What is 3PL? A Complete Guide to Third-Party Logistics

Selling 1000s of products online each month and delighting customers isn’t easy. This is why online businesses outsource order fulfillment to 3PL companies. With order fulfillment left in the safe hands of 3PL experts, companies can focus on growing their business.

This guide explains everything you need to know about third-party logistics (3PL) companies. And why their 3PL services are extremely popular with e-commerce companies today.

Table of Contents

What is a 3PL company?
What’s the difference between 3PL, order fulfillment, and e-commerce fulfillment?
Why do companies use 3PL services?
How do 3PL companies handle order fulfillment?
What are the benefits of working with a 3PL company?
What services do 3PL companies offer?
What software do 3PL companies use?
How do 3PL companies manage fluctuations in sales?
How do 3PL companies protect sensitive information?
What is 4PL?
What is the difference between a 3PL and a dropshipping company?
What to expect when partnering with a 3PL company?
What to look for when choosing a 3PL company for e-commerce fulfillment?
Why 3PL Center is the trusted fulfillment company for successful e-commerce businesses

What is a 3PL Company?

Third-party logistics (3PL) companies offer logistics and supply chain services to other companies. They’re in high demand as managing logistics and supply chains aren’t things you can learn with a quick Google search. There’s a lot to learn, especially when shipping 1000s of products all over the country and further afield.

E-commerce has grown year after year since it arrived in the 90s. 3PL companies have been fundamental in helping e-commerce businesses with order fulfillment.

There are many kinds of 3PL companies. Each specializes in different industries such as cold fulfillment (frozen foods), pharmaceuticals, automotive, and more. E-commerce 3PLs are the most in-demand service.

What’s the difference between 3PL, order fulfillment, and e-commerce fulfillment?

3PL refers to the logistics and supply chain services that 3PL companies offer. Order fulfillment is the process of receiving, processing, and shipping customer orders. And e-commerce fulfillment is order fulfillment tailored for e-commerce companies. 

Why do companies use 3PL services?

Online sales continue to grow year on year. The e-commerce market share is forecast to increase between 2023 and 2027 by 509.4 billion U.S. dollars. As fast delivery times and competitive pricing are essential for a great customer experience, companies soon feel the heat when they start selling goods online.

Delivery times and customer service make or break the experience. Companies use 3PL services as they want to provide a world-class experience right away. They know the cost of a poor customer experience:

Companies tend to manage order fulfillment themselves in the early days of their business. But as sales increase, they outsource it as it eats up too much time and focus. Shipping hundreds or thousands of orders a month soon feels like a full-time job in itself.

Businesses managing order fulfillment themselves also learn that they can’t achieve the same discounts on shipping that 3PL companies secure. As those selling online want a cost-effective solution and to delight customers with fast deliveries – partnering with a 3PL company is the obvious solution. It helps them achieve both.

E-commerce companies outsource fulfillment services to 3PL providers because shipping goods is time-consuming, complex, expensive, and it requires expert knowledge to ship high volumes of goods without delays or unexpected fees derailing progress. 

Delays annoy customers and hurt a company’s reputation. So, a trial-and-error approach to order fulfillment isn’t an option. This is why so many companies partner with a 3PL company early. Few want the burden of managing a warehouse, inventory, order fulfillment – and all the work that comes with them. 

Why businesses partner with 3PL companies:

Access 3PL logistics expertise

Running a warehouse, logistics, and regulations – there’s a lot to learn. It’s hard to “learn on the job” as mistakes cause delays – which customers don’t want. Outsourcing order fulfillment lets companies tap into a wealth of industry knowledge.

Get better deals

3PL companies have contracts and partnerships with shipping carriers, which gives them discounted rates. A company working alone cannot achieve the discounts that 3PL companies secure.

Quicker delivery

Customers expect fast and affordable shipping – to keep up with the competition, ecommerce businesses need to offer 2-day shipping. To offer this to your customers, you need to have your inventory distributed across the country in strategically located 3PL warehouses. Orders are then dispatched from the 3PL warehouse that is closest to the shipping address.

Free time for business development

Managing fulfillment eats up so much time that it becomes hard to manage other areas that need attention. Outsourcing order fulfillment frees up hours of time each week.

Scalable & flexible service

Companies often start managing order fulfillment themselves but soon hit the wall as business picks up. Whether it’s warehouse or software problems, they soon find their systems aren’t equipped to handle high volumes of orders.

Expand reach

As companies grow, they may want to offer their services to a larger audience. This requires more knowledge of international logistics. A 3PL company can help you “go global” fast.

Continuous improvement

3PL companies are heavily data-driven and always looking to save time and money. When managing your company’s order fulfillment, you’re often too busy to consider optimization. Working with a 3PL company that’s dedicated to improvement is great news for you and your customers.

Better customer experience

Ultimately, everything 3PL companies do is to help you give your customers a better experience.

How do 3PL companies handle order fulfillment?

A 3PL company handles their clients’ order fulfillment from the second the customer buys a product until it reaches their doorstep. They manage 3PL warehousing, plus the inbound and outbound transportation of goods.

The typical 3PL process:

1. A business orders products or makes their own.

2. Products are then shipped to distributed 3PL warehouses to be stored.

3. The warehouse receives inventory and then logs it into stock.

4. The 3PL warehouse team manages inventory.

5. Customer orders go straight from your platforms to your 3PL provider.

6. The warehouse team picks, packs, and ships to your customers.

That’s the basic process but 3PL providers tend to serve different industries, where they might offer a range of value-added services. For instance, an e-commerce-based 3PL center typically offers product kitting and assembly, subscription shipping, gift wrapping, and returns management services.

What are the benefits of working with a 3PL company?

Save money with 3PL logistics discounts

As 3PL providers speak with shipping carriers day in, day out – they secure great discounts. When working with a 3PL, you save more money and customers get a better deal. This is a major reason why companies quickly partner with a 3PL provider. They learn that working without one, they can’t secure the same deals.

Access a wealth of 3PL logistics experience

There are many things to learn when it comes to shipping products across the USA and globally. And some can only be learned through years of hands-on experience. Plus, rules and regulations can change so it requires focus all year round to stay in the loop. Partnering with a 3PL company gives you a wealth of knowledge that would otherwise take years to learn.

A flexible service that scales with you

3PL providers are typically set up to work with businesses of every size. As their services are never one-size-fits-all, you can pick and choose what works for you. This is what makes 3PL attractive as you could be working with a company for years – adjusting the services as your business evolves. And should your business need to downscale, they can adjust for that too.

Expand reach

Companies often hit the ceiling when managing order fulfillment by themselves. Their current systems may begin to crack when order volumes rise, or when they look to expand their reach. Plus, changing 3PL systems can be time-consuming and complicated. It’s easier to work with a 3PL provider as they can help companies expand their reach across the country right away.

Better systems

Nobody is more obsessed with logistics than a 3PL company, so their clients get access to better systems when partnering with one. 3PL companies use leading technology that gives clients real-time visibility, inventory management, shipment tracking, order processing tools, and more. All of this gives greater visibility to help business owners make better decisions while customers get a better experience.

Get more time to focus on growing your business

There are many moving parts involved in 3PL logistics. It eats up lots of time, effort, and headspace to manage. Handing over the responsibility of order fulfillment to another company frees up space to focus on your most important tasks that will help you grow your business.

Reduced disruption risk

Third party logistics companies have seen all the problems that can disrupt supply chains, so they prepare for the worst in advance. Should the supply chain break down due to strikes, transportation delays, etc. they have contingency plans in place. For companies, this beats having to investigate matters themselves should a problem arise.

Value added services

Some products are tricky to sell and others could benefit from customization. 3PL companies are known to offer value-added services such as product customization, labeling and barcoding, kitting and assembly, gift wrapping, product bundling, subscription shipping, quality control/inspection, product repackaging, customer support services, and more. This means less work for you and better products for customers.

A better customer experience

3PL companies exist to help you impress your customers with a world-class service. Everything a 3PL provider does is to try and save you time and money. Knowing that a 3PL has order fulfillment covered lets you focus on finding more products and customization ideas that your customers will love.

What services do 3PL companies offer?

This differs depending on the industry that the 3PL company serves and the clients’ needs. Clients may choose to keep some services in-house, but this often changes and they outsource more tasks to their 3PL provider as sales and product ranges increase.

Common services include:

Product storage

3PL companies have warehouse spaces where they manage the order fulfillment process for several clients at once. This is a huge benefit for clients as it takes a great deal of knowledge to maintain a safe, organized 3PL warehouse. Working with a 3PL company saves clients from having to buy forklift trucks (which also require trained staff) and securing deals with trucking companies to transport goods.

Inventory management 

Inventory always requires precision to maintain healthy stock levels and avoid selling out of top sellers. A 3PL company will sync your inventory with your online store, and will also create categories for your products to ensure no products get lost or misplaced.

Inventory distribution

Based on your customer’s location, a 3PL will route to fulfillment centers closest to them to reduce shipment time. A 3PL inventory service will ship goods all over the country for you.

Picking and packing services

3PL companies have staff on-site to pick and pack your customers’ orders for delivery.

Freight forwarding

As they’re using many services day in and day out, 3PLs have great knowledge of carrier services. They will pick the best ones based on price and speed.

Customs and compliance

Failing to meet import/export regulations is a common source of delay. A 3PL company will have great knowledge of the latest guidelines to ensure all legal requirements are met to avoid any problems.

Expedited shipping

3PLs often have expedited shipping options that a client couldn’t secure if working alone. This is because 3PLs often have negotiated deals with top-name carriers such as FedEx and UPS. 3PLs can offer superior shipping times at a discounted rate.

Shipment tracking services

A 3PL company has technology in place to keep your customers up to date with their order as it moves through the fulfillment process. There’s a big demand for this service, especially when shipping expensive products – customers want to know where their products are to make sure they’re going to be home when they arrive.

Returns (reverse logistics) 

3PL companies can simplify the dreaded customer returns process, which can get overwhelming as some goods such as clothing and shoes have a high return rate. The returns process will be customized to suit the type of products that you sell. For instance, a common request is to provide a returns label in the box, so customers can drop items off at a post office or have them collected by a courier service.

Value-added services

Some items may require some assembling or additional labeling. 3PL companies offer value-added services to help clients save time and money while giving customers a better end product. This could be assembly, gift wrapping, barcoding, inserting leaflets or gift messages, etc.

Supply chain consulting services

Some clients may not outsource all their processes to a 3PL provider. Some only seek help to optimize their supply chain. Whether they’re a startup or a well-established company, many companies work with 3PLs on a consultancy basis.

What software do 3PL companies use?

3PL companies use many systems to smoothly move & track products from start to finish. Business owners often assume that partnering with one involves a big tech overhaul that comes with a steep learning curve and some downtime. That’s not the case when dealing with a reputable 3PL service. They should make it simple.

It’s most common for a 3PL company’s systems to connect to their clients’ systems as they have many integrations for the most popular tools. A reputable 3PL company should also let your developers connect your systems to theirs if that approach works better for you.

Software typically used by 3PL companies:

Transportation Management System (TMS) – to help companies plan and execute the movement of goods and shipments. A TMS helps optimize route planning, carrier collection, calculating freight cost calculation, and shipment tracking. It also provides performance analytics to see where improvements can be made.

3PL Warehouse Management System (WMS) – used for inventory, order picking, packing, shipping, and receiving goods.

Order Management System (OMS) – can process and manage orders from multiple channels, with the ability to track orders from the moment it’s purchased to delivery. It’s also used for managing inventory levels and making sure on-time order fulfillment occurs.

Inventory Management Software – for assisting, managing, and controlling inventory levels across multiple warehouses. 

3PL Warehouse Control System (WCS) – an automation tool for handling equipment, such as conveyors and sorters, to optimize warehouse workflows.

Freight Management Software (FMS) –to compare rates, choose carriers, and manage shipments.

Customer Relationship Management (CRM) – used for sales pipeline management, email marketing automation, and tracking customer activity.

Business Intelligence and Analytics Software – to gather and analyze insights from operations, helping 3PLs make data-driven decisions to optimize supply chain processes.

Enterprise Resource Planning (ERP) Software – integrates multiple processes into one platform, helping 3PLs with resource planning, order management, inventory, finances, and more.

Visibility and tracking tools – 3PLs often use a range of tracking tools such as GPS, RFID, and IoT (Internet of Things) devices to see shipments and inventory in real-time throughout the supply chain.

How do 3PL companies manage fluctuations in sales?

Product sales are expected to fluctuate throughout the year for some items (such as bicycles and outdoor furniture). A reputable 3PL company knows this and accommodates it. Warehouse space, labor, and transportation services can all be adjusted to cater to changes in the season.

How do 3PL companies protect sensitive information?

A reputable 3PL should be well aware of best practices to protect sensitive information. Data centers, firewalls, encryption protocols, and access controls are commonly used. Always ask a 3PL company about this when inquiring about their services.

What is 4PL?

A 4PL company, also known as a lead logistics provider (LLP), has similar duties and responsibilities as a 3PL but they typically manage the supply chain differently. 4PLs often manage multiple 3PL companies at once, acting as consultants/coordinators. They take a hands-on approach to managing the supply chain and adjusting transport. 

What is the difference between a 3PL and a dropshipping company?

There are many differences between 3PL and dropshipping companies. A 3PL company provides a wide range of logistics services to businesses. A 3PL provider takes charge of inventory and manages supply chain operations while acting as an outsourced partner for the business.

A dropshipping company acts as an intermediary between the retailer and the product supplier. They do not own inventory. Products are shipped directly from the supplier to the customers, so the retailer does not stock or handle the products. The customer pays the retail price that the retailer sets, the retailer pays the suppliers’ wholesale price – and the rest is profit.

The typical dropshipping supply chain:

1. Items are advertised for sale on their online store but the company doesn’t own/control the inventory. They have contracts with dropshipping manufacturers/distributors.

2. The customer buys a product online.

3. Order gets passed to the dropshipping supplier while you (the retailer) pay for their order.

4. Supplier ships items to your customer.

What to expect when partnering with a 3PL company?

1. Consultation & quote

The first step is contacting a 3PL to make sure that you are a good fit for each other. During a consultation or quote, the 3PL will need to know how many orders you get per month (on average), your number of SKUs, how many pallets or cubit ft you will need, how your product arrives (container, LTL or small parcel), what shipping cart you are using and whether you need any kitting and assembly.

2. Onboarding & integrations

The first step is to define your company’s most important goals and objectives. This involves:

  • Sharing data – inventory information, past performance data, and any other relevant information that the 3PL company should know.
  • Training – inform the 3PL company about your products, processes, and customer service standards. A 3PL company wants your brand and customer service values to be reflected in every sale, so training is key to ensure customers get the level of service that they expect from your company.
  • Review & sign contracts – after you’ve both learned about each other’s way of working and how you can work together, all contracts are to be finalized – service level agreements (SLAs), and terms and conditions.

Once the paperwork is complete, the 3PLs team will begin integrating their systems with yours; or vice versa if that’s what has been agreed. Then they will train you on the new systems.

3. Set key performance indicators (KPIs)

A 3PL company checks in with clients regularly to review performance. To do so, KPIs will need will be set. Some common KPIs typically include:

  • Order accuracy
  • On-time delivery
  • Inventory turnover
  • Customer satisfaction

4. Growing together

During your meetings, you will look at performance together, addressing any concerns or problems that may have appeared. “Lean” principles are at the heart of 3PL companies’ culture. They will make adjustments as you go to maintain a successful partnership that works for all parties.

What to look for when choosing a 3PL company for e-commerce fulfillment?

Working with a 3PL company is highly likely to play a huge role in growing your business. It could be one of the best partnerships you ever make. But it’s crucial to take the time to choose the right 3PL company for you. Make sure that the 3PL you choose is a good fit for where you are now, and where you want to go.

What to consider when choosing a 3PL partner:

  • Integration capabilities – make sure their software is compatible with all of your sales channels. 
  • Simple pricing & contracts – review contracts and make sure that you are certain of the fees you are expected to pay and the duration of your contract. A reputable company should make this as straightforward as possible.
  • Expertise in your industry – some items are more tricky to ship than others. Take e-bikes for example – they’re heavy, bulky, and contain lithium batteries that need to be packaged a certain way. Check that your 3PL has experience shipping the kinds of products you are selling or plan to sell in the future.
  • Quality customer support – this is a big partnership that could last for many years to come. Ask the 3PL company how you can contact them should you need help. It’s much better to have a designated account manager, rather than speaking with a different agent every time.
  • Size of 3PL – do you want to be a small fish in a big pond or the other way round? If you are looking for more hands-on support, choosing a 3PL that has the scale, but isn’t going to lose you amongst their much larger customers, may be what you need to look for.
  • Their financial health – this is easily found online. Choosing a startup or a company in some difficulty is a risky move. Better to pick a 3PL company with healthier finances to put your mind at ease.
  • Customer reviews & testimonials – check as many as you can. Ask the 3PL company to show you where to find some if you can’t find them.
  • Premises – ask to visit their 3PL warehouse and distribution centers so that you can see them in action.
  • Security & stability – what security measures are in place to protect your stock? And what systems are used to protect your sensitive information and keep things moving should their systems fail?
  • Range of services – learn what services are available. Even if you don’t require them now, you may need them later when sales rise.
  • Scalability and flexibility – sales can fluctuate on certain items, so ask how they will accommodate when peak seasons or promotions affect sales volumes.
  • Discounts & rates – a reputable company should have a number of partnerships with shipping carriers. Ask who they partner with and what level of discounts you can expect.
  • Geographical coverage – make sure that they can cover your target markets and that they have warehouses placed to offer 2-day shipping.
  • Contingency plans – strikes and environmental disasters happen from time to time. Ask about their contingency plans should something occur.
  • Company values – look around their website and ask questions about their company values. If you have committed to improving sustainability and eco-friendly practices at your company, check that the 3PL doesn’t clash with your values.

Why 3PL Center is the Trusted Fulfilment Company for Successful E-Commerce Businesses

Years of experience with a proven track record

3PL Center has been in business since 2011. We’ve shipped items of all shapes and sizes, meeting every rule and regulation along the way to provide an excellent service for customers. We’ve done it all: floor loaded, palletized, slip sheets, drums – 20ft, 40ft, 45ft open containers – whatever you need, we can do it.

Scalable and flexible services

You don’t need to worry about being stuck with services that no longer suit your needs as you grow. Our services are flexible – built to scale with you. You can adjust your services whether you are ready to scale up or need to scale down.

Customs requirements expertise

We’re always up to date with the latest customs requirements. There will be no surprises that slow down your shipments. We will cover the customs requirements with you and will let you know of anything that you should know before moving forward.

Value-added services: custom kitting and assembly, pick and pack, subscription box services, and more

Some products require more attention to detail than others. Our clients are comfortable expanding their product range, as our services can cater to the most demanding products.

Unlimited integration capability

We’ve tried and tested each of our systems to make sure they sync with yours. We take pride in making systems that are impactful but not intrusive to your systems or way of working. We make our systems fit yours. Or your developer can sync your systems to ours if that suits you better.

Geographic coverage

Our team has picked, packed, and shipped products all over the United States and globally. Our 3PL warehouses are strategically distributed so that we can get our client’s products to their customers in the quickest time possible.

Order accuracy

We have earned a great reputation as we always put our customers first and never cut any corners. Our customers tend to stay with us for many years as their business grows. 

Reliable on-time shipping 

We can reach 99% of your customers in 1-2 business days. With two locations in the US, on the East and West Coast, we can delight customers with fast shipping times that few can match.

3PL trucking services

Our 3PL trucking services can deliver goods to your customers in three hours or by the next day. We offer drayage, express trucking, local California delivery, Local delivery for NY/NJ/PA, and Nationwide LTL trucking services

Returns management

Shipping products to customers is one thing but returning them is another. We arrange a returns management process during our onboarding process to ensure that you feel confident shipping goods all over the country. Returns won’t be a problem. 

Competitive Pricing 

We offer competitive pricing that companies couldn’t secure working alone. With us as your 3PL partner, you’ll benefit from our partnership deal with FedEx and our discounts on handling services, oversize and overweight fees and waivers.

Our customers sell on the biggest platforms

With online reviews and high volumes of sales, there’s no place to hide if service isn’t up to scratch on the big platforms. It requires total trust in your 3PL service. And our clients trust 3PL Center as they sell products on Amazon, Wayfair, Walmart, Home Depot, Saks and many more. With thousands of positive online reviews for products we’ve shipped, it’s a testament to our services.

A wide range of industries served

We help our customers sell, vitamins and pharmaceuticals, ebikes and bikes, auto parts, pet products, home goods, healthcare & hospital equipment, baby products, mattresses, outdoor equipment, surf & paddleboards, and apparel & shoes. Each industry has its challenges. We know them inside out and how to overcome them.

Nationwide LTL (less than truckload)

We track shipments every step of the way. And we have many trusted partners across the US, so we always have a backup plan should we need it. We offer local delivery LTL services in:

  • New York
  • New Jersey
  • Pennsylvania
  • Los Angeles
  • Long Beach
  • Simi Valley
  • Ontario
  • and Rancho Cucamonga.

We offer same/next-day delivery in North East or Southern California. Plus, options for expedited or standard 1-3 day delivery anywhere in the US.

Cross docking services

Our Cross-Docking services offer a streamlined approach to 3PL logistics by unloading goods, checking them into stock, labeling or palletizing, and then loading them directly onto trailers. We’ve eliminated the need for long-term warehousing, reducing storage costs and minimizing handling time. 

Custom 3PL integrations

Whatever systems you’re using, we’re confident our developers have already built a custom integration for it. Or if you prefer, your developers can integrate with our systems. Some of the custom integrations we have include:

Customer support

It’s normal for companies to feel a bit uneasy about trusting a 3PL company to manage their order fulfillment. Our onboarding process will put your mind at ease and you can contact us at any time through email, office phone, or cellphone. We’re here to help you.

Want to see how your company can benefit from a world-class 3PL service?

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