What '3PL' Actually Means | What You Need to Know About 3PLs

What is a 3PL?

When a company partners with a 3PL, the 3PL could be used for any service from basic warehousing to pick and pack, reverse logistics, LTL, etc. The term ‘3PL’ especially gained traction in the early 2000s when e-commerce and online shopping started to grow, and the term widely took on the meaning of warehousing and storing products and then shipping those stored products to the end customer.  

It is important to acknowledge the term ‘4PL,’ and a 3PL vs a 4PL is very different. A 4PL is a company that helps source or broker 3PLs while the type of 3PL we are breaking down can be thought of as a fulfillment center.  

Benefits and Downsides of Self-Fulfillment

Deciding to work with a 3PL, and which 3PL to partner with, is an important decision that should be determined on a case-by-case basis. Working with a 3PL in general is not a no-brainer for all companies, and all 3PLs are not a perfect match for all shippers seeking one. When deciding, it is important to look at the pros and cons of each side.  

Benefits of Self-Fulfillment

• You control the product and have hands-on access to your inventory
• You control the processes and the flow of your product
• More clarity if customer service issues arise
• You have more flexibility with your product and can have in-warehouse sales, etc.  

Downsides of Self-Fulfillment

• You must commit to a long-term lease
• You are responsible for the cost of the equipment inside the warehouse (forklifts, racking, etc.)
• You self-manage warehouse employees
• You must find and implement your own software, which is generally a large expense

When to Move into a 3PL Warehouse

After you have examined all the benefits and downsides of self-fulfillment vs working with a 3PL, you should ask yourself these questions.  

• Does working with a 3PL make financial sense?
• Will working with a 3PL improve my efficiency and profitability?
• Does working with a 3PL align with my business goals?

In all, if you are willing to share partial control and flexibility to gain scalability and the expertise of a 3PL, a 3PL may be a good move for your business.  

Want to learn more? Tee Up: Logistics Insights recently released a full episode dedicated to 3PLs! Listen here or wherever you stream podcasts.  

Related Terms:

• 3PL warehousing
• 3PL warehouse management software
• 3PL vs 4PL