What is a 3PL? Third Party Logistics: Meaning & Process

A Third Party Logistics (3PL) provider is an external partner that manages all or part of a company’s logistics operations. This includes services like warehousing, order fulfillment, transportation, and inventory management. By outsourcing these functions to a 3PL, businesses can focus on their core competencies while ensuring that their supply chain operates smoothly and efficiently.

How Do 3PL Warehouses Work?

3PL warehouses are the backbone of third party logistics services. Here’s an overview of their operations:

  • Ownership and Leasing: 3PLs may own or lease their warehouse facilities, allowing flexibility to scale operations based on client needs.
  • Essential Equipment: Warehouses are equipped with forklifts, conveyor belts, pallet jacks, and advanced warehouse management systems (WMS) to streamline operations.
  • Staffing and Training: 3PLs hire skilled personnel and provide ongoing training to ensure efficient handling of goods and adherence to safety protocols.
  • Inventory Tracking: Utilizing sophisticated WMS, 3PLs offer real-time inventory tracking, seamless e-commerce integration, and data analytics to optimize stock levels.
  • Security Measures: Both physical security (e.g., surveillance cameras, access controls) and digital safeguards (e.g., cybersecurity protocols) are implemented to protect client inventory.
  • Receiving Process: Upon arrival, shipments are verified for accuracy, inspected for damages, and logged into the inventory system.
  • Fulfillment Process: Orders are picked, packed, and shipped using optimized routes and carriers to ensure timely delivery.

What Is 3PL Logistics & What Does a 3PL Provider Do

Third-Party Logistics (3PL) refers to outsourcing supply chain operations, including warehousing, transportation, and order fulfillment, to a specialized provider. 3PL services help businesses streamline logistics, reduce costs, and improve efficiency.

Third Party Logistics providers offer a range of services to streamline supply chain operations:

  • Inventory Management: Monitoring stock levels to prevent overstocking or stockouts.
  • Warehouse Storage: Providing space and organization for products until they’re needed.
  • Order Fulfillment: Processing customer orders from picking and packing to shipping.
  • Returns Processing: Handling returned goods efficiently to minimize losses.
  • Transportation & Shipping: Coordinating the movement of goods from warehouses to customers.

Alternative terms for 3PLs include fulfillment companies, order fulfillment centers, and fulfillment warehouses. By partnering with a 3PL, businesses can enhance supply chain efficiency, reduce operational costs, and improve customer satisfaction.

Why Do You Need a 3PL?

Engaging a 3PL can be a game-changer for both e-commerce and traditional businesses, offering significant advantages in logistics management. 

One of the biggest benefits of third party logistics is cost savings, as businesses can reduce expenses related to warehousing, transportation, and staffing by outsourcing these operations. 

Additionally, 3PL providers bring specialized expertise and advanced technology, improving efficiency through faster, more accurate order processing and inventory management. 

By handling logistics, a 3PL allows businesses to focus on their core activities, such as product development and marketing, enabling them to scale and grow without being burdened by supply chain complexities.

Comprehensive 3PL Solutions for Ecommerce

For eCommerce businesses, a 3PL warehouse is the backbone of smooth order fulfillment. These logistics providers handle everything from storing products to picking, packing, and shipping orders efficiently. Unlike private warehouses, a third party logistics warehouse serves multiple businesses, reserving dedicated storage space for each client’s inventory. This shared infrastructure allows businesses to scale operations without investing heavily in logistics.

The core services offered by a 3PL logistics provider include:

  • Warehousing: Secure storage of products with advanced inventory tracking systems.
  • Inventory Management: Real-time monitoring of stock levels to prevent shortages or overstocking.
  • Picking and Packing: Efficient selection and packaging of products for shipment.
  • Shipping and Receiving: Coordinating with carriers to ensure timely deliveries.
  • Freight Services: Offering FTL (Full Truckload) and LTL (Less Than Truckload) shipping options to optimize freight costs.
  • Freight Forwarding: Managing international shipping and customs clearance.
  • Kitting and Bundling: Customizing packages for subscription boxes or promotional offers.
  • Reverse Logistics: Handling returns and exchanges to maintain customer satisfaction.

With these 3PL logistics solutions, businesses can improve efficiency, reduce costs, and enhance the customer experience. 

Understanding 3PL Services

3PL Ecommerce Platform Integration

Seamless integration with eCommerce platforms is crucial for any 3PL warehouse. A robust third party logistics provider connects with platforms like Shopify, WooCommerce, Magento, and BigCommerce to ensure real-time order processing and tracking. Using warehouse management systems (WMS) and custom APIs, 3PL logistics providers enable smooth data exchange between warehouses and online stores, reducing errors and improving efficiency.

Inventory Management Support

One of the biggest advantages of working with a 3PL logistics provider is expert inventory management. Businesses no longer have to worry about stock shortages or excess inventory. 3PL warehouses use advanced tracking systems to monitor stock levels and trigger restocking when needed. Whether managing seasonal demand fluctuations or ensuring a steady supply, a third party logistics provider ensures businesses never run out of stock.

Picking, Packing, and Shipping

The order fulfillment process in a 3PL warehouse follows a structured workflow:

  1. Order Placement: Customers place orders on an eCommerce store.
  2. Picking: Warehouse staff selects the items from inventory.
  3. Packing: Products are packed securely using cost-efficient materials.
  4. Shipping: Orders are dispatched with correct labels and tracking details.

Efficient fulfillment not only reduces shipping costs but also improves delivery speed, enhancing customer satisfaction.

Freight Shipping Options: FTL and LTL

A reliable third party logistics provider offers multiple freight options to optimize transportation costs:

  • FTL (Full Truckload): Suitable for large shipments requiring an entire truck.
  • LTL (Less Than Truckload): Cost-effective for smaller shipments, allowing multiple businesses to share freight space.

Some 3PL logistics providers also act as freight brokers, helping businesses negotiate better shipping rates and optimize delivery routes.

Kitting and Bundling Services

Kitting services provided by 3PL logistics providers allow businesses to bundle multiple products together before shipping. This is useful for:

  • Subscription boxes (e.g., monthly curated product shipments).
  • Gift sets and promotional bundles.
  • Customized product packaging for enhanced branding.

By handling kitting in-house, third party logistics providers ensure efficiency and accuracy in bundled shipments.

Reverse Logistics: Handling Returns Efficiently

Returns are an inevitable part of eCommerce, and an efficient third party logistics provider ensures smooth handling of returned products. 3PL warehouses inspect, process, and restock returned items while minimizing losses due to damages or fulfillment errors. A well-structured reverse logistics process enhances customer trust and improves retention.

Same-Day Shipping: Faster Fulfillment for Customers

Speed is a critical factor in today’s competitive market, and many 3PL logistics providers offer same-day shipping services. Orders placed before a specific cutoff time are picked, packed, and shipped the same day, ensuring quick deliveries. This level of efficiency enhances customer satisfaction and boosts sales for businesses.

Industry-Specific 3PL Services for Specialized Logistics

Not all third party logistics providers offer the same services. Some 3PL logistics companies specialize in handling specific products that require compliance with regulations or special storage conditions. Whether it’s pharmaceuticals, electronics, or oversized goods, a 3PL warehouse ensures proper handling, storage, and delivery.

Cold Chain Logistics

For perishable goods like food, pharmaceuticals, and cosmetics, third party logistics providers offer temperature-controlled storage and transportation. Refrigerated warehouses and reefer trucks ensure that sensitive products remain fresh and meet regulatory standards.

Hazardous Material Handling

Certain products, such as batteries, perfumes, and chemicals, require careful handling due to safety risks. A specialized 3PL logistics provider ensures compliance with safety regulations and holds necessary certifications to manage hazardous materials securely.

Large and Bulky Item Logistics

Heavy and oversized items like furniture, home appliances, and gym equipment require specialized storage and transportation. A third party logistics provider optimizes shipping strategies to reduce excessive freight costs, ensuring smooth and cost-effective delivery.

3PL Services vs. Drop Shipping – What’s the Difference?

Both third party logistics and dropshipping are fulfillment models used by eCommerce businesses, but they operate differently. Here’s a quick comparison:

While dropshipping is great for businesses wanting a low-risk model, 3PL logistics is ideal for those looking for scalable, long-term fulfillment solutions.

Feature

3PL Logistics

Drop Shipping

Inventory Ownership

Businesses own inventory

Supplier owns and stores inventory

Warehousing

Stored in a 3PL warehouse

No storage required for sellers

Shipping

Handled by the third party logistics provider

Supplier ships directly to customers

Customization

Offers branding, kitting, and packaging options

Limited customization available

Cost Efficiency

Reduces storage & shipping costs for bulk orders

Higher per-unit costs due to supplier fees

While dropshipping is great for businesses wanting a low-risk model, 3PL logistics is ideal for those looking for scalable, long-term fulfillment solutions.

What is 3PL Order Fulfillment?

The term 3PL (third party logistics) refers to outsourcing logistics operations, including warehousing, inventory management, and shipping. Unlike dropshipping, where businesses don’t own inventory, a 3PL warehouse stores, manages, and fulfills orders for businesses that purchase stock in advance.

Here’s how the 3PL logistics fulfillment process works:

  1. Inventory Purchase & Storage: Businesses send their products to a 3PL warehouse, where they are stored securely.
  2. Order Placement: Customers place orders via an online store or sales platform.
  3. Picking & Packing: Warehouse staff picks the correct items, packs them securely, and prepares them for shipping.
  4. Shipping & Delivery: The third party logistics provider partners with carriers to deliver orders to customers efficiently.
  5. Returns Handling: If a customer returns a product, the 3PL logistics provider manages the reverse logistics process.

Financial 3PL logistics Benefits

Partnering with a third party logistics (3PL) provider isn’t just about outsourcing fulfillment—it’s about making smarter financial decisions. By leveraging 3PL logistics, businesses can lower operational costs, improve profit margins, and gain better control over expenses.

Lower Cost of Goods Sold

One of the biggest advantages of third party logistics is the ability to buy in bulk at wholesale rates. Businesses can store large quantities of inventory in a 3PL warehouse, taking advantage of volume discounts. This reduces the cost of goods sold (COGS) and maximizes profit margins.

Greater Cost Efficiency in Fulfillment 

Shipping costs can add up quickly, especially for businesses managing multiple suppliers. 3PL logistics helps consolidate shipments, reducing transportation expenses and improving delivery efficiency. With strategically located 3PL warehouse facilities, businesses can offer faster shipping, enhancing customer satisfaction while keeping costs low.

More Control Over Logistics Costs 

By choosing a third party logistics provider that aligns with their budget and customer expectations, businesses can control expenses more effectively. Instead of managing in-house logistics, they can scale up or down based on demand, ensuring they only pay for the services they need. This flexibility in 3PL logistics services allows for smarter cost management and better long-term savings.

Operational Benefits of 3PL Logistics 

Beyond cost savings, 3PL logistics improves operational efficiency, helping businesses stay agile in a competitive market. From sourcing flexibility to streamlined order fulfillment, a third party logistics partner ensures smoother business operations.

Greater Flexibility in Sourcing

With 3PL logistics, businesses can source products from multiple manufacturers without worrying about storage and distribution. A third party logistics provider allows companies to stock diverse inventory and even customize products, catering to unique customer demands.

Faster Order Fulfillment

Speed matters in eCommerce, and 3PL warehouse networks are designed for quick turnaround times. Unlike dropshipping, where fulfillment is dependent on third party suppliers, third party logistics providers ensure products are stocked and ready for immediate shipping. This results in faster delivery times and a better customer experience.

Easier Returns Processing

Handling returns can be a logistical nightmare, but 3PL logistics simplifies the process. A third party logistics provider manages customer service, product inspections, and restocking, ensuring a smooth returns experience. Businesses can minimize losses and maintain strong customer relationships with efficient 3PL logistics support.

How to Find the Best Third Party Logistics (3PL)

Selecting the right 3PL logistics provider is more than just outsourcing your supply chain; it’s about finding a partner that aligns with your business goals. Whether you’re a growing e-commerce brand or a large-scale distributor, your third party logistics provider should offer seamless solutions to meet your unique needs.

With rising consumer expectations for fast and affordable shipping, businesses need a 3PL warehouse partner that offers efficiency and reliability. From inventory management to order fulfillment, the right third party logistics company should provide scalable services that adapt to your growth.

Here are some key factors to consider when choosing the best 3PL logistics partner for your business:

Considerations for choosing the right 3PL Partner

3PL Services Expertise

Not all third party logistics (3PL) providers offer the same level of expertise. Some specialize in e-commerce fulfillment, while others focus on bulk freight and transportation. Before selecting a 3PL logistics partner, evaluate their experience in key areas such as:

  • Warehousing: Does the 3PL warehouse offer enough storage space and efficient inventory management?
  • Order Fulfillment: Can they handle large volumes of orders with speed and accuracy?
  • Transportation Management: Do they provide cost-effective and timely shipping solutions?
  • Inventory Optimization: Does their system ensure real-time tracking and stock control?

Additionally, third party logistics providers that leverage advanced technology, such as AI-driven analytics and automated warehouses, offer greater efficiency and accuracy in fulfillment operations.

3PL Warehouse Locations

Strategic 3PL warehouse locations can significantly impact logistics efficiency. A third party logistics provider with fulfillment centers near major customer hubs can reduce transit times and lower shipping costs.

  • Why does location matter? The closer your 3PL warehouse is to your customers, the faster the delivery.
  • Proximity to transportation hubs: A third party logistics partner with warehouses near ports, highways, and airports ensures smoother and cost-effective distribution.
  • 3PL Logistics Example: A retailer using a 3PL warehouse located in Mumbai can fulfill orders faster for customers in India compared to a warehouse in another country.

The right 3PL logistics provider strategically places warehouses to optimize shipping routes and improve customer satisfaction.

3rd-Party Logistics Customer Support

Exceptional customer service is a critical factor in choosing a third party logistics provider. Reliable 3PL logistics customer support ensures smooth operations, timely deliveries, and quick issue resolution. Look for a provider that offers:

  • Dedicated account managers for personalized assistance.
  • 24/7 support availability for handling logistics emergencies.
  • Real-time tracking and proactive communication.
  • Quick resolution of delays or disruptions to avoid supply chain bottlenecks.

Specialty 3rd-Party Logistics Services

Some businesses require specialized 3PL logistics services to handle unique product needs. Not all third party logistics providers offer the same capabilities, so it’s essential to find one that caters to your specific requirements.

Key specialty services include:

  • Temperature-controlled storage for perishable or sensitive goods like pharmaceuticals and food.
  • Hazardous material handling for regulated items such as batteries and chemicals.
  • Kitting and assembly for businesses that require customized packaging solutions.
  • Large or bulky item fulfillment for furniture, appliances, and heavy equipment.

Questions to Evaluate 3PL Providers

Security & Operational Reliability

A reliable third party logistics (3PL) provider must have robust security measures and contingency plans in place to prevent disruptions.

  • What security measures are in place to prevent theft and damage?
    A reputable 3PL warehouse should have 24/7 surveillance, access controls, and insurance policies to protect inventory.
  • How do you ensure data security and protect against cyber threats?
    Since third party logistics involves handling sensitive customer and order data, cybersecurity protocols must include encryption, firewalls, and regular audits.
  • Do you have contingency plans, such as backup power and internet solutions?
    3PL logistics providers should have fail-safes for power outages, internet downtime, and natural disasters to ensure uninterrupted operations.

Inventory Management & Fulfillment Costs

Understanding the pricing structure of a third party logistics provider helps businesses avoid hidden costs and optimize supply chain expenses.

  • How is your pricing structured, and are there any hidden fees?
    A transparent 3PL logistics provider should outline warehousing, order fulfillment, and shipping costs upfront.
  • Do you offer scalable pricing models based on order volume?
    Businesses with fluctuating demand need flexible pricing options from their third party logistics partner.
  • What is your policy on mispacks, order errors, and associated costs?
    3PL warehouse efficiency directly affects customer satisfaction, so providers must have a clear strategy for handling errors.

Shipping & Cost Optimization

Efficient shipping is the backbone of third party logistics services, impacting both cost savings and customer satisfaction.

  • How do you calculate shipping costs, and do you offer discounted rates?
    The best 3PL logistics providers negotiate bulk shipping discounts and pass the savings to businesses.
  • What measures do you take to optimize shipping routes and reduce delivery times?
    A strong third party logistics provider leverages AI-driven route planning and fulfillment from strategically located 3PL warehouses.
  • How do you manage shipping for oversized, fragile, or temperature-sensitive items?
    Specialized third party logistics services should include handling for heavy, delicate, or perishable goods.

Omnichannel Integration & Technology

Advanced technology is a must for seamless logistics operations, and a top-tier third party logistics (3PL) provider should offer cutting-edge integrations.

  • Can your system integrate seamlessly with multiple eCommerce platforms?
    A 3PL logistics provider should support Shopify, Magento, WooCommerce, and other platforms for smooth order processing.
  • What technology do you use for real-time inventory and order tracking?
    Businesses should look for third party logistics solutions with RFID, cloud-based inventory management, and automated tracking.
  • Do you provide APIs or middleware for automated order processing?
    3PL logistics companies that offer API integrations enable businesses to automate workflows for faster fulfillment.

Frequently Asked Questions

1. What is the difference between courier and 3PL?

A: A courier service handles direct parcel deliveries, while third party logistics (3PL) providers manage the entire supply chain, including warehousing, inventory management, and bulk shipping.

2. What is the logistics cycle?

A: The logistics cycle refers to the movement of goods from production to final delivery, covering storage, transportation, and fulfillment in a 3PL warehouse.

3. What are the two major logistics operations?

A: The two major logistics operations are inbound logistics (sourcing and receiving goods) and outbound logistics (order fulfillment and distribution).

Surface Movement Solutions

At LP Logiscience, our land transport solutions offer a vast network of products and services to help our clients achieve a competitive edge. Our top-notch land shipping solutions ensure that your shipments are delivered reliably and on time, whether it's a single parcel shipment or the management of the entire surface supply chain. Our land transport network is equipped to transport goods of any kind to any location, with a track record of delivering millions of successful ground shipments with quality and timeliness.

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Air Movement Solutions

In the ever-evolving world of logistics, a comprehensive solution that combines speed, agility, and dependability is critical. At LP Logiscience, we offer a range of services to meet complex logistical requirements while maintaining an optimal balance between cost and speed to market. Choose a tailor-made solution that best suits your needs to start improving the efficiency of your supply chain. Our air movement solutions enable you to transport time-sensitive, high-value cargo quickly and efficiently, bypassing any supply chain disruptions caused by congested ports, labor shortages, or limited capacity. Whether used as a standalone service or in combination with inland transport modes, warehousing, and customs services, LP Logiscience is your ideal partner.

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Multimodal Movement Solutions

Our aim is to grow with our customers on their multi-sales channel journeys across various vertical markets such as retail, electronics, and healthcare, among others. We focus on developing capabilities that will lead to more standardized solutions in a dynamic environment. Our innovative pick and pack solutions and automation tools streamline e-commerce supply chains and allow for easier handling of seasonal peaks. Collaborating with a world-class logistics provider like LP Logiscience means getting better solutions. We handle all aspects of returns, from physical returns to quality checks, repairs, and disposals, ensuring that our clients' businesses run smoothly.

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Rail Movement Solutions

Our goal is to support our clients in their e-commerce journey across different vertical markets, such as retail, electronics, and healthcare. We strive to develop standardized solutions that cater to a dynamic environment, using innovative pick and pack solutions and automation tools that streamline supply chains and handle seasonal peaks. Working with a top-tier logistics provider like LP Logiscience guarantees superior solutions. We handle all aspects of returns, including quality checks, repairs, and disposals, ensuring seamless business operations. With our LCL rail freight multimodal service, we offer regular, scheduled departures and capacities across major city centers in India, providing reliability and flexibility for our clients.

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Temperature Controlled Movement Solutions

We understand the unique needs of perishable items and collaborate with cold chain partners to ensure they arrive on time and in perfect condition. Companies that can provide quality products with a long shelf life will have an advantage as demand for fresh products grows. However, this can be a challenging task, as perishable goods are fragile and require quick transportation. Maintaining a strict cold chain throughout the entire journey is essential to preserve freshness and taste. We adhere to all regulations when shipments cross borders to ensure that the process is as seamless and quick as possible. Our perishables teams at LP Logiscience provide safe and efficient transportation for temperature-sensitive cargo to exact specifications. Whether shipping fresh fruits and vegetables by land or air, our solutions ensure that temperature-sensitive products arrive on time and in perfect condition, with optimal transit times and modes of transportation. Our deep knowledge of various perishable commodities, including local legislation, allows us to provide safe and compliant international transportation from source to table. With real-time visibility from door to door, we monitor and steer your supply chain efficiently to ensure that end consumers receive products in the best possible condition.

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Environment

LP Logiscience's triple zero commitment to environmental sustainability encompasses a zero-waste supply chain. At every stage of our procedures, we prioritize adding value for the consumer and strengthening our competitive edge. Through complete waste prevention, we have modified the way materials move through our entire production process. Our zero-waste initiatives ensure that all materials are recycled or reused, eliminating the need to send waste to water sources, landfills, or incinerators. By reducing supply chain waste, we promote making better use of resources and developing goods and services that align with sustainability principles.

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Safety

At LP Logiscience, ensuring workplace safety, protecting our personnel, and promoting their well-being are critical components of our success and future. While technology can improve safety in modern warehousing, relying solely on safety precautions is not a solution. We prioritize ensuring that all our staff adhere to safety rules and procedures, not just for their safety but for the greater good of the brands they represent and our environment.

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CSR

A common goal: to help society progress.

LP Logiscience sees itself as a logistics partner that is part of a larger picture connecting people and communities worldwide. Giving back to the world and being a part of something bigger is central to our values. We work towards sustainable logistics to have a positive impact on the world around us. By transitioning to a zero-carbon business model and guiding our customers towards a zero-carbon future, we hope to make a difference for people living tomorrow. Our commitment to bringing about social progress has been constant since 1919, and we remain dedicated to this goal as the world around us evolves.

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