3PL: Definition, Meaning, and the Process of Choosing One


3PL: Definition, Meaning, and the Process of Choosing One

In today’s complex and globalized business landscape, companies often face challenges in managing their supply chains efficiently. Third-Party Logistics (3PL) providers have emerged as valuable partners to streamline operations and enhance logistics capabilities.

Hiring a 3PL (third-party logistics) provider to handle your order fulfillment lets you work with experts on a crucial business function so that you can concentrate on expanding your customer base and improving your marketing strategies. The business model of consumer goods companies handling many or all processes in-house can sometimes not be the most effective, especially if it comes to eCommerce fulfillment, and hence there is a significant demand for 3PLs among eCommerce brands. Many rapidly growing eCommerce businesses find that outsourcing their logistics to a 3PL saves them significant time and money.


What is 3PL?


Third-Party Logistics (3PL) refers to the outsourcing of logistics and supply chain management functions to an external service provider. These providers offer a wide range of services, including transportation, warehousing, distribution, inventory management, order fulfillment, customs clearance, and freight forwarding. Third-party logistics provider describes an organization that specializes in fulfilling orders. Third-party logistics providers (often known as 3PLs) are similar to order fulfillment businesses. Some third-party logistics companies offer extra features like:

  • Shipping freight using FTL or LTL
  • Transportation of Goods
  • Processing returns and exchanges through kitting.

With the help of a third-party logistics provider, you won’t have to worry about the logistics of running an online store.


ALSO READ: How can a 3PL Support a Business’ Seasonal Sales Cycle


Different third-party logistics providers excel in various aspects of order processing and storage. Some of these facilities have cold storage available, making them ideal for storing and transporting perishable foods. There are other 3PL companies available that can handle warehousing and distribution of anything from hazardous chemicals and clothing to high-SKU product lines and low-SKU product lines.


The Process of Utilizing Third Parties for Logistics


Products sent through a third-party logistics provider bypass the company’s own distribution network and go straight from the manufacturer to the customer. After receiving your stock, the fulfillment center may offer extra services beyond just standard fulfillment if you so desire. The 3PL Companies process consists of the following key components.


• Designing a Virtual Shopping Cart


Online stores rely heavily on several sales channels to stay afloat. In order to facilitate this, your fulfillment center needs reliable IT systems. The WMS used by fulfillment centres is compatible with majority of shopping carts. Your service provider should work with all the channels you use to sell products or develop an API that integrates seamlessly with your storefront. A dashboard that allows you to monitor your orders and see where they are at any given moment is another necessary feature.


• Shipping and Receiving for FTL and LTL Shipments


Less-than-truckload (LTL) and full-truckload (FTL) freight services might be invaluable when trying to cut costs in this area. This is especially important if your business often sends out bulk orders to wholesalers or retailers. Freight services can help you move products from one warehouse to another, or to a center for distribution that is more conveniently located for your clients. Delivering bulky items like the mattress in a box or a bicycle to a final consumer is a breeze with residential LTL freight. LTL freight, which uses pallets to safely transport objects, expands the options for transporting bulky items. There are logistics outsourcing firms that can help you with this, from setting up FTL or LTL loads to handling inbound truckload cargo. Your third-party logistics provider (3PL) can also assist you in determining the optimal service level and pricing for your freight shipment needs.


• Managing Stocks


You can save yourself a lot of time and effort in the long run by teaming up with a third-party logistics process that also handles inventory management. Your account rep can use the knowledge gained from working with other eCommerce businesses to improve your stock management. Get in touch if you need help figuring out how often to refill, how to organize your supply chain, or how much stock you should have on hand based on the season.


• Collection, Processing, and Delivery


Order fulfillment revolves around the “picking, packing, and shipping” processes. Orders placed through any of your sales channels are sent immediately to your fulfillment center for processing. There, a “picker” will scour the shelves for the required materials. The order is then packaged by a packer who carefully chooses the appropriate size box. The shipping label is affixed by the packer as well. The final step is for the shipper to arrange for the appropriate carrier to pick up the order when it is complete.


• Instantaneous Dispatch


Same-day shipping is a service provided by some 3PL Companies in which customer orders are processed, packed, and sent on the exact day they are collected. Customers are more likely to be happy if their orders are fulfilled quickly, and same-day shipment does this.


• Inverted Supply Chain


You can’t have a successful fulfillment procedure without considering reverse logistics or returns. Higher than usual return rates are seen for sizing-specific products like apparel and footwear. To facilitate this essential supply chain operation, many eCommerce fulfillment centers also accept and handle returns. Product inspection is a part of the reverse logistics process to determine if returned items are damaged or can be reused. Time spent waiting for undamaged goods to be made available for sale again can be cut with efficient reverse logistics. Many things, such as the products you offer, might affect your return rate; nevertheless, the strengths of your third-party logistics process (TPS) can be a major effect. Companies that provide eCommerce platforms integration can benefit from low return rates thanks to service providers with low error rates in fulfillment.


ALSO READ: Questions Retailers Should Ask About Split Shipment


Are Third-Party Logistics a Good Fit for Your Company?


The use of third-party fulfillment services is crucial to the success of online retailers. Using a 3rd party logistics company can help your company in many ways.

  • Warehouse space is not necessary for your company. If you outsource your logistics, you may easily adjust the amount of storage space your products require as your business grows or contracts.
  • Orders placed by customers are handled expertly to ensure client satisfaction.
  • Since you get to pick where your warehouses are located, you can put your goods in closer proximity to your clientele. That will result in reduced freight costs and reduced delivery times.
  • Your 3PL (third-party logistics service) provider may be able to save you funds on transportation because fulfillment facilities are quantity shippers and may have negotiated lower shipping pricing with major carriers.
  • You will have the option of value-added services such as customization, parcel consolidation, and freight shipment, all of which have the potential to help improve your company’s operations.
  • You acquire an expert companion. Your third-party logistics supplier will be able to guide you through the process of selecting the optimal shipping, packaging, stock control, and reverse logistics choices for your business.


Key Benefits of Using a 3PL Provider


Partnering with a reliable 3PL provider can bring numerous advantages to businesses:


a) Cost Savings: 3PL providers possess economies of scale, allowing them to negotiate favorable rates with carriers, warehousing facilities, and other logistics partners. This can result in cost savings for companies.


b) Expertise and Resources: 3PL providers have specialized knowledge, industry experience, and advanced technology systems to optimize supply chain processes. They can effectively manage complex logistics operations, including international shipping and customs compliance.


c) Scalability and Flexibility: As businesses experience fluctuations in demand, 3PL providers offer scalability and flexibility to accommodate changing needs. They can quickly adjust warehouse space, transportation capacity, and labor resources to match requirements.


d) Enhanced Service Levels: 3PL providers focus on delivering exceptional service levels to customers. They have dedicated teams to handle logistics operations, ensuring timely deliveries, improved order accuracy, and better customer satisfaction.


ALSO READ: Inventory Management Guide for eCommerce Leveraging 3PL for Efficient Operations


Choosing the Right 3PL Provider


Finding the right third-party logistics partner is the next step once you’ve made the decision to do so. It’s not like all fulfillment centres are the same. It’s possible that not even the best 3PL is the best fit for your company. Selecting the most suitable 3PL provider for your business requires careful evaluation and consideration. The best third-party logistics provider (3PL) for your firm is the one that can readily provide eCommerce platform integration and that has expertise shipping products that are comparable to yours. The following steps can guide you through the process:


• Assess Your Needs


Begin by identifying your specific logistics requirements. Consider factors such as transportation modes, warehousing needs, order volume, geographic reach, and value-added services. This assessment will help you outline the scope of services required from a potential 3PL partner.


• Find and Evaluate Potential Service Providers


Conduct thorough research to identify reputable 3PL providers that align with your business requirements. Seek recommendations, read reviews, and evaluate their industry expertise, service offerings, technological capabilities, and geographical coverage.


• Evaluate Capabilities


Once you have a shortlist of potential providers, evaluate their capabilities in detail. Assess their track record, financial stability, infrastructure, technology platforms, and their ability to meet compliance and regulatory requirements. Request case studies or references to validate their performance and customer satisfaction levels.


• Professional 3PL Services


Experience counts for a lot. There are specific ways in which each fulfillment centre is designed to handle packages. Warehouses which specialize in handling big items, contain features like wider aisles, a stronger conveyor belt, and stronger packaging. There is no way to obtain the attention you require from the warehouse staff if your goods are unusual. Actually, if the product isn’t packaged properly, you risk receiving broken items. It’s important to hire a business that can fulfill orders after learning about your products.


• 3PL Distribution Centres


Having your own warehouse to ship from can make you feel more in charge. However, unless your clientele is densely concentrated in a small area near your place of business, this likely works against you in terms of shipping prices and transit times. By strategically placing your few distribution centers, you can ensure that your items are conveniently close to your clients across the country.


• Customer Service for Third-Party Logistics Process Providers


When problems arise in the course of business, it is essential to pinpoint the source of the problem without delay. The success of your online store hinges on how quickly and reliably you respond to customer inquiries. Consider the response time of customer support when researching new fulfillment firms.


• Request Proposals and Conduct Interviews


Request detailed proposals from the shortlisted 3PL providers, outlining their services, pricing structure, performance metrics, and contract terms. Conduct interviews to better understand their approach, communication processes, responsiveness, and compatibility with your company culture.


• Site Visits


If feasible, schedule site visits to the facilities of the shortlisted providers. This will allow you to assess their warehouse operations, quality standards, technology systems, and overall operational efficiency. It is also an opportunity to meet their team and assess their level of professionalism.


• Due Diligence and Decision-making


Perform due diligence by checking references, reviewing contracts, and evaluating the financial viability and insurance coverage of potential 3PL providers. Compare the proposals, consider the overall fit, and make an informed decision based on factors such as service quality, cost-effectiveness, and the provider’s ability to support your future growth.



‍Partnering with a reliable and competent 3PL provider can have a transformative impact on your business’s supply chain efficiency. By outsourcing logistics operations to a trusted partner, companies can optimize costs, improve service levels, and focus on core competencies. When choosing a 3PL provider, a thorough assessment of your needs, careful research, evaluation of capabilities, and due diligence are crucial. By following a well-defined process, you can select the right 3PL partner that aligns with your business objectives and helps you achieve sustainable growth in today’s competitive marketplace.


About XPDEL:

XPDEL helps eCommerce brands accelerate their growth, empowering them with multi-channel fulfillment, whether shipping directly to consumers, delivering to businesses, or selling through retail stores. We are founded and operated by veterans with experience from Amazon, FedEx, UPS, JDA, Walmart, Target, and other leading companies in eCommerce and Retail. Guided by these experts, we provide customer experiences that help you grow your business.