3PL Third Party Logistics Explained | Just One Dime Blog (2023)

Whether you’re an Amazon FBA seller facing new inventory limits or another online retailer, third-party logistics or ‘3PL’, can help streamline your workflow.

Here’s how Fulfillment By Amazon (FBA) used to work:

You order 2,000 units of your product from China. You enlist the help of a freight forwarder to ship your product straight from your manufacturer into Amazon’s hands. Amazon keeps all of your product in their fulfillment center, and then Amazon delivers directly to the customer when a shopper orders. You never have to touch the product. You passively earn income and end up richer at the end of a vacation than when you left!

(Some of you Shopify, Etsy, or other online sellers must be thinking: D*mn! That sounds awesome. And it is.)

Most of that Amazon FBA process is still the same.

Now, there’s a challenge thrown in: Amazon is limiting inventory storage at their fulfillment centers.

Based on your Inventory Performance Index (IPI), your maximum FBA inventory level may be as low as 200 units—even after your first order.

3PL Third Party Logistics Explained | Just One Dime Blog (1)

Today, we’re going to break down the 3PL solution to Amazon inventory woes and answer your 5 most common and important questions about third party logistics:

What is a 3PL?

When you enlist the help of a 3PL service company, you outsource your warehousing, distribution, and/or fulfillment services.

If you think that sounds like Fulfillment By Amazon, you’re not wrong.

However, FBA also gives you favor with the customer and two-day shipping with Prime. Amazon customers will often specifically look for products listed as ‘fulfilled by Amazon’ by filtering their searches with ‘Prime only’. FBA is a part of a much larger system than 3PL.

If you’re not selling Amazon FBA, a 3PL can take a lot of FBA’s place. It won’t necessarily earn you more sales, but it still makes it possible to optimize and scale your online business. Plus, for Amazon sellers who choose ‘Fulfillment by Merchant’ (FBM), 3PL makes scaling plausible.

Once you sell 30, 100—even 500 products a day or more—it will become too much for you to pack, label, and sell on your own.

Don’t let the lack of ability to ship hold your sales back! Enlist FBA and/or 3PL to help.

And if you’re thinking, “I only expect to sell ten products a day.” Instead—think big and you will go big.

What does a 3PL do and what are the advantages of using 3PL?

For most Amazon sellers, the most relevant tasks that 3PLs do for you include:

  • Receiving parcels, pallets, or cartons
  • Storing your units in a safe environment
  • Prepping and shipping boxes or pallets to Amazon Fulfillment Centers
  • Providing Fulfilled By Merchant (FBM) services
  • Accepting removal orders and returns for inspection
  • Freight forwarding

... and more.

3PL Third Party Logistics Explained | Just One Dime Blog (2)

(Video) 3PL - Third Party Logistics Explained

What does this amount to?

First, using a 3PL can save you money.

If you’re thinking about Amazon FBM or otherwise fulfilling orders yourself, there are a ton of factors to consider: storage, shipping, inventory management software, ground transportation, and more.

Why hire three or four different services—or even hire your own employees—when you can hire one service to do it for you?

3PL services are already full of trained professionals who can understand your supply chain top to bottom and help you optimize your operations.

Second, you save time, and 3PLs give you expertise in shipping logistics.

3PLs already have experience with shipping labels, proper packaging, customs, tariffs, and regulations. You only have to provide them with information from your Amazon Seller Central account (or other marketplace facilitator), and the 3PL will take care of the rest.

Even better, you can give the sub user account access so they can go in and process all FBM orders for you (you can limit what they can and cannot access).

Your job should be to focus on building your brand experience. Not shipping.

Pro-tip: Spend your time where you make the biggest impact. Delegate additional responsibilities to experts as much as possible.

If there is a problem with shipping delays, a 3PL company already knows how to make alternate arrangements.

3PLs are also masters of efficiency. They live for this stuff. If your customers require overnight shipping, 3PLs can make it happen.

Their efficiency also makes Amazon Seller Fulfilled Prime plausible. Seller Fulfilled Prime requires FBM sellers to be able to deliver on the Prime two-day shipping promise.

Third, 3PLs make your operations flexible and scalable.

If you sell a seasonal product that fluctuates in demand, managing your Amazon Inventory Performance Index is less straightforward than if you sell a product that sells consistently year-round.

When you use a 3PL, you can easily scale your operations up when your product sells well and scale down when the dry periods come.

Additionally, when you enlist an international 3PL service, it allows you to test your products and sell in new markets without committing to investing in warehouses or staff. If you think your product can sell well in Russia, you can sell there regardless of whether Amazon sells there or not. Think beyond Amazon.

3PL companies don’t all offer the same services. Some offer less or more. In fact, when a logistics company offers an elevated level of service, it becomes known as a 4PL instead.

3PL Third Party Logistics Explained | Just One Dime Blog (3)

What is the difference between 3PL and 4PL… and 5PL?

To distinguish between 1PL, 2PL, 3PL, 4PL, and 5PL (this sounds like characters on a game board), you have to understand the degrees of separation between a seller and the supply.

First, a 1PL (first party logistics company) is when a seller or company handles their own fulfillment logistics.

An example of first-party logistics would be a farmer storing and transporting their own strawberries to a farmer’s market.

Second, a 2PL (second-party logistics company) is when a delivery company ships a product from a seller to the consumer or reseller.

The service that separates a 1PL and 2PL is delivery.

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An example of second-party logistics is when an Etsy seller utilizes the USPS to ship their crochet strawberries to the buyer.

Delivery services such as USPS, UPS, and FedEx are 2PLs. 2PLs are also sometimes called “Transportation-based 3PLs”.

Third, a 3PL (third-party logistics company) is when a logistics company receives and stores a product from a seller and then fulfills orders.

The services that separate a 2PL and 3PL are packaging and warehousing.

An example of third-party logistics is when an Amazon seller utilizes a logistics company to store their inventory and fulfill FBM orders. Another example of a 3PLprovider is a company that ships products from a factory in China to a warehouse in the US, packages and labels those products for Amazon FBA, then ships them into the Amazon Fulfillment Centers.

A 3PL will likely enlist the services of a 2PL such as USPS for delivery.

When we talk about 3PLs, we most often mean “Standard 3PL Providers”, “Service Developer 3PLs”, or “Full-service 3PLs”. Some 3PLs perform freight forwarding as well.

Fourth, a 4PL (fourth-party logistics company) is when a logistics company manages 3PL companies for the seller.

Yes, a logistics company manages other logistics companies for you.

The service that separates a 3PL and 4PL is logistics on behalf of the seller. By “logistics” we mean detailed operations for moving the product.

A fourth party logistics company takes over the supply chain operations directly after production. It is another level of convenience for the seller and another degree of separation between the seller and the supply line. This often involves freight forwarding.

The 4PL acts as a manager of the 3PL services. They find the 3PL company for you and make sure everything happens the way you need it, without you ever having to talk directly to the 3PL. This saves you time from having to go into extraneous detail with the 3PL provider and just have one contact—your 4PL provider—to handle it all for you. This is especially beneficial to companies with huge logistical needs.

The line between 3PL and 4PL often blurs. 4PLs are sometimes called “Customer Adapter 3PLs” or “Lead Logistics Providers” (LLPs).

The easiest way to distinguish between a 3PL and 4PL is that a 4PL does not actually own transportation vehicles or warehouses. The 3PLs do.

Fifth, a 5PL (fifth-party logistics company) manages the supply chain from raw materials to production to storage and delivery.

The service that separates a 4PL and 5PL is production management.

In this case, a company would not only oversee storage, delivery, and logistics, but also manage suppliers as well—like if you sell a ceramic mug, the 5PL would start their oversight with the ceramic production (before the manufacturer makes the mug with the ceramic).

Trading companies coordinate raw material suppliers and goods production. But a 5PL starts at the beginning and takes it all the way to the customer or reseller.

5PLs do the job of a 4PL provider plus production management. It’s almost like a trading/sourcing company and a 4PL provider merged into a new service.

5PLs are sometimes called “Customer Developer 3PLs”.

Finally, does your company need a 3PL, 4PL, or 5PL?

For most ecommerce sellers, a standard 3PL service is all that is needed. What should ultimately affect your decision is which service will make you the most profitable.

What are the cons of using a 3PL provider?

When you enlist 3PL services, you have less direct control over the delivery process. Perhaps you’d prefer to use United States Postal Service or UPS tracking instead. For low-volume and handicraft sellers (under 10 sales per day), sometimes using a 2PL is the best option.

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For 4PLs and 5PLs, the degree of separation is even greater.

3PLs will not directly interact with your customers or handle customer service like Amazon FBA will. So that responsibility is still yours.

Amazon sellers: we always suggest you utilize Fulfillment by Amazon when it makes sense for your bottom line. You also do not have to choose between exclusively using FBA or a 3PL provider.

Sometimes 3PLs come with a large upfront investment and/or a monthly minimum spend. However, 3PLs can more than pay for themselves in the long run. We here at Just One Dime always suggest long-term thinking and encourage you to believe that you can and will scale your online business.

What should you look for in a 3PL facility?

1. The 3PL should have warehouses where you need to operate.

If the 3PL isn’t in a location close to where you want to sell, your costs will go up greatly. For example, if your customer base is in the USA, then hire the services of a USA-based 3PL. If you are doing arbitrage or wholesale, your profits will be significantly higher if you are using a 3PL in a no-sales tax state like Oregon. Every time you ship a product to their warehouse, there is no due sales tax.

Also ask yourself: does the 3PL have enough warehouses in the places where you sell the most? When you have massive sales volume, having 3PL locations close to customers will save you from higher costs and decrease shipping wait times for your buyers.

2. Ensure your 3PL has high quality warehouses.

A high quality warehouse must be:

  • Temperature regulated
  • Have 24-hour security
  • Fully staffed
  • Have regular drop-off and picks with UPS, FedEx, and the USPS
  • Able to receive cartons, pallets, and individual parcels

3. Your 3PL needs to be able to handle your business volume.

Some 3PLs will only be cost-effective for high volume businesses. Others will be more flexible. Pick one that suits your needs and double check that they are fully equipped to deliver 50 units per day if you sell 50 units per day.

4. Your 3PL provides references for exceptional past performance reports.

Most good 3PLs will be willing to share a two-year track record of financial statements with you.

You should be able to examine the 3PL’s ratio of on-time versus delayed deliveries, how well they communicate with clients, and whether they have long-standing relationships with sellers or if they lose every client within a year or so.

5. Your 3PL uses compatible software.

Make sure that your 3PL can integrate with whatever inventory management system you use. And if you don’t use any yet, choose a 3PL that is on the cutting edge of technology rather than one that still uses Windows XP.

6. Your 3PL should be able to process returns.

This is one of the largest headaches for people who use 3PLs. But if your 3PL can handle seamless returns, then that’s one less thing to worry about. If you need to do a removal order on one of your Amazon products, you need a place to ship it to within the same country where you are selling it.

Shopify sellers: make sure the 3PL integrates directly with your Shopify store through an API or approved application.

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7. Amazon sellers: you will have a better experience if your 3PL is run by experienced Amazon sellers.

Make sure your 3PL’s services include FBA prep and ship ability and can also fulfill orders FBM.

You may also want to consider 3PLs that have long operating hours including weekends and holidays.

Does Just One Dime know of any good 3PLs?

As a matter of fact, we do! Former Just One Dime student and current Amazon expert coach Eric Abbey runs AP Prep Services.

3PL Third Party Logistics Explained | Just One Dime Blog (4)

AP Prep Services:

  • You ship your boxes, pallets, or cartons directly to their state-of-the-art warehouse
  • They receive your units, catalog them, and store your product with 24 hour security
  • When you are ready, they prepare your pallets and ship them to Amazon fulfillment centers
  • To get started, click on this link

3PL Third Party Logistics Explained | Just One Dime Blog (5)

Other, more well-known 3PLs and 4PLs include:

ShipBob

CH Robinson

XPO logistics

EasyPost

Rakuten Super Logistics

Red Stag Fulfillment

Verde Fulfillment

Fulfyld

eFulfillment Services

To get the full scoop on third party logistics providers, international shipping plans, and more, visit JOD.com/freedom. Our Amazon FBAMastery membership will take you through everything you need to know to start and run a successful online business.

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Is there anything we can help you with concerning 3PLs? Let us know in the comments section!

FAQs

What is third party logistics in simple words? ›

A 3PL (third-party logistics) provider offers outsourced logistics services, which encompass anything that involves management of one or more facets of procurement and fulfillment activities. In business, 3PL has a broad meaning that applies to any service contract that involves storing or shipping items.

What are the biggest challenges for using 3PLs and 4pls? ›

6 Major Challenges in 3rd Party Logistics and Distribution
  • Finding New Talent. ...
  • Lack of Good Reporting Systems. ...
  • Increased Emphasis on Rules and Regulations. ...
  • Lack of Collaboration. ...
  • Meeting the Shippers' Specific Requirements. ...
  • Lack of Infrastructure.

What are the four types of 3PL? ›

4 Types of 3PL Companies
  • Standard 3PL Providers. eCommerce retailers needing only the most basic logistics would turn to a standard 3PL company. ...
  • 3PL Service Developers. ...
  • 3PL Customer Adapters. ...
  • 3PL Customer Developers.

What are the disadvantages of using a 3PL? ›

Disadvantages of Outsourcing Logistics to a 3PL provider

Lose skills and infrastructure you may want to develop. Have a hard time finding find a trustworthy 3PL. Sacrifice some control of your image and customer service. Send out your inventory to a relatively unknown third party.

What is the importance of 3PL? ›

When a company uses a 3PL, they can scale space, labor, and transportation according to current inventory. Additionally, they are often able to ease the transition between seasonal periods and industry fluctuation. When expanding into new markets, businesses can rely on a 3PL to aid growth in new regions.

What are the advantages of 3PL? ›

3PL helps companies to focus on their core competencies, thus fostering business growth, market expansion, and innovation. Outsourcing logistics services to a 3PL provider can drive cost savings, allow access to cutting-edge technologies in logistics, and improve scalability, flexibility, and customer satisfaction.

What are the risks involved in using 3PL? ›

In the relationship with their customers, some specific risk factors for the customer have been described, such as the possibility of inefficient management of the 3PL, the asymmetry of information, the loss of logistics innovative capacity, hidden costs, the dependence of the customer on the 3PL, loss of control, ...

What are the advantages and disadvantages of third party logistics? ›

There are many advantages to using third party logistics providers. These include cost savings on labor costs, increased efficiency in warehouse operations, and reduced inventory levels. Yet, there are also disadvantages, such as a higher risk of theft.

What are the challenges of 3PL? ›

The 3PL challenges
  • Poor end-to-end visibility: 3PL operations suffered due to a lack of end-to-end visibility, especially in last-mile delivery due to COVID-19 lockdown zones and travel restrictions. ...
  • Unpredictable demand surges: ...
  • Last-mile logistics problems: ...
  • Warehousing challenges: ...
  • High re-opening costs:

What services do 3PL provide? ›

Third party logistics is outsourcing the supply chain operations and logistics to get a company's products to their customer. The logistics solutions that 3PLs offer include receiving, storing, packing, and shipping services. Some 3PL companies also provide other logistics services, referred to as value added services.

How do 3PL companies make money? ›

Depending on the complexity and frequency of your needs, 3PL procurement companies charge either per-project fees or account retainer fees. If you're looking for a one-time manufacturing run for a product, procurement 3PLs may charge a service or consultancy fee.

What is 3PL explain with the help of a suitable example? ›

Examples are courier, express and parcel services; ocean carriers, freight forwarders and transshipment providers. The most significant difference between a second party logistics provider and a third-party logistics provider is the fact that a 3PL provider is always integrated into the customer's system.

Is 3PL cost effective? ›

3PLs Help Reduce The Cost Per Order

A 3PL can provide a lower cost per order when compared to internally managed operations. This isn't always true, but it is often true for small to moderate-sized companies that don't have four-season businesses. The larger order volume 3PL facilities allow cost justification of: WMS.

What is the biggest downside to using a 3PL? ›

Disadvantages of 3PL
  1. Loss of Control. When choosing a 3PL provider, an organization is giving up a certain amount of control of the delivery. ...
  2. Cost. While a 3PL can save a business lot of time and money, external factors (tariffs, over-regulation, weather, etc.) ...
  3. Business Understanding.

How does a 3PL work? ›

A third-party logistics (3PL) company works with businesses to outsource operational logistics that span the gamut from warehousing, picking, packaging, inventory, order fulfillment, forwarding and delivery. Allowing a 3PL company to oversee the logistics lets you focus on your core business needs.

Can 3PL be effective supply chain partners? ›

A 3PL can help make your supply chain smoother simply by giving you a real-time view into the many moving parts, their efficiencies, issues, blockages, and more. With supply chain transparency, you will be better able to make decisions for all parts of your supply chain.

What are the basic types of 3PL firms and which are most prevalent? ›

What are the basic types of 3PL firms, and which are in most prevalent use? Basic types: transportation based, warehouse/distribution based, forwarder based, shipper/management based, financial based, and information based.

What is a 3PL company Why is it considered an important link in a supply chain? ›

3PL is a service that allows you to outsource operational logistics from warehousing, all the way through to delivery, and ultimately enables you to focus on other parts of your business. Third-party logistics companies provide any number of services having to do with the logistics of the supply chain.

What are the 6 R of logistics? ›

The Chartered Institute of Logistics & Transport UK (2019) defines them as: Getting the Right product, in the Right quantity, in the Right condition, at the Right place, at the Right time, to the Right customer, at the Right price.

Is Amazon a 3PL? ›

This third-party logistics provider (3PL)service allows other businesses to utilize Amazon's massive infrastructure to provide ecommerce fulfillment for their own customers. Amazon is the largest third-party logistics providers (3PL) company in the world.

What are some reasons that third-party logistics arrangements are not always successful? ›

Some reasons that third - party logistics arrangements are n't always successful are : 1 - Unreasonable and unrealistic expectations , generally from the user 's perspective ; for example , it might be unrealistic ( and unreasonable ) for a customer to expect a 3 PL provider to cut the user 's annual transportation ...

What are main criteria for selecting a 3PL provider? ›

Keep in mind: the 3PL's price is seldom the only selection criteria; you must also consider total supply chain costs.
  • Cultural alignment. ...
  • Company infrastructure. ...
  • IT capabilities. ...
  • Ease of doing business. ...
  • Metrics. ...
  • Partnership intangibles.
15 Oct 2007

What in your opinion is the best way to manage 3PL firms? ›

3 Tips for Managing 3PL Performance
  1. Clear Communication With 3PL. Start business relationship with a good RFP. ...
  2. Regular Check-Ins. Establish a reasonable reporting schedule. ...
  3. Working Together. Make sure both you and the 3PL UNDERSTAND each other's business.
27 Jul 2021

Does 3PL makes more sense than public warehousing? ›

The most substantial contrast between public warehouses and 3PL service providers is that 3PLs offer a much broader range of services. Public warehouses will give you room for your inventory, but they aren't going to help you coordinate how the product gets there.

What are the critical issues in logistics outsourcing? ›

Critical Issues of Logistics Outsourcing
  • Switching cost.
  • Degree of control.
  • Human and electronic interface.
  • Tuning logistics services to the needs of channel partners.
  • Degree of outsourcing.
  • Legal aspects.
12 Jun 2021

What is the best way to develop a long lasting productive partnership with a 3PL? ›

Tips to Maintain a Successful 3PL Relationship
  1. Set Clear Expectations. ...
  2. Establish Single Points of Contact. ...
  3. Keep Your 3PL Partner in the Loop. ...
  4. Measure Performance. ...
  5. Regular On-Site Visits. ...
  6. Involve Your 3PL Provider in Long-Term Planning. ...
  7. Align Interests. ...
  8. Make Sure the Price is Right.
2 May 2019

What do you mean by reverse logistics? ›

Reverse logistics is a type of supply chain management that moves goods from customers back to the sellers or manufacturers. Once a customer receives a product, processes such as returns or recycling require reverse logistics.

What is 3PL fulfillment? ›

What is 3PL fulfillment? 3PL (third-party logistics) fulfillment refers to outsourcing the retail order fulfillment process to a team of experts. This includes receiving orders, picking and packing, inventory management, shipping, and warehousing.

Is FedEx a 3PL? ›

FedEx Supply Chain, is a 3PL provider in the US and Canada. Industries it serves include: technology and electronics, retail and e-commerce, consumer and industrial goods, and healthcare industries.

What is the difference between a 3PL and a broker? ›

A 3PL and a freight broker connect the shipper and the carrier but have different roles. A freight broker tends to be a part of one specific event in the logistics process- moving goods between shippers and carriers. A 3PL provides a much wider variety of services than just managing a particular shipment.

How do you find a 3PL customer? ›

The Logistics of Logistics Podcast
  1. Speaking engagements. If you can score yourself a speaking engagement at an industry event, there is a very good chance that you will be approached by a prospective customer right after your presentation. ...
  2. Webinars. ...
  3. White Papers. ...
  4. Blogging. ...
  5. Email Marketing. ...
  6. Linkedin. ...
  7. Youtube.
2 Apr 2015

Why is the third party logistics industry growing so rapidly? ›

Third-party logistics market growth has been driven by several factors, including the increasing demand for effective inventory management and enhanced working capital, booming e-commerce, growing globalization, and trade activities, as well as the increase in seaborne trades.

How many 3PL companies are there in the US? ›

There are 20,406 Third-Party Logistics businesses in the US as of 2022, an increase of 2.1% from 2021.

Which of the following best describes the services provided by third-party logistics 3PL companies? ›

Which of the following BEST describes the services provided by Third-Party Logistics (3PL) companies? They warehouse and distribute your products, and potentially perform some value add processes.

What is the role played by third-party logistics providers in the success of businesses? ›

Third-party logistics providers can store, ship, and manage product delivery for businesses, allowing brands to focus their efforts on marketing and selling their products.

What is 1PL 2PL 3PL 4PL 5PL? ›

1PL - First-Party Logistics. 2PL - Second-Party Logistics. 3PL - Third-Party Logistics. 4PL - Fourth-Party Logistics. 5PL - Fifth-Party Logistics.

What is the importance of 3PL? ›

When a company uses a 3PL, they can scale space, labor, and transportation according to current inventory. Additionally, they are often able to ease the transition between seasonal periods and industry fluctuation. When expanding into new markets, businesses can rely on a 3PL to aid growth in new regions.

How does 3PL reduce costs? ›

Because 3PLs save time by managing all the supply chain management operations and allow manufacturers to cut costs by reducing their transport and staff training expenditure.

What is 3PL experience? ›

Third-party logistics (or 3PL) refers to the outsourcing of ecommerce logistics processes to a third party business, including inventory management, warehousing, and fulfillment. 3PL providers allow ecommerce merchants to accomplish more, with the tools and infrastructure to automate retail order fulfillment.

What are the pros and cons of a 3PL? ›

Pros and Cons of Third Party Logistics
  • Pro: Someone Else Takes Care of the Tedious Tasks. ...
  • Con: You Lose Some Control over Your Inventory. ...
  • Pro: You Have Specialists Working for You. ...
  • Con: You Have to Find Someone You Can Trust. ...
  • Pro: Save Money in the Long Run. ...
  • Con: Spend Money at the Beginning. ...
  • Pro: Flexible Service Options.
24 Aug 2015

What are the challenges facing third party logistics? ›

The 3PL challenges
  • Poor end-to-end visibility: 3PL operations suffered due to a lack of end-to-end visibility, especially in last-mile delivery due to COVID-19 lockdown zones and travel restrictions. ...
  • Unpredictable demand surges: ...
  • Last-mile logistics problems: ...
  • Warehousing challenges: ...
  • High re-opening costs:

What are the risks involved in using 3PL? ›

In the relationship with their customers, some specific risk factors for the customer have been described, such as the possibility of inefficient management of the 3PL, the asymmetry of information, the loss of logistics innovative capacity, hidden costs, the dependence of the customer on the 3PL, loss of control, ...

How does a 3PL make money? ›

Depending on the complexity and frequency of your needs, 3PL procurement companies charge either per-project fees or account retainer fees. If you're looking for a one-time manufacturing run for a product, procurement 3PLs may charge a service or consultancy fee.

What services do 3PLs offer? ›

What is a 3PL? A 3PL (Third-Party Logistics) is a partner or service that helps ecommerce merchants manage their supply chain. Common 3PL services include warehouse and inventory management, order fulfillment, shipping coordination, retail distribution, exchanges, and returns.

Who uses 3PL? ›

The short answer is everyone. From small eCommerce stores to medium-sized firms to large-scale companies, all kinds of firms utilize 3PL. Small e-commerce shops on Etsy use 3PL distributors and carriers to get their products from their production locations to customers.

What is third-party logistics give an example? ›

Third-party logistics, also known as 3PL, is a system where an organisation (a third party) provides logistics services to companies in need of inventory management and distribution. The company (client) with no logistics department usually employs the help of the 3PL company.

What is 3PL and 4PL in logistics? ›

A 3PL (third-party logistics) provider manages all aspects of fulfillment, from warehousing to shipping. A 4PL (fourth-party logistics) provider manages a 3PL on behalf of the customer and other aspects of the supply chain.

What is 1PL 2PL 3PL 4PL 5PL? ›

1PL - First-Party Logistics. 2PL - Second-Party Logistics. 3PL - Third-Party Logistics. 4PL - Fourth-Party Logistics. 5PL - Fifth-Party Logistics.

What is third party transportation? ›

Third-party logistics means the outsourcing of transportation or logistics services. This can involve any activities related to shipping, storing or delivering a company's products. Typically, a 3PL provider takes an embedded, strategic approach to managing a client company's transportation and supply chain.

What are the advantages and disadvantages of 3PL? ›

Advantages and disadvantages of third-party logistics
  • Specialization. ...
  • Access to advanced new technology. ...
  • Access to required facilities. ...
  • Ability to handle large number of clients at a time. ...
  • Disadvantages. ...
  • Communication problems.
4 Feb 2018

How do 3PL companies make money? ›

Depending on the complexity and frequency of your needs, 3PL procurement companies charge either per-project fees or account retainer fees. If you're looking for a one-time manufacturing run for a product, procurement 3PLs may charge a service or consultancy fee.

What is a 3PL company Why is it considered an important link in supply chain? ›

3PL is a service that allows you to outsource operational logistics from warehousing, all the way through to delivery, and ultimately enables you to focus on other parts of your business. Third-party logistics companies provide any number of services having to do with the logistics of the supply chain.

What is the difference between logistics and 3PL? ›

A 3PL provider focuses on the day-to-day operations of your supply chain logistics while a 4PL focuses on optimizing your entire supply chain. Consequently, a 4PL takes over the entire operation and allows you time to grow and expand your business.

Why is it called 3rd party logistics? ›

In the context of logistics and supply chain management, a company's use of third-party businesses to outsource a part (or all) or their distribution and fulfillment services is called third-party logistics (or 3PL for short).

What are the 7 R's of logistics? ›

In this step, we look at the 7 Rs of logistics. So, what are the 7 Rs? The Chartered Institute of Logistics & Transport UK (2019) defines them as: Getting the Right product, in the Right quantity, in the Right condition, at the Right place, at the Right time, to the Right customer, at the Right price.

Is Amazon a 5PL? ›

The best example of a 4PL model is Amazon.com.

What is the difference between 3PL 4PL and 5PL? ›

A 3PL is there to simply fulfill the orders of the shipper. A 4PL is there to fulfill orders, find, and make improvements. Then, a 5PL is there to handle each and every aspect of the supply chain. No matter what level of logistics provider you plan on using it needs to be with a company that you trust.

How does 3rd party logistics work? ›

Third-party logistics (or 3PL) refers to the outsourcing of ecommerce logistics processes to a third party business, including inventory management, warehousing, and fulfillment. 3PL providers allow ecommerce merchants to accomplish more, with the tools and infrastructure to automate retail order fulfillment.

What are the different types of third-party logistics services? ›

Common 3PL services include warehouse and inventory management, order fulfillment, shipping coordination, retail distribution, exchanges, and returns. Partnering with a 3PL ultimately allows a merchant to focus on other aspects of their business.

Who uses 3PL? ›

The short answer is everyone. From small eCommerce stores to medium-sized firms to large-scale companies, all kinds of firms utilize 3PL. Small e-commerce shops on Etsy use 3PL distributors and carriers to get their products from their production locations to customers.

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