Third-Party Logistics (3PL)
Definition
A third-party logistics provider is an outside company that handles logistics functions such as warehousing, transportation, and order fulfillment on behalf of a shipper. Businesses use 3PLs to access logistics capacity and expertise without owning the assets themselves.
In Practice
A 3PL contract typically covers some combination of storage, pick and pack, freight management, and delivery. The shipper sends inventory to the 3PL's facility, transmits orders electronically, and the 3PL executes fulfillment against agreed service levels, usually billing per pallet stored, per order picked, and per shipment moved.
For a planner, the day-to-day impact is that capacity becomes a commercial question rather than a fixed constraint. Peak season volume can be absorbed by paying for more throughput instead of building warehouse space, but you also inherit the 3PL's cutoff times, labor availability, and system accuracy.
A typical example is a mid-sized e-commerce brand that ships 2,000 orders a day. Rather than leasing a warehouse and hiring staff, it stores inventory with a 3PL that picks, packs, and tenders parcels to carriers, letting the brand focus on demand planning and purchasing.
Related Calculators
Related Terms
A fourth-party logistics provider manages a shipper's entire logistics network, including coordinating and overseeing the 3PLs and carriers that physically move and store goods. It acts as a single control point for the whole supply chain rather than executing operations itself.
Freight ForwarderA freight forwarder is an intermediary that arranges international shipments on behalf of shippers, booking space with ocean and air carriers, preparing documentation, and coordinating handoffs along the route. Forwarders do not usually operate the ships or planes themselves.
Distribution CenterA distribution center (DC) is a facility designed to receive goods in bulk and rapidly redistribute them to stores, customers, or other facilities. Unlike a long-term storage warehouse, a DC is optimized for throughput and order fulfillment.
Pick and PackPick and pack is the warehouse fulfillment process of retrieving individual items for an order from storage locations and packing them into cartons for shipment. It is the core labor activity in most order fulfillment operations.