William K. Turner
William K. Turner

A Comprehensive Guide to Third-Party Logistics (3PL)

15 min read

Published on: Jan 17, 2024

Last updated on: Jan 22, 2024


On This Page On This Page

As an ecommerce business owner, you know that creating and marketing your products are the core of your business. However, order fulfillment is almost as essential. 

After all, you have to make sure that your products reach your buyers seamlessly. However, focusing too much on the logistics of order fulfillment becomes costly and time-consuming as your business grows. 

The challenge you face is this: how to manage inventory, packaging, shipping, tracking, and more without spending too much time and energy?

That's where 3PL services come in to help!

3PL is a simple solution for businesses looking to outsource their supply chain management. By hiring a 3PL provider, you can delegate the logistics tasks to the experts so you can focus on enhancing your product and customer satisfaction.

So what is 3PL, and how can it benefit your business? Read this comprehensive guide to learn everything you need to know, from its working and benefits to helpful tips on choosing the right 3PL provider for your needs. Let’s dive in! 

What is Third-Party Logistics?

Firstly, what does 3PL mean? 3PL stands for third-party logistics. At its core, third-party logistics companies manage the storage and delivery of your products for your ecommerce business. 

Their main goal is to provide efficient and cost-effective solutions for businesses that need assistance managing their supply chain operations. This includes everything from storage, order processing, packaging, shipping, and tracking to final delivery.

Simply put, 3PL companies…

  • Provide transportation and warehousing services for businesses looking to outsource their supply chain operations.
  • Are responsible for the pickup, storage, and delivery of products to customers.
  • That helps businesses manage their inventory and provide order fulfillment services.

You can check out this short video explanation of 3PLs:

How’s a 3PL different from 4PL?

A 3PL is like a logistics expert that manages specific tasks like transportation and warehousing. On the other hand, fourth-party logistics takes a bigger role, overseeing the entire supply chain process, coordinating various 3PLs, integrating technology, and optimizing the entire chain. 

Think of a 3PL as a specialist handling specific logistics tasks, while a 4PL works with logistics as a whole, crafting and implementing holistic supply chain strategies. 

Expert Tip

Expert Tip: Learn more about the difference between 3LP and 4PL with our simple guide on 3PL vs. 4PL.

How Do 3PLs Work? Know the Order Fulfillment Process

Before you hire a 3PL for your business, it’s better to understand what goes on inside when a customer buys your product.

So here are the main steps involved in a 3PL fulfillment process:

Step 1: Receiving Your Products

First of all, a 3PL requires inventory on hand. So once you choose your 3PL partner, you need to send them your products. They’ll receive and store these products in their warehouses.

Different 3PLs offer various options on how they receive your products. You can either transport them through a courier, or they might pick them up from your doorstep. However, one aspect is common: you need to tell them in advance about which products you will send and how many. So the 3PL can prepare appropriate arrangements in time.

Step 2: Storing The Products in Warehouses

Once a 3PL receives your products, the next step is to inspect and store them. They inspect the products for potential damages or faults and then store them across their warehouses.

3PLs keep track of the SKUs using inventory management systems and ensure that you have enough stock on hand when it’s needed. The inventory is stored in appropriate spaces, for instance, shelves, pallets, or specialized storage units, depending on the type of product. 

Step 3: Picking

When you receive an order from a customer through your online store, the 3PL managing your product is immediately notified, and they initiate the picking process.

Their inventory management system identifies the products required to fulfill the order. Then, the warehouse management staff picks the products from the storage shelves. Before moving forward, the picked items are checked and verified. This step is critical to prevent shipping errors and ensure that customers receive exactly what they ordered.

 Step 4: Packing 

Once the 3PL has collected the required products, they pack them in the required packaging and label them with the shipping information. 

The 3PL team carefully selects appropriate packaging materials based on the nature of the products. For instance, electronic devices get custom boxes, while clothing items are packed in polybags. 

Moreover, proper packaging is not just about securing products for transit; good packaging contributes to the overall customer experience. At this stage, some 3PLs also handle any special requests, such as gift wrapping or custom packaging.

Step 5: Shipping

“Pick, pack, and ship” forms the core of order fulfillment.

Once the order has been picked and packed, it's time for the 3PL to ship your product. They add shipping labels to the packages, with complete shipping information such as the addresses and information about the product.

3PLs often partner with multiple carriers, such as FedEx, DHL, and others. Having multiple shipping options, they can deliver the goods quickly and cost-effectively. 

The 3PL tracks the shipment, ensuring that it reaches its destination on time and without any problems. They also provide detailed tracking information for customers to track the progress of their orders.

Returns Processing

Finally, 3PLs also handle the returns management process. They will process the product return and refund the customer according to your policy.

The 3PL will also inspect the product, figure out what went wrong, and take steps to ensure that it doesn’t happen again. This helps improve customer satisfaction and retention in the long run.

With this step, they can help you minimize your losses and protect your profits.

7 Essential Services That 3PLs Offer

There are many different types of services offered by 3PL providers. However, some of these services are essential for your ecommerce fulfillment. Here are 7 important services that most 3PL companies offer:

Warehousing and Storage

3PL providers offer warehousing and storage services to help businesses store their products. They can provide short-term or long-term storage, depending on your needs.

A 3PL provider will provide a secure facility and a climate-controlled environment for your inventory. They are also responsible for keeping it safe from damage or theft.

This helps save time and resources; therefore, many big companies use 3PL services to avoid managing storage themselves

Some 3PLs also provide distributed inventory. This involves the storage and management of your products across multiple warehouses at various locations. This makes the delivery process faster and more efficient, especially if your buyers are scattered throughout different regions.

Inventory Management

Managing inventory is an important part of any eCommerce business, and a 3PL can help with that.

Inventory management involves tracking and managing your product inventory. This includes keeping an accurate record of available products, how much is in stock, and when items need to be reordered.

These companies use advanced 3PL software to keep track of inventory and ensure orders are fulfilled quickly and accurately. They also sync your online store with the stored inventory to ensure accurate product data and transparent tracking.

This way, a 3PL provider can help you manage your inventory more efficiently and keep track of stock levels to prevent stockouts.

Order Fulfillment

Fulfilling orders can be time-consuming and complex. A 3PL provider can take care of this for you to make sure your customers get their orders quickly and accurately.

3PLs use automated order fulfillment systems that enable them to process, package, and ship orders faster. They also track the progress of each order from start to finish and provide order tracking information to customers.

This ensures that all your customers get their orders on time and in perfect condition, which can help increase customer satisfaction and loyalty.

Shipping & Transportation

A 3PL can provide a range of efficient shipping and transportation solutions to ensure your products are delivered on time.

This includes selecting the best carriers for your shipments, finding cost-effective routes, and managing freight forwarding services.

Additionally, 3PL providers will handle all packing and labeling for you, as well as arrange pickup and delivery of your orders. This allows businesses to focus on running their operations without worrying about shipping and transportation.

Returns Processing

In addition to storage and order fulfillment, 3PLs also help process returns and reverse logistics.

Processing returns can be a costly task for small businesses. A 3PL provider will manage this process for you and handle all the paperwork, shipping labels, and reverse logistics involved in this process.

This helps ensure that your customers have a smooth and hassle-free experience when returning products.

Value-Added Services

The best 3PLs don't just stop at storing and transporting your goods. They also provide value-added services such as customization and kitting.

Here are the most important value-added services your business requires from a 3PL:

  • Custom Packaging

Custom packaging involves customizing your product packaging to meet your customers' needs. In addition, it helps reinforce your brand identity and create a memorable unboxing experience.

This includes adding special features and branding elements that make it stand out from the competition.

  • Custom Sender Notes

Custom sender notes are personalized messages sent with each order. 3PLs can include custom notes with a package according to your client's wish.

These help create a personal connection with the customer, which can increase customer loyalty and satisfaction.

  • Kitting

Kitting is the process of combining multiple items into a single customized package. This can be used to create unique and attractive packages that attract customers and increase sales.

These value-added services provided by 3PLs can help your business stand out from the competition, boost customer satisfaction, and increase sales.

Data Analytics To Help Grow Your Business

A 3PL can also provide valuable data analytics to help you understand your customers better, optimize operations, and grow your business.

They provide insights into customer behavior, sales trends, and order fulfillment performance. This helps you make more informed decisions about what products to stock up on or discontinue.

It also helps you optimize inventory levels and shipping costs, so you can increase profits.

In short, all of these services can help streamline your operations and make your business more efficient. By using these services, companies can save on costs, reduce storage and transportation times, and improve customer service.

When Do You Need a 3PL?

You now know that a 3PL can help your business reduce costs, increase efficiency, and build capacity. Every eCommerce store out there can receive these benefits from a 3PL provider.

But the question remains: Do you even need a 3PL service for your business?

Let's dive into the reasons you may need 3PL services.

You Don't Have Enough Space for Your Inventory

When you run a retail business, one of the biggest challenges is finding enough space to store your inventory. Not having adequate storage facilities can lead to product losses due to overcrowding or even damage from improper handling and storage conditions.

By partnering with a 3PL provider, you can reduce the need for physical space as they have secure warehouses that can store and manage your inventory.

You Don't Have Sufficient Staff

It can be challenging for any business to have sufficient staff to handle the orders. This is especially true for small eCommerce businesses that don't have enough resources to hire and train personnel for each step of the order fulfillment process.

A 3PL can provide you with enough resources to process and send out the orders. This can help you save time and money by reducing the need to hire additional staff. Check out our blog for more details on the signs why you might need a 3PL order fulfillment!

You Need to Increase Your Delivery Speed

Slow delivery can really harm your business. Partnering with a 3PL is a great way to ensure a consistent delivery speed for your customers.

3PLs have access to multiple shipping carriers and can ensure that your products are shipped quickly and cost-effectively. This will help improve customer satisfaction, leading to more sales in the long run.

Your Shipping Volume is Increasing

As your business grows, your shipping volume will also increase. This can be a challenge if you don't have the right resources or infrastructure in place.

A 3PL company can help you manage this increase in shipping volume by providing the required manpower and resources for efficient fulfillment. They'll ensure that all orders are processed quickly and shipped accurately.

In short, you need services from a 3PL provider if your business is growing and you want it to grow even more!

How to Choose the Right 3PL for Your Business?

A 3PL provider is a valuable asset for any eCommerce business looking to maximize efficiency and productivity while minimizing costs. However, there are many 3PL companies out there, so how do you choose the right one for your needs?

Here are a few questions to ask yourself while selecting a 3PL partner that suits both your budget and operational requirements.

Does the 3PL provider have fulfillment centers closer to your customer base?

You need to find out the locations of a 3PL company’s order fulfillment centers to find out whether they will be able to ensure fast delivery.

As a business, you know your customers more than anyone. So make sure to choose the best location of a fulfillment center for 3PL that is closer to your customer base. 

Does the 3PL provider have the right technology? 

The right technology is essential for efficient order fulfillment. Make sure that the 3PL provider has advanced management software and systems to help you track orders in real-time and automate processes.

Also, make sure they are up-to-date with the latest shipping technologies and standards.

How good is their customer service?

Customer service is an important factor when selecting a 3PL partner. Ensure that the 3PL provider has a team of experienced professionals willing to help with any issues or inquiries you may have about their services.

It is also a good idea to check reviews online to see what other customers have to say about the 3PL provider.

Does your 3PL Provider have a Global Presence? 

Look for an international 3PL provider with a global presence, as they may have fulfillment centers in key international markets. This can contribute to faster shipping times, last-minute fulfillment, and lower overall shipping costs.

Is the 3PL Partner Cost Effective?

Find out how much the 3PL provider charges for their services and compare it with your budget. It’s best to choose one that offers competitive pricing for quality services that lies within your budget.

Moreover, 3PL companies that allow you to opt for additional services such as kitting and bundling within a reasonable price could be a better option. These additional services may be the key to making your customers happy.

Popular 3PL Companies

There are several 3PL services known for their excellent service. You can review these and choose one that fulfills the criteria discussed above. Here are your top options:

  • 3PL Fulfillment and Prep
  • Rakuten Logistics
  • RedStag
  • Shopify Fulfillment
  • FedEx Supply Chain 
  • Shipwire

3PL Fulfillment and Prep is a leading 3PL provider specializing in warehousing, order fulfillment, and shipping solutions. We offer comprehensive, cost-effective services tailored to meet your business needs.

The Advantages of Working with 3PL Fulfillment and Prep

If you’re looking to work with a 3PL partner, you should hire 3PL Fulfillment and Prep. We will not only help you minimize your challenges but also maximize your returns!

Here are some of the most significant benefits you can get from working with us:

Saving Your Time and Costs

By outsourcing the logistics operations and associated services to us, you can free up time and resources for other areas of your business. This results in cost savings that have a direct and positive impact on your business. 

For small businesses, outsourcing to 3LP Fulfillment Prep can be especially beneficial. By doing so, they can access resources that would otherwise be unavailable or too costly. This includes access to advanced technology-enabled 3PL and expertise in storage, order fulfillment, and other areas of logistics.

Improved Efficiency

By partnering with us, companies can reduce operational costs while building capacity to meet customer demands more efficiently.

3PL Fulfillment and Prep can also help you optimize your supply chain operations and identify areas of improvement. These efforts lead to faster order fulfillment times and improved inventory management. All of this leads to better customer service and increased profitability for your business. 

Flexibility and Scalability 

Another major advantage of working with us is that they can provide flexibility and scalability when meeting your shipping needs.

We can quickly adjust our operations to meet the changing demands of your business. This means that you can focus on other aspects of your business without worrying about whether or not you have enough inventory or staff to handle an unexpected surge in orders. 

Access to Industry Expertise

E-commerce logistics can be a complicated business. By outsourcing it to 3PL Fulfillment and Prep, you can access the knowledge and expertise of an experienced partner.

We are up-to-date on changes in regulations, as well as new technologies and services that can help improve the operations. In addition, we have the resources to handle any problems that may arise during order fulfillment quickly and effectively.

This helps ensure that your products reach their destination on time and without complications.

Hire 3PL Fulfillment and Prep for Seamless 3PL Experience!

3PL companies offer their clients the ability to simplify their supply chain operations and reduce costs associated with warehousing, shipping, and order fulfillment. If you need a 3PL provider for your business, you must review a 3PL's ability to deliver reliable services in a cost-effective way.

At 3PL Fulfillment and Prep, we ensure to handle your logistics needs with care and expertise. Our experienced team uses advanced tools and techniques to ensure the safety of your products throughout the entire fulfillment process. Our highly competitive pricing and commitment to customer satisfaction make us a great choice for your business.

With us, you can rest assured that you are making the right decision to meet your operational needs. Whether you are looking for warehousing services or need a partner to handle order fulfillment and shipping, we've got it all covered.

So why not take advantage of 3PL Fulfillment and Prep and make the most of your business? Contact us today!

Frequently Asked Questions

How is a CFA Different from a 3PL?

A CFA (Contract Logistics Fulfillment) provider typically offers more comprehensive services beyond warehousing, such as packaging, labeling, and order fulfillment. In contrast, a 3PL (Third-Party Logistics) provider focuses on the transportation, distribution, and storage of goods. 

What is FBA prep and how does it relate to 3PL?

FBA Prep or Fulfillment by Amazon Prep, focuses on preparing products to meet Amazon's standards for storage and shipment within their network. Unlike general 3PL providers that handle diverse logistics functions, FBA Prep specifically addresses Amazon's requirements. Some 3PLs may include FBA Prep services as part of their comprehensive solutions.

William K. Turner


William K. Turner (Supply Chain Management)

Willian K. Turner, our esteemed author with expertise in International Trade, Global Logistics, and Supply Chain Management, has a lot to offer when it comes to writing about these topics. He has a wealth of experience and knowledge to share with readers. Whether he's writing blog posts or articles his insights will be surely valuable to anyone interested in these industries.

Willian K. Turner, our esteemed author with expertise in International Trade, Global Logistics, and Supply Chain Management, has a lot to offer when it comes to writing about these topics. He has a wealth of experience and knowledge to share with readers. Whether he's writing blog posts or articles his insights will be surely valuable to anyone interested in these industries.

Keep reading