What Is a 3PL (Third-Party Logistics Provider)?
A 3PL handles your warehousing and fulfilment. Learn when to use one and what to look for.
Key Takeaways
- A 3PL stores your inventory and fulfils orders on your behalf
- Use a 3PL when self-fulfilment is too costly or operationally complex
- Key factors: location, pick accuracy, tech integration, pricing model
- FBA (Fulfilment by Amazon) is a specialised 3PL for Amazon sellers
What a 3PL does
A third-party logistics provider (3PL) handles some or all of your supply chain operations on an outsourced basis. At minimum, a 3PL stores your inventory, receives orders via API integration with your eCommerce platform, picks and packs orders, dispatches with chosen carrier, and processes returns. Some also offer value-added services: kitting, labelling, quality inspection.
When to switch to a 3PL
Most businesses start fulfilling orders from home or a small rented unit. The right time to move to a 3PL: you are spending so much time on fulfilment it is distracting from growth; your order volume makes self-fulfilment uneconomic; you need to expand into a new geography quickly. A good rule of thumb: evaluate a 3PL when you are fulfilling more than 50-100 orders per day.
Choosing a 3PL
Evaluate on: location (proximity to your customer base affects delivery speed and cost), pick accuracy (what is their error rate?), technology (do they integrate with your Shopify or Amazon storefront via API?), pricing model (storage fee per pallet or per cubic foot, per-unit pick and pack fee), minimum volumes, and contract flexibility.
FBA as a 3PL
For Amazon sellers, Fulfilment by Amazon (FBA) is a 3PL embedded in the Amazon ecosystem. You send inventory to Amazon's fulfilment centres; Amazon picks, packs, ships, and handles returns. FBA products are Prime-eligible, significantly increasing conversion rate. The trade-off: FBA fees can be high (especially for heavy or oversized items) and long-term storage fees accumulate on slow-moving stock.
The transition plan
Moving from self-fulfilment to a 3PL requires a structured transition: audit your current inventory accuracy before transfer, agree on a cutover date during a low-volume period, conduct a parallel run for 2-4 weeks before going fully live, and plan for a temporary increase in returns during the bedding-in period.