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Third-party logistics (3PL) is a vital component of modern supply chain management. In this guide, we look at 3PL services, exploring their definition, functions, and applications with a specific focus on their role in shipping and maritime operations. We also examine the concept of 3PL warehousing, offering insights into how these facilities function as part of the broader logistics ecosystem.

What is 3PL logistics?

3PL stands for third-party logistics. 3PL refers to the process of outsourcing fulfilment and logistics to a partner who stores and ships products on behalf of other companies.

3PL incorporates a range of different activities and can refer to a single provider (e.g. a warehousing facility) or a logistics network that can take care of end-to-end supply chain management. While not all 3PLs provide the exact same services, typically they will offer:

  • Procurement
  • Inventory management
  • Warehouse storage
  • Order fulfilment
  • Returns processing
  • Transportation

In short, 3PL logistics help your company get goods from A to B without you directly spending your time or effort on doing so. 3PLs take on the responsibility of managing the logistics and supply chain on your behalf, freeing you up to focus on other business activities. In addition, 3PL offers a number of other potential benefits, such as:

  • Minimising inventory holding costs
  • Reducing logistics complexities
  • Optimising the supply chain
  • Experts handling customs clearance and any cross border complexities
  • Experienced logistics professionals handling oversized or dangerous cargoes

What is 3PL in shipping​?

 

Now let’s look at 3PL specifically in the context of shipping. Similar to freight forwarding, 3PL involves moving goods from origin to destination. However, 3PL in shipping is more deeply integrated into the supply chain than freight forwarding. While both types of service involve moving goods and arranging customs clearance, 3PL will typically also include warehousing and value-added services such as packaging and reverse logistics. As such, 3PL tends to cost more than freight forwarding – because you are not just paying the freight rate  to move goods, but also for additional wraparound services. 

 

Who uses 3PL?

 

If you are wondering what types of businesses typically use 3PL services, the answer is broad and varied. A huge number of companies around the world outsource their logistics requirements to a 3PL logistics partner and the practice is commonplace in a wide range of industries, including:

  • Manufacturing
  • Pharmaceuticals
  • Construction
  • Retail
  • Medical
  • Food and restaurant
  • Cosmetics
  • Automotive
  • Hospitality
  • Home improvement
  • Tech
  • Aerospace

 

Even notable Fortune 500 companies use 3PL services. But it’s not just large multinationals that can benefit from using 3PL services. Whatever the size of the company, or the industry they operate in, 3PL can help optimise supply chain efficiency and reduce operational costs, in turn enabling companies to streamline their logistics and transportation management while meeting rising customer expectations. This is particularly useful for companies who want to scale their operations without having to expand their internal logistics capabilities.

 

What is a 3PL warehouse​?

 

The term 3PL warehouse stands for third-party logistics warehouse. It refers to a warehouse which is owned and managed by a third-party company which works as an outsourced logistics partner on behalf of another organisation.

A 3PL warehouse carries out a number of functions, typically including:

  • Goods management
  • Goods storage, including scalable storage solutions
  • Inventory management
  • Order fulfilment – from picking the item to packing it to releasing it for shipping

 

At first glance, operations at a 3PL warehouse look the same as at any other commercial warehouse. The key difference is that the third-party is responsible for all elements of the warehousing process – rather than the company that has produced the goods handling this themselves in-house.