A third-party logistics provider (3PL) is a company that handles logistics operations — warehousing, inventory management, order fulfilment, and shipping — on behalf of other businesses. Instead of operating their own warehouses and delivery fleets, companies outsource these functions to a 3PL.
When you order from an e-commerce brand and the package arrives from a warehouse you’ve never heard of, a 3PL is likely handling the fulfilment.
You’ll hear this when…
“We use a 3PL” is common among e-commerce businesses, consumer brands, and any company that ships physical products but doesn’t want to manage warehouse operations. Major 3PLs include companies like XPO Logistics, DHL Supply Chain, and ShipBob.
“3PL integration” refers to connecting a company’s order management or e-commerce platform (Shopify, for example) with the 3PL’s warehouse management system so that orders flow automatically from sale to fulfilment.
The “3” in 3PL refers to the third party in the relationship. The first party is the shipper (the company selling the product). The second party is the customer. The third party is the logistics provider. There’s also a 4PL — a company that manages the 3PLs, acting as a single point of contact for an entire supply chain.
When to use a 3PL
3PLs make sense when a company’s order volume exceeds what it can handle in-house but doesn’t justify building its own logistics infrastructure. The trade-off: lower capital investment and faster scaling, but less control over the fulfilment experience.
Source: Council of Supply Chain Management Professionals (CSCMP)