Managing a supply chain isn’t just about moving products — it’s about precision, efficiency, and scalability. And that’s a big job, from selecting the right shipping carriers to securing strategically located warehouses. Handling everything in-house isn’t always practical, but fortunately, third-party logistics (3PL) providers offer a smarter solution.
Whether you're refining your logistics strategy or building it from the ground up, this guide covers what you need to know. We’ll explain what 3LPs are, why they matter, and how to choose the right logistics services provider for your business.
What’s 3PL? The Meaning of Third-Party Logistics
Let’s start with a clear definition of 3PL logistics.
3PL logistics companies, also known as fulfillment companies, help businesses manage different parts of their supply chains. Instead of handling everything themselves, companies partner with 3PL service providers to assist with additional tools, storage space, and support with tasks like warehousing, packaging, and shipping.
Core Services Offered by 3PLs in Logistics
Many types of 3PLs exist, each offering different services to help companies meet supply chain needs. Some 3PLs specialize in specific areas like warehousing, while others provide more comprehensive, end-to-end solutions for manufacturing and delivering products.
The range of services that 3PLs offer is broad, so no matter what your business needs, a 3PL can likely help. Common third-party logistics services include:
Inventory Management
3PLs monitor and maintain inventory levels so you always have the right amount of products in stock. For online stores, 3PLs sync directly with e-commerce platforms, so inventory updates happen automatically with each sale. This is especially helpful during high-demand seasons like the holidays when certain products sell out quickly.
Warehousing
Many 3PL service providers operate their own warehouses, where they store and manage products for businesses. Some 3PL warehouses offer specialized storage solutions, such as climate-controlled facilities for perishable goods or secure spaces for fragile or oversized items.
Order Fulfillment
Once a shopper clicks “Pay now” or “Complete purchase,” who actually fulfills their order? For many businesses, a third-party logistics services provider oversees the process, from picking and packaging to shipping products from the warehouse to the customer.
Shipping and Transportation
3PLs work with carriers and delivery companies to make sure your products are on the road and en route to customers on time — and at the best possible cost. They coordinate outbound shipments, negotiate shipping rates, secure the right vehicles and couriers, and arrange special options like same-day or expedited shipping.
To keep buyers in the loop — and limit those “Where’s my order?” inquiries — 3PLs also set up automated order tracking to provide real-time visibility for businesses and customers.
Returns Management
Returns are an inevitable challenge of running an e-commerce company. Fortunately, 3PL service providers take the reins here, too, managing returns by sorting, inspecting, and restocking or disposing of items. They lead the reverse logistics process from end to end, so you don’t have to.
Freight Forwarding
For bulk and international shipments, 3PLs work with freight forwarders to move goods via ocean, air, and land. They also use cost-efficient shipping methods like less-than-container load (LCL) and less-than-truckload (LTL) freight.
Supply Chain Consulting and Optimization
Beyond daily operations, 3PLs help businesses streamline supply chain management. With experience across industries, 3PLs are experts at identifying inefficiencies and suggesting optimizations to prevent bottlenecks before they happen.
8 Key Benefits of Using a 3PL
By outsourcing logistics processes to 3PLs, companies can better scale and adapt as their needs change. They also save time and money while avoiding the hassle of managing logistics in-house. This ultimately frees up resources so businesses can focus on the big picture — long-term growth and success.
Here’s an overview of the many benefits that 3PL services offer:
1. Cost Savings
Struggling to negotiate the best price when it’s time to ship? 3PLs deal with high volumes from multiple clients across various industries, which gives them stronger negotiating power with carriers. 3PLs also eliminate the need for companies to invest in their own warehouse space.
2. Time Savings
Instead of building and managing an in-house logistics team, companies can offload time-consuming supply chain tasks to a 3PL. Automating and outsourcing these processes frees up valuable time to focus on customer relationships, marketing, and growth.
3. Logistics Expertise
Logistics is one part of your business, but for 3PLs, it’s their entire focus. 3PLs bring specialized knowledge, stay ahead of industry trends and regulations, and implement the latest technology so that you're always current and compliant.
4. Enhanced Scalability
A 3PL partner makes it easier to scale operations up or down based on demand. Need to stock up for a big sale or cut back during a slow season? A 3PL helps you adjust without the burden of long-term commitments.
5. Increased Reach
Looking to expand into new markets? 3PLs have established networks to support international shipping, helping businesses grow while meeting global compliance requirements with confidence.
6. Improved Efficiency
Fulfilling orders on time and handling returns as quickly as possible is key to keeping customers happy. 3PLs offer the tools and know-how to make that happen.
7. Supply Chain Risk Mitigation
Disruptions like supply chain shortages or natural disasters derail operations. Fortunately, 3PLs anticipate these risks and develop backup plans to help you adapt on the fly if necessary.
8. Faster Shipping
3PLs use strategically located warehouses, extensive carrier networks, and techniques like cross-docking to speed up deliveries and improve service. The result? Happier customers with fewer complaints about late shipments, thanks to faster, more reliable shipping.
7 Common Challenges of 3PL Services
As with any partnership, there are certain challenges and risks to working with 3PL services. That’s why, no matter which 3PL partner you choose, it’s important to establish clear lines of communication and be transparent about your goals, needs, and expectations from the start.
Before working with a 3PL provider, here are a few potential hurdles to consider and how to avoid them:
1. Misunderstood Roles and Responsibilities
Clearly define roles and other details upfront. Which processes will you leave to your 3PL, and which will you manage in-house? What communication channels will you use? How often will you provide input and receive updates? Setting these terms early on sets you and your 3PL partner up for success.
2. Complex Integrations
Without the right technology, like Electronic Data Interchange (EDI), 3PLs may struggle to integrate their systems with yours. This can make it difficult for you and your 3PL provider to share data in real time, which is key to a reliable partnership. With EDI, 3PLs can easily exchange critical data and documents with you whenever necessary.
3. Unexpected Costs
Working with a 3PL should reduce costs — not add to them. Be sure to review contracts carefully and watch for hidden fees or restrictive terms that could negatively impact your bottom line.
4. Inventory Management Scalability and Complexity
Your 3PL provider should be able to scale logistics operations as your business — and your product offerings — grow. That means they must be capable of managing inventory, updating data, and adapting supply chain processes accordingly. To do this, many 3PLs use EDI platforms, which allow them to receive purchase orders and send advance shipping notices automatically.
5. Quality and Service Standards Considerations
While 3PLs should be responsive to your needs, remember that you may be one of many clients. Maintain oversight to ensure consistent service quality. Setting and tracking key performance indicators (KPIs) can help you monitor your 3PL's performance over time.
6. Data Privacy and Security Concerns
3PLs have access to sensitive business and customer data. Make sure they have robust security measures, including encryption and authentication protocols and adhere to data privacy laws to protect your information and keep you legally compliant.
7. Potential Loss of Control and Visibility Over Supply Chain Operations
Outsourcing logistics to a 3PL provider means giving up some control over supply chain operations, which can impact your internal processes. Work with your 3PL ahead of time to establish visibility measures and any other ground rules that will help maintain transparency between the two of you.
How to Choose the Right 3PL: 6 Tips
Just like supply chains, 3PL companies aren’t one-size-fits-all. There are many different 3PL partners to pick from, each with its own specialties and services for different kinds of industries and product lines.
As you start your search for reliable and credible partners, consider these key factors to find the right 3PL for your business:
1. Scalability
Make sure your 3PL can scale logistics processes to meet changing demand. If you plan to expand your reach or sell internationally, for example, your 3PL should have the tools and carrier relationships to help support your growth.
2. Technology Capabilities
Behind every strong logistics partnership is top-notch tech. Your 3PL should have the technological capabilities to integrate with your e-commerce platforms and automate fulfillment services. For example, implementing EDI can accelerate response times, improve data security, and provide automatic updates like stock statuses and shipment confirmations.
3. Reliability
You need a trustworthy and credible 3PL partner that's in it for the long haul. Always research every 3PL candidate by asking for references and talking with other customers.
4. Data and Reporting
3PLs should provide real-time access to data, documentation, and reporting through cloud EDI solutions to give you complete visibility into your supply chain and valuable customer insights at your fingertips.
5. Fulfillment Center Locations
Choose a 3PL with a strong network of warehouses, ideally in the regions you serve. The closer the warehouses and distribution centers are, the faster your orders will reach customers and the more satisfied they'll be.
6. Service Expertise
Some businesses require specialized logistics services. If your products are fragile, temperature-sensitive, or oversized, you’ll need a 3PL that understands those needs and can accommodate them.
Talk to an EDI Expert
No matter your industry or inventory, EDI and third-party logistics services go hand in hand — together, they optimize operations, cut costs, and enhance data accuracy. They also allow businesses to outsource the grunt work of logistics management while providing complete visibility into their supply chains.
Ready to learn more about all that cloud-based EDI services and 3PLs can do for you? Connect with an EDI expert to set up a free consultation today.