3PL Definition & How Third Party Logistics Companies Work

Cody Cromwell
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3PL Services & the Supply-to-Sale Cycle: Connecting the Logistics Pieces

There are a number of different methods of ordering goods from suppliers and sending them to your customers. These can be grouped into categories that we call Supply-to-Sale cycles.

These are then further divided into multiple ways of tracking your business so that suppliers and customers know where things stand. Suppliers, for example, can view your orders on a daily, weekly or monthly basis, while your customers can view orders placed in the past, current or future.

The following is a general explanation of the various Supply-to- Sale cycles and how 3PL plays an important role along these cycles. You will find a more in-depth look at the Supply-to-Sale cycle in our upcoming post.

3PL Definition & How 3PL Companies Work – 3PL Services

When it comes to moving goods from one place to the next, timing is everything. Once you get the goods out to your shipping point, you need someone to pick them up as well as someone to deliver them to their final destination.

So what happens in between deliveries is a critical step to making sure that the products get to their desired destinations in a timely manner. How exactly does this happen?

Well, this is where a 3PL company steps in to get the goods from you to the final location.

3PL Services — What They Do for Businesses

3PL services are becoming more widely available, and this is a good thing because they give businesses options for shipping and logistics. Sometimes a business will need to use two or more services to ship a product. For example, a company might ship a package with a carrier and use a 3PL service to re-package the package for a different carrier. That means businesses can save money and use the best service for the job.

3PL services also give businesses more control over their packages. For example, if a package arrives and you notice that it’s not held tightly in a cardboard box, you’ll know something has gone wrong. With 3PL service – FedEx Ground, you can track the progress of your package and see where it is to make sure the package is being delivered.

Some 3PL services specialize in different services. For example, Shipwire is a 3PL service that does packing and shipping, but you may have heard of Parcelforce, a UK-based 3PL service that does things like provide delivery guarantees. If you can’t receive your package after 7 days then Parcelforce will leave it outside your door for you, and you can just open it and sign for it. Other carriers may not offer such a guarantee.

The most common 3PL services include:

Procurement — How 3PL Services Streamline Sourcing & Manufacturing

Third party logistics is a complex selection of services provided by third party logistics providers to companies and organizations. The services typically fall into three main categories: sourcing, manufacturing, and delivery.

Source to Manage Supply Chain Procurements

A third party logistics provider (3PL) can simplify processes related to managing supply chain procurements on behalf of a company. In an effort to help companies boost productivity, improve cost savings, and optimize resources, a 3PL can manage the process, purchasing products in bulk quantities and delivery them directly to the manufacturer.

By optimizing the number of suppliers and suppliers’ list, a 3PL can provide an efficient and effective purchasing unit to a company that supervises the procurement process. As a consequence, the company can also focus on purchasing, manufacturing and other functions.

A 3PL can help companies streamline the sourcing, purchasing, and delivery processes by receiving, tracking and delivering the products to manufacturing facilities.

Source to Receive

One of the best ways for a company to manage its procurement process is through a 3PL that actively engages in the process. Through the use of a 3PL, the company does not have to engage each individual manufacturer, ensuring that it can better manage the long list of manufacturing vendors.

In other words, the process can be simplified by a 3PL by streamlining the list of manufacturers from which a company can source products.

What 3PL Procurement Services Cost

If you’re a business owner who wants to expand your sales by expanding your distribution network, you’ll need to hire a 3PL.

A 3PL can help you manage logistics processes that include sourcing, warehousing, picking and packing, shipping and tracking. 3PLs work for many companies and brands, large or small. They’re also in a unique position to handle the increased regulations and have gained experience.

A 3PL can provide you with professional services like picking and packing, shipping, tracking, auditing and financial management. For a small startup that’s carrying out these services on its own may not have realized that the requirements of a 3PL can be very different from the logistics operations it’s managing on its own. This can lead to inefficiencies, errors and unnecessary costs without taking efficiency and profitability into consideration.

So how does a business with limited resources find the right 3PL partner? This process can take a considerable amount of time and effort and may involve a few false starts depending on what the business needs.

How to Find 3PL Procurement Partners

Like any supply chain management development project, finding a reliable third-party logistics provider can be a challenging task. In general, supply chain management projects are hard to do as they require a strong understanding of the industry and the specific requirements of the project.

You may be lucky enough to find a partner that is established and ready to go through a skilled and experienced 3PL. However, if you are not comfortable with the idea of spending your time running through the basics and trying to figure out the best partner for your project, then you should consider meeting with a 3PL specialist.

Here Are a Few Steps that Will Help You Find a Reliable and Quality Supplier

Educate yourself to identify the different types of 3PLs in the industry. You can start by learning what the most common types of 3PLs are and what they’re typically used for.

Craft an end-to-end supply chain logistics project plan. You must be able to clearly outline the logistics requirements, the logistics activities and the time frames you want for each step of the project

Identify potential partners based on the availability of the 3PL’s services and the ability to meet relevant criteria that will be crucial in managing the logistics project and operations.

The key is to consider various factors that will affect you and your supply chain enterprises. Consider the following four factors

Transportation — How 3PL Services Handle Inbound Shipping

Third-party logistics (3PL) services are responsible for managing the transportation of shipments from a shipper (typically a business that can afford to use a third-party logistics service) to their designated locations to recipients. These companies are responsible for preparing and packing the shipments for shipment, and ensuring timely and safe delivery.

The name 3PL services is misleading because 3-party logistics isn’t an industry full of just three companies. There are, however, three types of 3PL providers:

Full-service 3PL: Typically centers on the transportation of perishable and/or non-perishable goods. These include shipments of food, small to mid-sized household items and other non-urgent shipments. Against the odds, these companies manage a large range of shipments and provide one-stop services for shippers. Their organizational of service offerings varies based on their general practice and customer preferences.

Small package 3PL: Less investment than full-service 3PLs, these services focus on the transportation of lost or misdelivered packages, as well as high-value items that need to arrive at destination in high-quality shape. They focus on the transportation of smaller packages of goods and operate in areas that are less populated. It makes the transportation of goods safer and reduce congestion in transportation centers.

What 3PL Transportation Services Cost

In a 3PL, the seller’s and the buyer’s shipping costs, duties and taxes are taken care of by the 3PL. Furthermore, 3PL companies give their customers the option of shipping product in bulk. In the case of bulky products, the seller and the buyer can ship product all at once to the 3PL logistics company. This means that the seller saves money on packaging materials and the buyer saves on freight costs. In many instances, 3PL companies will provide their customers with a discount on their shipping costs.

3PL companies also offer their customers independence from their shipping and logistics. The owner of the 3PL company carries out the shipping on behalf of the seller and the buyer. As a result, the seller doesn’t have to worry about shipping. From the seller’s point of view, the 3PL company acts as the logistics company.

Furthermore, using a 3PL gives the customer the opportunity to be completely transparent with companies that are outside of the U.S. Furthermore, by using a 3PL, you can ensure that your company doesn’t break any trade regulations or monitoring and is therefore exempt from taxes.

How to Find 3PL Transportation Partners

Third Party Logistics Companies (3PL) have been around for years, they provide freight shipping services and have different rates to compete against one another. To get your freight moving, you can either select a 3PL at random or ask a retailer or a supplier for the companies they use.

The problem with these methods is that it could take months to find a 3PL partner, and you still need to deal with the transportation components yourself. There are other options though to seamlessly integrate the existing freight shipping logistics system you have with a 3PL, which saves you time and money. There are 3PL transport resellers that help you complete the freight shipping with a 3PL carrier.

Freight Shipping Logistics

Through a freight shipping logistics provider, you can log on to a website and select the freight shipping of your choice including air or sea freight shipping. You may also get quotes from several shipping companies. This method includes a three to four week lead time on certain freight services, and it includes an inbound and outbound freight shipping logistics system.

You could choose your own freight shipping service provider and save on the 3PL 3PL fees, but that will require more data entry and management on your part. These systems could also either be a toll free environment, where you fill out forms about the shipment online, or a system where the customer service team addresses your requests.

3PL Resellers

Distribution — How 3PL Services Manage Fulfillment

The term distribution is commonly used instead of logistics. Logistics is, after all, a set of processes that operate in a supply chain to enable and support activity in this chain. Distribution is a more general concept that widens this definition and highlights the role of associated functions as a type of service.

3PLs are commonly thought of as providers of that service, although many of them also offer warehousing and freight forwarding services. While they may have different business models, a distribution layer adds value to a product by communicating the plan of action to other participants in your supply chain.

The goal of distribution clearly isn’t to have someone’s order sitting in your warehouse. In this case, it’s the order-making company that’s the “shipper”.

Your fulfillment and warehouse partners will have much different roles to play than the traditional 3PL model of shipping and receiving.

Most of the time, these companies will act as a buffer between the order-maker and your customers. They’ll take the order, manage the logistics of shipping and delivery and handle returns.

What 3PL Distribution Services Cost

The more complex the product, the more likely you will want to seek out a third party logistics company to help you get the most out of your supply chain. The most common thing to use a 3PL for is the transport and delivery of large, heavy or specialized items such as flowers.

If you do a lot of business with large national suppliers, you may find that these supply chains work more efficiently with the use of a 3PL company. Yet outside of large national suppliers, there’s a lot of demand for 3PL services.

Since there are numerous 3PL companies, it can be difficult to decide on which one is the best to handle your large items. So I’m going to take a look at some of the criteria a company goes through when determining which 3PL provider to go with. This may help you make a more informed decision about whether or not it’s worth the extra cost to use a 3PL company. This is helpful information right now as the economic environment is tough and costs are rising.

How to Find 3PL Distribution Partners

Businesses interested in distributing products need to know how to find the right 3PL dealer so they can take advantage of the opportunities offered by the 3PL supply chain.

Distributing products to 3PL companies requires a willingness to learn new business processes and a commitment to quality. A business that manually processes all orders can’t take advantage of the capabilities of the 3PL logistics company.

Finding the right 3PL company is vital to the success of any business. It will significantly increase the speed of the distribution channel.

Businesses that don’t give careful consideration to choosing their 3PL partner will likely find that their needs are already met. Check with firms that you already do business with and see if they offer 3PL services. Once you find a good company to work with, they’ll take care of your 3PL needs until you get comfortable with the process.

Here’s essential information for businesses interested in figuring out how to find 3PL partners.

Characteristics of a Good 3PL Partner

Finding a 3PL partner that meets all of your distribution needs is essential for success. Here are some questions you can ask when taking the time to choose a 3PL service provider.

How well does the 3PL company handle customer service?

Are they willing to work with your needs as a distributor?

Growth — How 3PL Services Expand Your Sales Reach

3PL companies help businesses manage their logistics efficiently. Whether they’re sending products to other businesses, running internal shipping operations or shipping products to consumers, 3PL logistics companies share a focus on increasing efficiency while managing costs. This focus makes them very useful for businesses looking to make further use of their product lines.

As a business owner, you may not even consider 3PL companies as a viable option. However, they’re a great option for retailers or wholesalers looking to increase sales, specifically through their online retailers. They can help companies increase sales and boost profits by helping them expand into new markets abroad.

But before 3PL companies can help your business, they have to be brought on board. It’s important that you identify the right logistics company and work with them closely to develop the right strategy for you.

First identify the most effective method to get your product to new markets. Then look at costs and how you can manage your logistics operation without incurring costs. After this, decide on a delivery method best suited for your product lines. From here you’ll need to assess your strengths and weaknesses, and discuss these with a 3PL logistics company.

What 3PL Sales Services Cost

The cost of third party logistics (3PL) services varies based on the type of service you will receive. Because each type of packing service requires different supplies for transportation and storage, there are also some additional costs involved.

The packaging supplies are used to provide you with quality service, and they are one of the most frequent expenses. These costs vary according to the size of your shipment.

Some companies provide you with a number of different options for packaging supplies. They may offer you multiple packaging services, allowing you to choose what you think will be the best for your needs.

As mentioned, there are additional costs that you will need to consider when talking about any potential 3PL services. You will need to pay for third party services, storage charges, and other miscellaneous expenses. (Some companies require a deposit.)

For example, you may need to pay for a dedicated workforce to package your orders and handle them on a first come, first served basis. You will also pay to transport your items. This can include boxes, boxes and tapes, material handling equipment, truck rentals, and so on.

Some of these expenses may also be covered by value added tax (VAT), sales taxes, or shipping/delivery taxes. Just like purchasing some items, you may be able to claim these taxes as a tax deduction on your form.

How to Find 3PL Sales Partners


A 3PL is a third party logistics company, often referred to as a 3PL sales partner, is a provider of freight management services to many large corporations.

3PLs will ship freight and handle freight transportation and other administrative functions for a company doing business in various locations within the US, Europe, Latin America and Asia.

Often, 3PLs perform these services on a contract, as opposed to a regular sales or customer agreement.

Because this industry is quite fragmented and small, it is still very much education driven. Many times companies will find the 3PL they want through recommendations from friends, business associates or other connections.

If you find a company that is right for you, go ahead and make some calls. Keep in mind that many companies have sales representatives who may not be in the same location as the company itself. They will, however, be able to forward you to the right person.

If you are in a business sales position, you should be able to come across contacts for 3PLs at conferences, trade shows, social gatherings.

To make the most out of these connections, you will have to be prepared to listen and take notes. Don’t jump in with the sales pitch immediately, and don’t make the call with an agenda in mind. You are there to learn and see if there’s a business fit.

When to Add 4PL Services to Your Outsourcing Mix

To meet the needs of business today, a growing number of outsourcing companies are offering companies a 4PL solution. 4PL? That’s right … 4th Party Logistics support. This should not be confused with the concept of an industrial-level shipping container, which is known as a 2PL solution. Third party logistics, in general, has been extremely popular over the past few years.

What is this 4PL thing, and why is it so important today?

This is where the skills, experience and commitment of professional 3PL service providers comes in. Here’s how it’s going to work …

You’ll engage a 3PL to supply your organization with the necessary packaging, labeling and shipping equipment. Your 4PL will also help with the following:

Order Processing: The preferred method of shipping is by ocean freight, or container, but there are also options for air freight and truck freight. This is where the expertise of your provider comes into play. Most likely, your provider used to supply content to you directly, so they understand your business and know how to help you get your products to their final destinations.

What 4PL Partner Services Cost

There are some unique benefits to opting for professional 4PL partners.

It eliminates the guesswork and the bad reputation of possibly engaging with the wrong 3PL.

Provides you a better understanding of how 3PL partner services work and which ones will best suit your needs.

It provides you a broader range of potential 3PL service providers that you can choose out of. Choose the partner based on location and reputation, not a 3PL who cannot deliver the required quality you need.

With a reputable 3PL partner you can expect:

  • Plenty of options and custom solutions
  • Industry experience using the 3PL (can be a plus)
  • A great reputation in the 3PL market (can be a negative)
  • A solid track record of balanced customer satisfaction and 3PL rates (can be a plus)
  • High level of service and attention to detail (can be a negative)

When overcharging you will get responses that range from “We’re doing this all in the name of frugality” to “You just don’t know what you’re talking about,” both of which don’t exactly tell you anything about how you can obtain a lower price.

How to Find 4PL Partners

Many businesses are already using 3PLs to provide outsourced logistics and supply chain services. Freight forwarding companies are also beginning to offer 4PL logistics solutions. However, most business owners don’t even know where to find possible partners. To help salespeople and business executives identify those partners, their purpose has been to help businesses identify and develop relationships with many 3PL potential partners.

3PL is a detailed description of a logistics company that acts as a middleman between the businesses needing their services and the transportation companies that can fulfill those needs.

A 4PL logistics company is a logistics company that provides a variety of logistics and supply chain services.

There are several permutations of the 4PL model that can be used. Also, there are several different types of 4PL companies that can provide each of those services. There are a few 4PL options that are universal. These are the ones used by businesses:

  • a Freight Brokerage
  • b Financial Services
  • c Logistics "pa"
  • d Supply Chain Management Services
  • How to Reach Companies

Most 4PL companies require business owners to fill out a contact form on their website. They also direct you to a website where you can find corresponding contact information for them.

If you would rather speak with someone directly and ask questions, some suppliers will provide you with one point of contact.

The Bottom Line

3PL services offer a whole range of innovative and cost-effective solutions for businesses looking to grow, develop or manage their supply chain. The most successful businesses ride on a smooth supply chain from manufacturing to shipping. And the most successful supply chains have a smooth and organized way of managing their materials as each stage of the process involves various business processes and safety factors.

3PL companies provide a range of factors such as freight, risk management, tailor-made solutions and also their services to their clients to help them streamline and optimize their supply chain. Third-party logistics companies (3PL companies) offer a whole range of custom-built logistics services to help businesses manage and maintain their supply chain.

The 3PL definition describes an industry that bridges the gap between the client or company with the need for various logistics services, and the 3PL provider. These providers have an extensive network of qualified warehouses and facilities to ensure that businesses do not lose out on time and money during the manufacturing and shipping process.

3PL companies often play the role of an extension of a company’s full supply chain. They supply the right kind of logistics and supply chain solutions for businesses looking to expand their operations or find a way to improve their logistics.