Logistics · · 4 min read

What Is a 3PL? Third-Party Logistics Meaning, Services and Pricing Explained

A 3PL is a company that stores, packs and ships products for other businesses. What 3PLs do, how they differ from 1PL, 2PL and 4PL, how pricing works, and how to choose one.

By Orbital Technologies

What is a 3PL? Third-party logistics meaning: storage, pick and pack, shipping and returns.

Short answer: a 3PL, or third-party logistics provider, is a company that stores, packs and ships products on behalf of other businesses. Instead of running your own warehouse, you send your stock to the 3PL. When a customer orders, the 3PL picks the items, packs them and hands them to a carrier, and you pay for the storage and each order handled. The name comes from the parties involved: you are the first party, your customer the second, and the logistics company the third.

This guide explains what a 3PL does, how it differs from 1PL, 2PL and 4PL, how 3PL pricing works, when using one makes sense, and what to ask before you sign. If you run a 3PL yourself, the last section covers the software side.

What a 3PL does

Most 3PLs offer some or all of these services, usually priced separately:

  • Receiving: unloading your inbound stock, checking it against what was ordered, and putting it away in the warehouse.
  • Storage: keeping your products on pallets, shelves or bins, often with stock levels you can see online.
  • Pick and pack: collecting the items for each order, packing them and labelling the parcel.
  • Shipping: handing parcels to carriers, often at discounted rates the 3PL has negotiated across all its clients.
  • Returns: receiving returned items, inspecting them and putting saleable stock back on the shelf.
  • Value-added services: kitting and bundling, labelling, gift wrapping, or consolidating shipments from several suppliers.
  • Integrations: connecting to your online store or marketplace, so orders flow to the warehouse automatically and tracking numbers flow back.

How 3PL fulfillment works, step by step

  1. You send stock to the 3PL, usually with an advance shipping notice that lists what is coming.
  2. The 3PL receives it and counts it, checks its condition and stores it in a known location.
  3. A customer places an order on your store or marketplace, and it passes to the 3PL's system automatically.
  4. The 3PL picks, packs and ships it, and the tracking number goes back to your store and your customer.
  5. You are billed for storage, each order handled, shipping and any extras, usually monthly.
How 3PL fulfillment works in five steps: you send stock, the 3PL receives and stores it, a customer orders, the 3PL picks, packs and ships it, and you are billed monthly.
How an order flows through a 3PL, from your stock arriving to the monthly bill.

1PL, 2PL, 3PL and 4PL: what is the difference?

ModelWho handles logisticsTypical example
1PLYou, with your own staff and vehiclesA business delivering its own goods
2PLA carrier you hire to move goodsA shipping line, trucking company or parcel carrier
3PLA provider that runs warehousing and fulfillment for youA fulfillment center storing and shipping your orders
4PLA provider that manages your whole supply chain, including other 3PLs and carriersA lead logistics partner coordinating several warehouses
Four logistics models: 1PL, you handle logistics yourself; 2PL, a carrier moves your goods; 3PL, a provider runs warehousing and fulfillment; 4PL, a provider manages the whole supply chain.
Who handles your logistics in each model.

Most small and mid-sized brands that outsource logistics are looking for a 3PL. A 4PL makes sense when the supply chain is large enough that coordinating several warehouses and carriers is itself a full-time job.

How 3PL pricing works

3PLs rarely quote a single price, because their costs depend on how much space your products take and how many orders you ship. Expect a quote with lines like these:

FeeWhat it coversUsually charged
Setup or onboardingAccount setup, integrations and the first stock intakeOnce
ReceivingUnloading, counting and putting away inbound stockPer pallet, carton or hour
StorageThe space your products usePer pallet, shelf, bin or cubic foot, monthly
Pick and packCollecting and packing each orderPer order, plus per extra item
PackagingBoxes, mailers and fillPer package, or bring your own
ShippingThe carrier's charge for deliveryPer parcel, at the 3PL's rates
ReturnsReceiving and restocking returned itemsPer return
Account minimumA floor on your monthly billMonthly

Rates vary widely by region, product size and volume, so compare quotes on the same basis: take last month's real orders and stock, price them with each 3PL's rate card, and compare the totals rather than the headline storage or pick fee.

When should you use a 3PL?

A 3PL usually makes sense when:

  • Packing orders is taking over your week, and that time would be better spent on product or sales.
  • You are outgrowing your space, but a warehouse lease, racking and staff would cost more than outsourcing.
  • You want faster delivery to customers in another region, which a 3PL with warehouses there can offer.
  • Your volumes swing with the seasons, and you would rather pay per order than staff for the peak.

Keeping fulfillment in-house can still be the better call when your products are unusual to handle, your margins depend on custom packing, or your volumes are small enough that a 3PL's minimums would cost more than doing it yourself.

How to choose a 3PL

  • Does it integrate with your store? Ask which platforms and marketplaces connect directly, and how orders and stock levels sync.
  • Can you see your stock in real time? A client portal with live inventory and order status saves a lot of emails.
  • Where are its warehouses? Distance to your customers drives shipping cost and delivery time.
  • What is its accuracy? Ask how it measures picking accuracy and what happens when an order goes out wrong.
  • What does the full bill look like? Ask for a sample invoice using your own volumes, including minimums and extras.
  • How easy is it to leave? Check the notice period and how your stock is returned if you move.

Running a 3PL? The software matters

For the 3PL itself, the hard part is often not the warehouse floor but the paperwork around it: billing each client correctly for storage and handling, keeping every client's stock separate, and giving clients a portal so they stop emailing for updates. That is the job of a warehouse management system built for 3PLs.

Spiffy, our warehouse management system, is built for 3PLs, freight forwarders and brands: scan-based intake, storage billing, consolidation, multi-carrier shipping and client portals, with each client's data kept separate. If your logistics business needs something more tailored, see our work for the logistics and fulfillment industry.