3PL - What Is It? Your Guide to Third-Party Logistics

Should you stay (doing what you’re doing) or should you go (to a 3PL)? 

When it comes to warehousing logistics, companies face a critical decision that affects their operational efficiency and growth potential: Should they manage logistics on their own or partner with a 3PL (third-party logistics)? 

This choice is an important one because it will define not only how things run now but also how the business will scale in the future. 

But what does a 3PL do, and how can you figure out if a 3PL fits your business needs? 

Let’s break it down …

3PL: What is it?

3PL, or third-party logistics, refers to a shift in how businesses manage their supply chain operations. Instead of managing everything on their own, brands can turn to experts to handle important warehousing and shipping tasks like picking, packing, kitting, storing, and fulfillment. 

Businesses move away from brand fulfillment to 3PL fulfillment, usually to help them handle higher customer demands and to stay competitive with a more efficient and scalable solution. 

What does a 3PL do?

Any business that deals with physical inventory and order fulfillment understands that a solid logistics plan is not just useful but crucial to grow. As order volume increases, logistics systems must grow to support the additional workload for your team. This is very important because without proper scaling, bottlenecks can form and operations can slow down. All of this results in fewer sales, unhappy customers, and missed growth opportunities.

A 3PL provider steps in as a key partner to your strategy. 

When you outsource to a 3PL, you’re handing off warehouse management to seasoned pros who know exactly what they’re doing.

Your 3PL partner handles your inventory storage and takes care of the entire order fulfillment process. That way, your business can hand off some of the more effort-heavy tasks and dedicate attention to more important tasks like growing the business and exploring new markets. 

Outsourcing to a 3PL can save more money than handling operations in-house. The ability to provide lower costs stems from the 3PL’s business model: They manage large warehouses serving several clients under one roof. This setup means that you are only paying for your proportional share of their space, staff, and resources, rather than bearing the full burden of warehouse expenses. 

3PL companies handle various logistics tasks, which include:

• Kitting and assembly operations
• picking and packing orders
• Shipping and receiving tasks
• Specialized shipping solutions
• Storing and tracking inventory
• Returns and reverse logistics 

3PLs also tend to focus on certain industries or specific areas of expertise. For example, some 3PLs are better suited for goods that spoil or need cold storage (and have the technology and setup in place to support these kinds of goods best). 

Some 3PLs function as hybrid providers. They don’t just store and send out goods for other businesses, but they also run their own product lines. These hybrid companies bring unique insights and operational efficiencies because they understand logistics from both sides. 

Finally, with so many 3PL providers out there, it is helpful to understand your business needs fully. Then, use those requirements to find a trusted and vetted 3PL provider that has the tools and the knowledge to meet those needs.  

Your 3PL will become your fulfillment champion, so take all the time you need to make sure you choose the best one to help your business reach its goals and grow. 

3PL: Warehouse basics

Now that we have addressed the fundamental question – “What is a 3PL?” – many people often then start to wonder: “How does a 3PL work in real life?”

To break it all down, let’s take a look at an example that shows a typical warehouse workflow step-by-step.

Step 1: Receiving

Let’s say you’re running an e-commerce business that is focused on selling perishable goods, and you have decided to team up with a 3PL service provider. The process begins with moving your inventory to their warehouse facility. This is key because the 3PL cannot start fulfilling orders for you until they have your inventory. So, getting your stock delivered to the 3PL is a vital initial step. 

After the 3PL receives your inventory, they will use technology like a WMS to keep all the warehouse activities organized. For perishable goods, a WMS is especially valuable because it enables the team to follow best practices like FEFO (first expiring, first out), ensuring products with the nearest expiration dates ship out first.

Step 2: Order packing and shipping

The order fulfillment process begins the moment a customer completes their purchase (ka-ching!) This starts the seamless flow of information between your sales platform and the 3PL’s system. While some setups may still need you to enter orders into the 3PL system manually or with a bulk upload, advanced systems like Zenventory eliminate this extra step entirely. Through the power of Zenventory's integrations, orders flow straight to your 3PL’s dashboard in real-time. This speeds up processing, cuts down on those pesky human errors (I mean to err, is human after all), and makes the whole fulfillment process smoother. 

Then, once an order enters the system, one of your 3PL’s team members will spring into action. Using advanced inventory management technology, the items in the order are located easily within the facility, picked, and packed. 

Packing takes more than just putting things into boxes. Your 3Pl team uses packing strategies tailored to your products. If items need specific temperatures, they use cooling tools like ice packs or insulated materials to make sure the proper temperature is maintained during transit. The packer’s attention to detail does not stop there, though. Nay, nay. This attention to detail extends to the selection of the box size, void fill materials, and protective packaging to make sure everything stays safe and intact during delivery. 

Step 3: Shipping

The shipping process highlights the true value of expert 3PL services. Your logistics partner handles everything needed to get shipments ready. From generating and applying accurate shipping labels to providing shipping tracking information.  

Many 3PLs go beyond standard shipping services and include extra options that can boost how your business serves customers. They often manage product returns, which is a complex process that involves careful handling, inspection, and putting the inventory back into stock. Some providers even offer customer support services, acting as an extension of your business to help handle shipping-related inquiries and resolve delivery issues. 

These additional services can help growing businesses offer professional customer care without needing their own in-house team.  

Why partnering with a 3PL can boost your business

Instead of just asking the question – “What is a 3PL?” – businesses should look at the strategic value these partnerships bring. Third-party logistics providers offer advantages that stand out when compared to doing it yourself in-house. 

Here’s a look at some of those key advantages.

Better speed and accuracy

Building a warehousing and inventory operation from the ground up requires significant investment and know-how. The list of necessities is pretty extensive: warehouse space, the right equipment, trained personnel, technology to support warehouse operations ... the list goes on and on. 

Working with a 3PL provider gives businesses another way to use built-in expertise and tools to get things done. These logistics specialists have already fine-tuned their operations, set up smart workflows, and invested in the tech. Because of their experience and well-run systems and processes, they often complete orders faster than many businesses could handle on their own during the beginning phases of growth. 

Lowering business costs

When businesses manage everything themselves, costs pile up fast in areas like renting warehouses, buying equipment, hiring workers, and running daily operations. These costs can get out of control during busy seasons or unexpected market changes, which makes it tough to keep profits steady. 

Therefore, 3PLs provide a compelling alternative with their ability to reduce and stabilize warehouse operational costs significantly. 

Shipping and handling compliance

Shipping goods might sound easy at first, but some products come with bigger challenges that need expert handling and compliance knowledge. Therefore, 3PL providers show their expertise when it comes to handling these compliance needs. How? They keep up with changing compliance rules and regulations across industries and locations to make sure every shipment meets the necessary safety standards and legal requirements. And their team understands the specific packaging specifications for delicate items, temperature-sensitive products, and hazardous materials, and applies the correct handling methods for each type.    

Support for Amazon FBA prep

With Amazon’s announcement that its in-house FBA prep services will end after 2025, sellers face a major shift in how they get products ready for Prime-eligible fulfillment. This adds new challenges around labeling, packaging, and compliance with Amazon’s detailed requirements. Partnering with a 3PL offers a powerful solution during this transition.

Many 3PL providers specialize in Amazon FBA prep, handling everything from labeling and poly bagging to bundling and carton forwarding. This takes the burden off sellers, reduces costly mistakes, and ensures shipments arrive at Amazon’s fulfillment centers, meeting every requirement. Instead of sellers scrambling to set up their own prep and compliance systems, 3PLs deliver a turnkey service that keeps products moving without interruption. For businesses planning long-term growth on Amazon, this makes 3PL partnerships even more valuable.

3PL pricing models

Understanding the cost structure of third-party logistics services involves examining several key operational components that influence pricing. 

3PL providers typically factor in multiple activities when determining their fee structure, creating comprehensive pricing models that reflect the full scope of their services.

The primary charging components often include:

• Receiving and putting goods away: This covers the initial handling of inventory, including unloading, inspection, and proper storage placement.
• Storage costs: Most 3PLs implement a cubic foot-based pricing system, offering flexible solutions that scale with your inventory levels.
• Fulfillment fees: These typically follow either a flat-rate structure based on item characteristics (size, weight, category) or custom pricing based on specific packing and shipping requirements. Fulfillment charges also generally encompass pick and pack operations, packaging materials, and carrier costs at either standard or negotiated rates.
• Returns processing: Usually structured as a flat fee covering the handling of returned items, including quality inspection, disposal when necessary, or restocking for resale.

3PL: Next steps

Now that we’ve got a good grasp on third-party logistics services, it’s time to figure out if teaming up with a 3PL makes sense for your company’s goals and day-to-day operations. 

If a 3PL can help your business out, you can find a reliable (and vetted) 3PL in the Zenventory Fulfillment Network.

Interested? Click here to find your next 3PL champion.