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Third-party logistics (3PL): Meaning, services, benefits, and process
Third-party logistics providers are service partners who offer outsourced logistics support. Learn more about the benefits, workings, and types of 3PLs in this blog.
Efficient logistics is essential for succeeding in international trade. Many businesses choose to outsource their shipping and logistics to third-party logistics providers (3PLs). This helps them save time, reduce complexity, and focus on growing their core business. In this blog, we’ll break down what 3PLs are, how they work, the different types available, and the key benefits they offer.
What is third-party logistics (3PL)?
Third-party logistics (3PL) means outsourcing tasks like warehousing, transportation, and order fulfilment to a specialised logistics provider. Instead of creating their own logistics setup, businesses rely on 3PL partners who already have the networks, technology, and expertise to manage these operations efficiently.1
Who is a third-party-logistics provider?
A third-party logistics provider (3PL) is a service provider that helps businesses manage their supply chain. 3PLs offer services like storage, inventory management, order fulfillment, shipping, and returns. Partnering with a 3PL enables businesses to optimize their operations and focus on other important areas of their business.2
Types of third-party logistics providers
Different 3PL companies offer different levels of services. Businesses should choose the type that best matches their specific logistics needs:
1. Standard 3PL providers:
Standard 3PL providers offer basic logistics services like transportation and warehousing, making them a low-cost option suitable for firms that need only essential support.
2. Service developers:
3PL service developers provide more advanced services like tracking, customer-specific IT solutions, and customized transportation. They offer a higher level of integrated logistics support.
3. Customer adapters:
Customer adapters manage the entire logistics process for businesses, including storage, distribution, and final customer service, giving end-to-end support across the supply chain.
4. Customer developers:
Customer developers take complete control of a company’s logistics. They manage all supply chain activities and offer consulting to help improve efficiency and performance.3
Core services of third-party logistics (3PL)
Third-party logistics support different parts of a company’s supply chain by offering several key services. Some key offerings are as follows:
1. Transportation management:
A 3PL manages the movement of goods from one place to another by choosing the best shipping options and carriers. With their large network and technology, they help reduce shipping costs and improve delivery speed.
2. Warehousing and distribution:
3PLs provide warehouse services to store products in strategic locations. This improves inventory control and allows faster distribution to customers.
3. Order fulfillment:
3PL providers often manage the entire order fulfillment process, from picking to shipping, ensuring accurate and on-time deliveries. Many also offer customized packaging and manage returns.
4. Inventory management:
3PLs use advanced tools to track inventory levels in real time. This helps prevent overstocking or shortages and supports better restocking decisions.4
How does third-party logistics (3PL) work?
Here’s a simple overview of how a 3PL service provider operates:
● Step 1: Receiving inventory
The 3PL provider receives products from suppliers or manufacturers and checks their quality before storing them.
● Step 2: Processing orders
When a customer places an order, the 3PL provider picks the item from storage, packs it, and gets it ready for shipping.
● Step 3: Fulfilling orders
The 3PL arranges shipping, shares tracking details, and may even provide last-mile delivery through carriers like DHL or UPS.
● Step 4: Handling returns
The 3PL manages returns by collecting the product, inspecting it, and restocking or disposing of it as needed.5
Benefits of third-party logistics
Some key benefits of third-party logistics include:
● Lower costs: Helps reduce warehousing and transportation expenses, and offers better shipping rates through their networks.
● Scalable operations: Makes it easy to handle seasonal demand or sudden business growth without extra investment.
● Expert support: Gives access to skilled logistics professionals who help improve supply chain decisions.
● Customer service: Faster deliveries and accurate order fulfillment boost customer satisfaction.
● Advanced technology: Offers tools for real-time tracking, improved inventory management, and more accurate orders.6
Disadvantages of third-party logistics
Here are some disadvantages of third-party logistics:
● Cost considerations: For low-volume shippers, 3PL services can sometimes be more expensive than in-house logistics.
● Dependency risks: Relying on a single provider may expose the business to service disruptions.
● Reduced control: Outsourcing logistics means less direct oversight, which can lead to challenges if performance expectations aren’t met.7
Difference between 3PL and 4PL
Here is a quick look at the key differences between 3PL and 4PL service providers:
Aspect
3PL (Third-party logistics)
4PL (Fourth-party logistics)
Scope of services
Handles specific logistics functions such as transportation, warehousing, and order fulfilment.
Manages the entire supply chain, including planning, coordination, and oversight of logistics partners.
Role
Focuses on carrying out day-to-day logistics operations.
Acts as a strategic partner, optimising processes and managing multiple 3PLs, if needed.
Control
Provides operational support for selected logistics activities.
Provides end-to-end supply chain management and decision-making support.
Best for
Businesses needing help with specific logistics activities.
Businesses looking for complete supply chain integration and optimization.8
Difference between 3PL and dropshipping
The main difference between 3PL and dropshipping lies in where inventory is stored and who handles the fulfillment process. Here’s a quick comparison:
Aspect
3PL (Third-party logistics)
Dropshipping
Inventory storage
With 3PL, the business stores its inventory in a third-party warehouse.
With dropshipping, the retailer does not hold inventory; products are stored by the supplier.
Order fulfillment
Handles picking, packing, and shipping on the business’s behalf.
When a sale is made, the retailer places an order with the supplier, who ships directly to the customer.
Control
Higher control over packaging, branding, and customer experience.
Limited control because the supplier handles packaging and shipping.
Best for
Businesses that want to scale operations and maintain brand identity.
Businesses wanting low upfront investment and no warehouse management.9
Third-party logistics vs freight forwarding
A 3P logistics provider manages the entire supply chain, including warehousing, transportation, and order fulfillment. A freight forwarder focuses only on moving goods between two locations, such as shipping products from India to the US.10
How can 3PL services help businesses?
3PL providers make delivery easier and more efficient, allowing ecommerce exporters to focus on their main business activities. Since fast and accurate shipping is key to customer satisfaction, 3PLs offer the infrastructure and expertise needed for smooth, on-time deliveries. This support improves the customer experience and makes selling within India and globally much simpler.11
When should an exporter consider a 3PL?
Exporters may benefit from partnering with a third-party logistics provider (3PL) in the following scenarios:
● Outsourcing is cheaper: When it costs less to outsource logistics than to handle it on your own.
● Your business is growing fast: When demand increases quickly and your current resources can’t keep up.
● Rising labour or facility costs: When managing your own warehouse and staff becomes too expensive.
● You need help with inventory: When you want to focus on your main business activities instead of managing stock.
● You need better technology: When you want advanced supply chain tools without making large upfront investments.12
How to find the best third-party logistics providers?
Choosing the right 3PL plays a big role in how smoothly your supply chain runs. Here are the key factors to consider:
Expertise and reliability
Pick a 3PL that understands your industry’s needs and challenges. Their experience helps ensure accurate handling, dependable service, and solutions tailored to your business.
Technology usage
Look for a provider with modern tools like real-time tracking and automated systems. Seamless tech integration makes it easier to manage orders, inventory, and data.
Cost transparency
Choose a 3PL that offers clear, honest pricing with no hidden fees. Flexible pricing models help you scale costs up or down based on your shipping volume.
Geographical coverage
A provider with a wide network and warehouses near key transport hubs can speed up deliveries. This helps you reach customers faster in different regions.
Scalability and flexibility
Make sure the 3PL can grow with your business. They should be able to handle changes in order volume, seasonal spikes, and new markets without disruptions.
Customer service
Reliable support is essential. Choose a 3PL with quick response times and a solid plan for handling delays, errors, or emergencies.
Sustainability and compliance
Partner with a provider that follows environmental standards and legal requirements. Sustainable practices and proper compliance help avoid risks and support your brand image.
Conclusion
Partnering with a 3PL can streamline logistics, reduce costs, and provide access to specialized expertise and technology. It allows businesses to scale efficiently while focusing on core operations. Choosing the right provider ensures reliable, timely, and customer-focused supply chain management. For businesses looking to expand globally through ecommerce, Amazon Global Selling offers robust logistics solutions through its network of trusted service providers and fulfillment programs.
Amazon Global Selling: Easy e-commerce exports and hassle-free shipping
If you are a business owner and you want to sell your products to the world, Amazon Global Selling enables you to list and sell ‘Made in India’ products on 18 Amazon global marketplaces. As an e-commerce export program, Amazon Global Selling provides support and guidance at every step of your export journey, connecting you to Amazon’s Service Provider Network for tailored compliance, payments, and logistics support.
Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfillment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.
Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfillment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.
Frequently Asked Questions
1. What is the difference between 3PL and a freight forwarder?
A 3PL manages multiple parts of the supply chain, such as warehousing, inventory, and order fulfillment. A freight forwarder mainly arranges the transportation of goods from one place to another. In simple terms, freight forwarders handle shipping, while 3PLs offer broader end-to-end logistics support.
2. Is 3PL the same as order fulfillment?
No, 3PL and order fulfillment are not the same. Order fulfillment is one of the services provided by a 3PL, which also handles broader logistics like inventory management, transportation, and warehousing.
3. How do you measure 3PL performance?
Percentage of deliveries made on time, order and shipping accuracy, inbound receiving time, and timing of return processing are some of the performance indicators companies can consider to evaluate 3PL performance.
4. Which is better – 3PL or 4PL?
A 3PL is better if you need help with specific tasks like warehousing or shipping. A 4PL is better if you want a partner to manage and optimise your entire supply chain from start to finish. The choice depends on how much control and support your business needs.
5. What does a third-party logistics provider do?
A third-party logistics provider handles various aspects of supply chain management, including warehousing, transportation, and order fulfillment. They help businesses streamline operations, reduce costs, and improve efficiency.
6. Why do you need third-party logistics for your business?
For online businesses, partnering with a 3PL can ease the complexities of managing supply chains. By outsourcing logistics, you save time and reduce operational pressure, allowing you to focus on growing your business and improving customer experience.
7. What is on-demand transportation in third-party logistics?
On-demand transportation is a flexible logistics service offered by third-party logistics providers, where transportation resources are arranged as needed rather than through fixed contracts.
8. What is a third-party warehouse?
A third-party warehouse focuses on the storage and management of goods, offering scalable space, inventory control, and support for order fulfillment.
Published on December 3, 2023.
Updated on December 1, 2025.
Sources:
1. https://redstagfulfillment.com/3pl-definition-process-resources/
2. https://redstagfulfillment.com/3pl-definition-process-resources/
3. https://www.thefulfillmentlab.com/blog/4-types-of-3pl-providers-and-how-they-differ#table-of-contents-3
4. https://www.maersk.com/logistics-explained/supply-chain-management/2024/07/03/3pl
5. https://flexlogistics.com/news/3pl-logistics-explained-what-you-need-to-know-about-third-party-services
6. https://redstagfulfillment.com/3pl-definition-process-resources/
7. https://cart.com/blog/advantages-and-disadvantages-of-3pl
8. https://dclcorp.com/blog/3pl/the-difference-between-a-3pl-and-4pl/
9. https://redstagfulfillment.com/drop-shipping-third-party-fulfillment-difference/#what-is-third-party-fulfillment
10. https://redstagfulfillment.com/3pl-vs-freight-forwarder/
11. https://flexlogistics.com/news/3pl-logistics-explained-what-you-need-to-know-about-third-party-services
12. https://www.cleo.com/blog/knowledge-base-3pl-third-party-logistics
Updated on December 1, 2025.
Sources:
1. https://redstagfulfillment.com/3pl-definition-process-resources/
2. https://redstagfulfillment.com/3pl-definition-process-resources/
3. https://www.thefulfillmentlab.com/blog/4-types-of-3pl-providers-and-how-they-differ#table-of-contents-3
4. https://www.maersk.com/logistics-explained/supply-chain-management/2024/07/03/3pl
5. https://flexlogistics.com/news/3pl-logistics-explained-what-you-need-to-know-about-third-party-services
6. https://redstagfulfillment.com/3pl-definition-process-resources/
7. https://cart.com/blog/advantages-and-disadvantages-of-3pl
8. https://dclcorp.com/blog/3pl/the-difference-between-a-3pl-and-4pl/
9. https://redstagfulfillment.com/drop-shipping-third-party-fulfillment-difference/#what-is-third-party-fulfillment
10. https://redstagfulfillment.com/3pl-vs-freight-forwarder/
11. https://flexlogistics.com/news/3pl-logistics-explained-what-you-need-to-know-about-third-party-services
12. https://www.cleo.com/blog/knowledge-base-3pl-third-party-logistics
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