7 mins read
As a business grows, storing stock, packing orders, and getting them to customers gets harder to manage in-house.
Every extra order means more staff, more space, and more things that can go wrong.
3PL, short for third-party logistics, is when a business hands some or all of these tasks to a specialist provider instead of building the capability itself.
A 3PL company can handle warehousing, order fulfilment, transportation, or delivery, depending on what has been agreed between both parties.
The term covers a wide range of logistics models, and no two 3PL arrangements look exactly alike.
Some businesses outsource a single function, such as last-mile delivery.
Others hand over their entire supply chain, from the moment stock arrives at a warehouse to the moment it reaches a customer's door.
This guide explains what 3PL covers, the benefits, the different types of providers, common challenges, and how to choose the right one for your business.
What Does 3PL Cover?
A 3PL provider can take on one part of the supply chain or several, depending on the contract.
There are services under a 3PL arrangement; often times they include:
(a) Warehousing and inventory storage
(b) Order picking and packing
(c) Freight and transportation between locations
(d) Last-mile delivery to the end customer
(e) Returns processing and reverse logistics
(f) Order tracking, status updates and reporting
(g) Customs support for cross-border shipments, where relevant
A business does not have to outsource everything at once. Many start with one function, such as delivery or warehousing, and expand the relationship as their order volumes and needs change.
This staged approach is common among growing SMEs that are not yet ready to commit to a full-service 3PL contract.
It also helps to understand what 3PL does not typically include.
A 3PL executes logistics tasks; it does not usually set overall supply chain strategy or manage other vendors on a business's behalf.
That broader coordinating role sits with a 4PL, covered further down in this guide.
If some of these terms are new, our logistics glossary breaks down 50 delivery and supply chain terms worth knowing.
What Business Benefits Do 3PL Solutions Provide?
1. Renting warehouse space, buying vehicles and hiring a full logistics team is expensive, and much of that cost stays fixed even during slow months. A 3PL spreads infrastructure and labour costs across many clients, so a business pays largely for what it uses.
2. A 3PL has already built the processes, software, and rider or driver networks needed to move goods reliably. A business does not need to learn logistics from scratch or figure out route planning, warehouse layout, and delivery software by trial and error.
3. During busy periods, such as festive seasons or promotional campaigns, a 3PL can absorb higher volumes without the business scrambling to hire and train temporary staff at short notice.
4. Every hour spent managing a warehouse, chasing a delivery rider, or resolving a shipping error is an hour not spent on product development, sales, or customer relationships.
5. A 3PL with multiple locations can help a business deliver to more cities or regions without opening a warehouse or office in each one.
6. Many 3PL providers offer dashboards or reports that show delivery performance, helping businesses spot delays or bottlenecks earlier than they otherwise would.
Different 3PL logistics models suit different business sizes and goals, so it is worth understanding which model fits before signing a contract.
Our breakdown of logistics models covers this in more depth.
What Are the Different Types of 3PL Providers?
1. Warehouse and fulfilment 3PLs: They store inventory, pick items, and pack orders as they come in. These are common among online sellers who need storage without owning a warehouse.
2. Transportation-focused 3PLs: They move freight between warehouses, ports, or distribution points, often for larger volumes rather than individual customer orders.
3. Last-mile delivery 3PLs: They handle the final leg of delivery, from a hub, warehouse, or seller's location to the customer's door. This is usually the stage customers notice and complain about most.
4. Integrated or full-service 3PLs: They combine warehousing, transportation, and delivery under one provider and one contract, reducing the number of parties a business has to coordinate.
5. Freight forwarders: They coordinate international shipping, customs documentation, and cross-border logistics, and are especially relevant for businesses importing or exporting goods.
A growing business might only need last-mile delivery support at first, then add warehousing later as order volumes increase and in-house storage becomes impractical.
What Challenges Should Businesses Consider With 3PL?
(i) Less direct control over how orders are packed, stored, or delivered, since these tasks now happen outside the business's own team and premises.
(ii) Integration work, since the 3PL's systems need to connect properly with the business's own order management and inventory data to avoid manual double-entry or mismatched stock counts.
(iii) Dependence on the provider's reliability, particularly during peak periods, in areas with weaker delivery infrastructure, or when a single 3PL handles a large share of total order volume.
(iv) Cost structures that vary widely, so it is worth confirming exactly what is included in a quoted rate and what gets billed separately, such as storage fees, failed delivery attempts or fuel surcharges.
(v) Communication gaps, especially where a business and its 3PL are not sharing real-time updates, which can leave customer service teams unable to answer basic "where is my order" questions.
None of these challenges rule out working with a 3PL.
They are simply worth discussing upfront, in writing, so expectations are clear on both sides before volumes scale up.
How Do You Choose the Right 3PL Partner?
1. Define what needs to be outsourced: Warehousing, delivery, freight, or a combination. Being specific here prevents paying for services that will not be used.
2. Check coverage against where customers actually are: A 3PL with strong coverage in one region may not serve another well, so map the provider's network against actual order data, not assumptions.
3. Ask how orders and updates are tracked: Visibility into where an order is at any given moment matters as much as the delivery itself, particularly for businesses fielding frequent customer enquiries.
4. Understand the pricing structure: Per-order, per-kilogram, or flat monthly fees all affect cost differently at scale, so model a few months of expected volume before committing.
5. Review how failed or delayed deliveries are handled: Ask what happens when a customer is unreachable, an address is wrong, or a delivery attempt fails, and who bears that cost.
6. Start with a smaller commitment: A trial period or single service line makes it easier to judge reliability before scaling up to a full contract.
7. Track performance once live: Agree on a small set of measurable indicators from day one, rather than relying on general impressions.
Our guide to 3PL KPIs walks through the metrics worth tracking, from on-time delivery rate to order accuracy.
A short list of two or three 3PL providers, tested against real order volumes rather than sales pitches, usually gives a clearer answer than reading reviews alone.
Give Your Deliveries More Visibility With Kwikpik
Whichever 3PL setup a business chooses, one thing stays constant, and that is customers want to know where their order is.
At Kwikpik, we support this through our logistics API that businesses can connect to their own websites or systems, covering delivery requests, order tracking, and status updates from pickup to drop-off.
For businesses that are not ready for a full API integration, we also offer managed fulfilment, where orders are processed through an agreed manual workflow instead.
Either way, the goal is the same. Use Kwikpik Today.
Frequently Asked Questions
Is 3PL the same as dropshipping?
No. Dropshipping means a business never holds stock at all. 3PL means a business still owns its inventory but pays a provider to store, pack, or deliver it.
Do small businesses use 3PL, or is it only for large companies?
Both. Many SMEs use 3PL for a single function, such as delivery, before expanding into warehousing or fulfilment as order volumes grow.
What is the difference between 3PL and 4PL?
A 3PL carries out logistics tasks directly. A 4PL sits above that layer, managing and coordinating multiple 3PLs and logistics vendors on a business's behalf.
How much does a 3PL cost?
This varies by provider, service, and region, so it is best confirmed directly with each provider rather than assumed from a general figure.
