3PL

What is a 3PL?

A 3PL is a third-party logistics (3PL) services provider that manages logistics activities on behalf of a customer shipper.

3PL stands for third-party logistics, which is the process of outsourcing logistics management activities to an organization specializing in solutions across the end-to-end supply chain network. Third-party logistics providers specialize in supply chain operations like transportation and warehousing that can be customized to meet customer needs based on market conditions.

3PL solutions often include fulfillment services like receiving, freight shipping, inventory management, warehousing and related services. Third-party logistics providers often support value-added services during the production and procurement of goods, as well as carrier management for shippers who need help coordinating transportation providers.

What are types of 3PL providers?

The 3PL provider offers order fulfillment services, commonly for e-commerce companies. Different types of 3PL providers offer specialized services within the supply chain network. A 3PL's services can have a singular focus, or third-party logistics providers can provide numerous activities required to support a customer's needs.

Common 3PL solutions include:

A logistics 3PL provider may offer additional services, such as:

  • Processing returns

  • Order customization

  • Customer service

Some types of 3PL providers are specialized in certain areas, such as temperature-controlled goods, bulky items or hazardous materials.

What are the top 3PLs by size and revenue?

According to Armstrong & Associates, Inc., a firm that provides 3PL market research and consulting and compiles an annual list of the top 50 global third-party logistics providers, the top 3PL companies globally by size and gross logistics revenue/turnover include:

  1. Kuehne + Nagel

  2. DHL Supply Chain & Global Forwarding

  3. DSV

  4. DB Schenker

  5. C.H. Robinson

Armstrong & Associates also compiles a yearly list of the top 3PL firms in the U.S., which includes:

  1. C.H. Robinson

  2. Expeditors

  3. UPS Supply Chain Solutions

  4. Kuehne + Nagel (Americas)

  5. J.B. Hunt

What solutions do 3PLs provide?

While third-party logistics providers can support a variety of logistics management activities, the top 3PL solutions include:

  • Inventory management: visibility into inventory and the ability to manage it

  • Split inventory: distributed inventory between different warehouses

  • Business-to-business (B2B) and direct-to-consumer (DTC) fulfillment: managing both business-to-consumer (B2C) and B2B types of fulfillment for multichannel logistics

  • Kitting and customization: custom packaging, notes or other personalized experiences

  • Fast shipping: offering two-day and free shipping options to satisfy customers

  • International fulfillment: scaling to global markets

  • Returns management: handling returns and returning items to inventory

  • Transportation and carrier coordination: managing carrier selection, freight movement and rate negotiation on a shipper's behalf

  • Analytics: offering analytics tools to track data and gain insights

What to use a 3PL

Third-party logistics organizations are helpful for smaller shippers and e-commerce businesses that may need help to handle all of their operations in-house. For instance, owning and managing a warehouse and taking care of all aspects of fulfillment is difficult, especially without a lot of capital or employees.

A 3PL makes logistics more possible for many businesses by storing inventory and providing numerous logistics services. Merchants can manage their part of the business without worrying about this aspect, as they outsource it to a 3PL.

3PL vs. 4PL: what's the difference?

Both 3PLs and 4PLs cover logistics and fulfillment outsourcing. While a 3PL handles specific logistics activities for a merchant, a fourth-party logistics (4PL) organization manages the entire supply chain.

Often referred to as a lead logistics provider, or LLP, a 4PL may manage different partners and other 3PLs for a customer, handling aspects like technology, fulfillment and transportation.

Benefits of using 3PLs

Beyond giving smaller businesses a chance to handle order fulfillment at more significant levels, 3PLs offer important benefits to businesses:

  • Wholesale prices: outsourcing with a 3PL allows merchants to buy products in advance at wholesale prices, saving on the cost of each one

  • Product sourcing options: businesses can be flexible in sourcing products from numerous manufacturers, combining them in a single warehouse and shipping them together, providing more options, flexibility and cost savings

  • Ability to scale: a 3PL allows a business to scale its operations without purchasing warehouses, hiring more employees or adding to in-house processes and technology

  • Fast delivery: choosing a 3PL with strategic warehouse locations enables businesses to fulfill orders and deliver them quickly

  • A better return process: a 3PL can handle returns, taking over the customer service aspect of a product return, processing the returns and adding items back into inventory when possible

  • Coordinated transportation management: a 3PL that also manages transportation can negotiate carrier rates, consolidate freight and give shippers a single point of contact for both warehousing and transportation decisions

How a transportation management system helps shippers and 3PLs

A transportation management system (TMS) simplifies processes for shippers and 3PLs.


How a TMS helps 3PLs manage transportation:

  • Automating repetitive, labor-intensive logistics tasks

  • Creating real-time visibility for managing supply chains

  • Collecting data and turning it into business intelligence to improve performance


How a TMS helps shippers manage 3PLs:

  • Providing tools that help with all logistics stages

  • Offering final mile service that optimizes the final stage of delivery

  • Centralizing data to manage claims

How technology supports shippers and 3PLs

As a 3PL helps manage logistics processes for shippers, technology is integral to executing a range of logistics tasks. The right tools help 3PLs manage processes and clients across both warehousing and transportation needs, and help shippers manage their 3PL partners and their roles in the logistics process, including carrier oversight and claims handling.