping, and returns.

Efficiency Gains

By outsourcing to specialists, you can refocus on core competencies like sales and product innovation. Your internal logistics department shrinks or disappears altogether, freeing up time and budget.

Emerging Trends in the Third Party Logistics Industry

The logistics industry is evolving quickly, and 3PLs are investing in advanced technology to stay ahead. Here are some trends to watch:

Automation and AI

From autonomous forklifts to AI-driven demand forecasting, technology is reducing human error and improving supply chain efficiency.

Green Logistics

To meet corporate sustainability goals, more 3PLs now offer supply chain services such as carbon-neutral shipping, recyclable packaging, and optimised route planning to lower emissions.

Micro Fulfillment

Small fulfillment centers located closer to urban areas are helping brands reduce last-mile delivery times while controlling shipping costs.

Global Network Expansion

Providers like DHL Supply Chain and FedEx Supply Chain are expanding their infrastructure, giving small businesses access to global reach without the need to build their own network.

Hybrid Models

More businesses are combining in house logistics with 3PL support—retaining control over certain SKUs or peak periods while outsourcing everything else.

Real-World Example: uTenant’s Contract Logistics Network

uTenant connects businesses with trusted contract logistics providers to match their goals, budget, and scale. Whether you need a third party provider for basic warehousing or a fully managed 4PL service, uTenant simplifies the process.

Our curated platform makes it easy to:

• Compare pricing and SLAs
• Find providers aligned with your industry
• Choose a solution that balances cost and customer experience
• Avoid lock-in contracts that limit your flexibility

Every 3PL in the network is vetted to ensure transparency, performance, and access to value added services.

Is 3PL Right for You?

If you're looking to reduce operational burden, scale efficiently, and meet rising customer expectations, a third party logistics service could be your next big move.

The right 3PL can help:

• Reduce excess inventory costs
• Improve delivery accuracy and timelines
• Expand your market reach through a reliable global network
• Maintain brand standards at every stage of the customer journey
• Save on everything from warehouse space to freight brokerage

And perhaps most importantly, a great 3PL gives you peace of mind—knowing your logistics are in expert hands, so you can focus on building the business you love.

Published: 21 June 2021
Updated: 23 June 2025