What Is a 3PL? What It Does, Costs and When You Need One
A 3PL, or third-party logistics provider, is a company you pay to receive your inventory, store it in its warehouse, and pick, pack and ship your orders. You keep ownership of the goods and the customer relationship; it runs the building, the labor and the carrier handoff. We cover what a 3PL takes on, what a month of fees looks like, the main types, and the point at which outsourcing pays.
Quick summary
- A 3PL is an outside company that receives, stores, picks, packs and ships your inventory and usually processes returns, while the goods stay yours.
- Forecasting, purchase orders, product data and customer service stay with the brand after the switch.
- A 3PL bills separate lines for receiving, storage, pick and pack, packaging and postage, and our 1,500-order sample month comes to $15,980 to $23,495, of which postage is 64 to 66%.
- ASCM sorts 3PLs into 4 types (warehouse-based, transportation-based, full-service, and financial and information-based), and most ecommerce brands hire a warehouse-based or full-service one.
- The trade is control for capacity: you give up on-the-spot fixes in exchange for space, labor, pooled carrier rates and shipping locations you would not build yourself.
What a 3PL does
ASCM, the Association for Supply Chain Management, defines third-party logistics in its Supply Chain Dictionary as “a buyer and supplier team with a third party that provides product delivery services”. For an ecommerce or CPG brand, that third party is a warehouse operator doing the physical work between your supplier’s truck and your customer’s door.
The core services barely change from one provider to the next:
- Receiving: counting inbound shipments against your advance ship notice (ASN).
- Storage: holding stock on pallets, shelves or bins, tracked by location.
- Pick and pack: pulling each order’s items, packing them and printing the label.
- Shipping: handing parcels and freight to carriers at rates pooled across clients.
- Returns: inspecting returned items and restocking sellable units.
- Value-added services: kitting, inserts, labeling and retail compliance work, billed on top.
The Bureau of Labor Statistics files these companies under warehousing and storage, NAICS 493: businesses that store goods they do not sell, often adding pick and pack, packaging and order fulfillment. That industry employed 1,837,400 people in August 2026 (preliminary). “Goods they do not sell” is the business model: the inventory is yours, and the 3PL sells space, labor and systems.
Armstrong & Associates puts the US third-party and contract logistics market at $323.4 billion in gross revenue for 2025, up 5.0% on the year. At the top, the largest US 3PL networks run warehouses in dozens of metros and sell freight, fulfillment and contract warehousing under one account. At the other end, single-building operators serve brands in one region.
How a 3PL works, from inbound truck to tracking number
| Step | What happens | What you supply |
|---|---|---|
| 1. Integration | The warehouse management system (WMS) connects to your store or ERP | Store access, SKU list, barcodes |
| 2. Inbound | The 3PL counts, inspects and logs each carton | An ASN with SKU and quantity per carton |
| 3. Put-away | Units get locations, fast sellers nearest the pack stations | Product weights and dimensions |
| 4. Order release | Orders arrive by API and release in batches before the carrier cutoff | Shipping rules and service levels |
| 5. Pick and pack | Staff scan each item, pack the specified box, add inserts | Packaging and insert specs |
| 6. Ship | The WMS compares carrier rates, prints the label, posts tracking | Your carrier account, or use theirs |
| 7. Returns | Parcels are inspected; sellable units go back to stock | Disposition rules |
For an online store, step 1 decides whether ecommerce fulfillment runs hands-off: a native integration pushes each order to the warehouse within minutes and pulls stock counts back, so you never sell units that are not there. Step 2 is where the first month goes wrong. Cartons that arrive without an ASN, or with 3 SKUs mixed in one box, get counted by hand and billed by the hour. Most ecommerce 3PLs run all 7 steps out of a fulfillment center, a building laid out for fast turnaround rather than long-term storage.
What moves to the 3PL and what stays with you
Signing a 3PL moves the physical work, not the decisions, and most onboarding disputes start on the line between the two.
| Job | The 3PL | You |
|---|---|---|
| Inbound receiving | Counts, inspects, logs discrepancies | Send the ASN, chase supplier shortages |
| Storage | Assigns locations, tracks units | Pay for the space, decide how much to hold |
| Pick, pack and label | Does the work, scans each item | Specify boxes, fillers and inserts |
| Carrier handoff | Compares rates, prints labels, books pickups | Choose service levels and delivery promises |
| Returns | Receives, inspects, restocks or quarantines | Approve refunds, set disposition rules |
| Forecasting and purchase orders | Reports stock levels | Decide what to buy and when |
| Inventory risk | Liable for loss up to a contract cap | Insure the remaining value |
| Product data | Uses what you send | Keep SKUs, barcodes, weights and dimensions accurate |
| Customer service | Answers your tickets about orders | Answers the customer |
The last 4 rows cause the trouble. Brands assume the 3PL will flag stock running low, or that its insurance covers the retail value of what sits on its racks. A 3PL reorders nothing, and its liability is whatever the contract says.
What a 3PL costs: one month at 1,500 orders
3PL pricing is a rate card with separate lines, not one price per order. The sample is a brand shipping 1,500 orders a month across 300 SKUs, with 2 pallets arriving weekly and 1.6 items per order, at example rates rather than a quote.
Three lines are missing because not every 3PL charges them: a setup fee, a monthly account minimum and a long-term storage surcharge on stock that sits for months. The minimum hits small brands hardest: a $1,000 floor in a month where fees total $600 means $400 paid for no work.
Types of 3PL
ASCM’s dictionary sorts 3PLs into 4 types.
| Type | What it runs | Typical client |
|---|---|---|
| Warehouse-based | Buildings, storage and order fulfillment | Brands that need stock held and orders shipped |
| Transportation-based | Trucking, freight brokerage, managed transport | Shippers moving pallets and truckloads between sites |
| Full-service | Warehousing, transport and value-added services under one contract | Brands selling DTC, wholesale and retail at once |
| Financial and information-based | Freight audit, freight payment, visibility software | Shippers with heavy carrier spend to control |
A second split cuts across all 4. An asset-based 3PL owns or leases its warehouses and trucks; a non-asset 3PL arranges capacity from others and can switch buildings or carriers freely. Transportation-based providers often run cross-docking operations, moving freight from inbound trailers to outbound ones within hours with no storage step.
For a brand, the split that matters most is the order profile: many small DTC parcels, cartons and pallets to retailers under their routing rules, or specialist work such as cold chain and hazmat. A building tuned for 5,000 parcels a day is rarely good at palletized retail orders.
Above all of these, a fourth-party logistics provider manages several 3PLs and carriers on a brand’s behalf and usually runs no warehouse itself, which few brands need before they juggle providers across regions.
3PL vs in-house fulfillment
| Factor | In-house | 3PL |
|---|---|---|
| Upfront cost | Lease, racking, equipment, WMS | Setup fee, if any |
| Cost structure | Mostly fixed: rent and salaries | Mostly variable: per pallet, per order |
| Carrier rates | Your own volume only | Pooled across every client |
| Peak season | Hire and train temps | The 3PL’s staffing problem |
| Shipping locations | 1, unless you open another | Several, if the 3PL has a network |
| Control over packing | Total | Set by written specs |
| Fixing a mistake | Walk to the shelf | Open a ticket |
The fixed-versus-variable row settles most cases: in-house costs the same in a slow March as in a busy November, while a 3PL bill moves with orders. In-house also hides costs, such as the founder’s hours at the packing table and the wholesale order declined for lack of space.
Brands whose problem is space rather than packing labor can rent 3PL warehousing for bulk stock alone and keep parcel shipping in-house, a split that suits heavy or slow-moving goods.
When a brand needs a 3PL
Good fit:
- Packing eats the week. Someone on a team of 5 spends 2 days a week at the packing table.
- Storage has outgrown the space. Stock sits in hallways, a garage or a second rented unit.
- Delivery promises stop at your region. From one coast, 2-day ground delivery to the other is out of reach.
- Errors are climbing. Wrong items, missed orders and stockouts surface only when a customer complains.
- A new channel brings rules. A retailer with routing guides and ASN requirements, or a marketplace with prep standards.
Wrong tool:
- Hand-finished packing. Personalized, gift-wrapped or made-to-order items where the packing is part of the product.
- Very low or erratic volume. Monthly minimums would exceed what it costs to pack the orders yourself.
- Oversized or fragile goods. A parcel-focused 3PL prices them as exceptions on every order.
The downsides of a 3PL
The main cost is control. A mispacked order becomes a ticket and a credit request, and a brand shipping 30 orders a day gets less attention than one shipping 3,000. Switching is expensive: moving stock between 3PLs means freight, new receiving fees and days when nothing ships. A WMS with no native connection to your store runs on file uploads, and every manual step adds delay or a stock mismatch.
What to check before you sign
When you compare 3PL quotes, run each rate card against one month of your own orders, because a low pick fee paired with a high minimum or per-SKU storage can cost more than a higher headline rate. The contract then carries the oversight you used to do by walking the floor.
The SLA does the most work, and only if it is measurable.
Frequently asked questions
How do 3PLs make money?
3PLs earn on activity fees: receiving, storage, pick and pack, packaging and value-added services, each billed per unit, per order or per pallet. Many also earn a margin on postage by reselling carrier rates they negotiated across all their clients. Monthly minimums and setup fees put a floor under small accounts.
What is the difference between 2PL, 3PL, 4PL and 5PL?
A 1PL is a shipper moving its own goods, and a 2PL is a carrier hired for one leg, such as a trucking line. A 3PL runs warehousing, fulfillment and transport as an outsourced service. A 4PL manages several 3PLs and carriers on the shipper's behalf, and 5PL is a loose label for providers coordinating whole networks through software.
Is Amazon a 3PL?
For its sellers, yes: Amazon describes Fulfillment by Amazon as sellers sending stock to its fulfillment centers while Amazon picks, packs, ships and handles customer service and returns. Its Amazon Warehousing and Distribution service also stores bulk inventory and distributes it to non-Amazon sales channels. It is not a neutral 3PL, since FBA fees and storage rules are built around selling on Amazon.
What is an example of a 3PL company?
Typical examples are the logistics arms of parcel carriers and trucking companies, freight brokers that also run warehouses, contract logistics firms running dedicated buildings for manufacturers, and ecommerce fulfillment networks built for DTC brands. Amazon's FBA program is another for sellers on its marketplace. Which form fits depends on whether you ship parcels, cartons to stores or truckloads.
What is the difference between a 3PL and a freight forwarder?
A freight forwarder arranges shipments, mostly international, by booking carriers, preparing documents and coordinating customs, but it usually does not store or pick inventory. A 3PL runs the warehouse work, and many add forwarding on top. If your goods need to sit somewhere and ship out as orders, you need a 3PL.
Do I still own my inventory when a 3PL stores it?
Yes. The 3PL holds your goods under a warehousing agreement and never takes title, which is why BLS defines the industry as storing goods it does not sell. Read the liability clause: the 3PL's responsibility for loss is set by the contract and can be far below the stock's value.