Whether you’re a high-volume shipper looking to better manage fulfillment in specific geographic locations or a growing ecommerce brand that needs better product placement (but doesn’t have the capital to build warehouses nationwide), third party logistics (3PL) is the solution.
Let’s review what third party logistics companies are, their scope of services, and how to choose the right partner for your business.
Third-party logistics is the outsourcing of logistics functions like warehousing, transportation, and inventory management to a specialized third-party company. This strategy enables enterprises to access ecommerce supply chain expertise and established shipping networks.
Particularly advantageous to mid-sized businesses, 3PL companies operate by building networks of warehouses, carriers, and technology systems to manage multiple clients' logistics needs simultaneously. This shared infrastructure offers economies of scale through collective shipping volumes and established carrier relationships.
More and more businesses are seeing value in working with third party providers. In fact, the global 3PL market is expected to grow from $1.14 trillion to $2.54 trillion between 2024 and 2032, representing a CAGR of 10.5%.
Primary services offered by 3PL providers
In many ways, third party logistics operates as a one-stop shop for supply chain operations, offering everything from last mile delivery that helps enterprise operations cut time-in-transit to full-blown warehousing for businesses that don’t yet have dedicated fulfillment centers.
3PL partners can store products, manage inventory, and handle order processing — from picking and packing boxes to actual shipping. This comprehensive approach speeds up order processing and helps you deliver products to customers more efficiently.
Transportation management services move orders efficiently from pickup to delivery. From selecting carriers to optimizing routes, these services help businesses cut costs while getting products to customers on time.
Freight forwarding moves products across international borders. Using 3PL delivery services to coordinate air and ocean logistics, consolidate shipments, and handle international shipping compliance saves time and money.
Customs brokerage helps navigate complex international trade rules. Your 3rd party shipment service can manage customs clearance, documentation, taxes, and compliance requirements to keep your international shipments moving smoothly.
Reverse logistics handles product returns from start to finish. The 3PL service receives returned items, restocks sellable products, and processes exchanges or refunds. A smooth returns process keeps customers happy while minimizing losses.
3PLs offer multiple shipping methods that can be customized to your volume, speed, and cost requirements. This flexibility allows businesses to optimize their shipping strategy as needs change.
Types of 3PL shipping services include:
Using a 3PL service offers benefits for both mid-sized businesses and high-volume enterprise operations:
|
Third party logistics benefits |
How these 3PL benefits enhance your business |
Scalability |
Adjust operations up or down based on demand without investing in warehouse space, equipment, or additional staff. |
Cost savings |
Get comprehensive rate shopping via established carrier relationships while eliminating fixed warehousing and staffing costs. |
Time savings |
Focus on core business growth while experts manage logistics operations and shipping processes. |
Regional expertise |
Leverage established regional networks that offer faster routes with shorter delivery times. |
Technology access |
Gain access to enterprise-grade technology systems without the cost of building and maintaining infrastructure. |
When selecting the best third party logistics provider for your business, follow these five steps:
Analyze your current shipping process and document what is and isn’t working. While reviewing, consider:
These insights will help you pick 3PL logistics solutions that resolve your pain points and accommodate your business as markets shift.
Assess the range of general and value-added services, including warehousing, transportation, and inventory management. Examine their technology infrastructure, such as warehouse management systems (WMS) and real-time tracking capabilities, to ensure they align with your operational requirements and allow you to offer a great customer experience.
Look for 3PLs with proven experience in your industry. Request case studies and client testimonials, and don't hesitate to contact their existing customers for feedback on performance, reliability, and problem-solving abilities.
Review where the 3PL's warehouses and distribution centers are to make sure they effectively cover the target markets where your customers live. Check which shipping carriers they work with and whether they can handle domestic and international shipping if your business needs it.
Examine pricing models based on transactions, space utilization, or both. Consider the contract terms, including service level agreements (SLAs) and performance metrics.
Enterprise shippers work with multiple 3PL providers to ensure reliable service and reduce risk across their markets. With Shipium, you can automate:
You can reduce costs and boost profits by reducing your delivery times and consistently ensuring your business uses the most cost-effective shipping methods. In fact, according to a report by Nucleus Research, customers who use our platform reduce their parcel spending by an average of 10%.
Book a demo today to explore how Shipium can help you better manage your third party logistics companies.
3PL service providers reduce shipping costs through established carrier relationships, shared volume discounts, and optimized route planning. They help you choose the most cost-effective delivery options while efficiently consolidating shipments.
Yes. Shipium is designed to integrate seamlessly with most 3PL providers through our standardized API connections and flexible integration options. Our platform works alongside your existing relationships, providing enhanced visibility and performance analytics across your network.
See how Shipium’s integration framework connects with your existing systems.
Yes. Using multiple 3PL and LSP service providers makes sense as your business grows. Each provider brings different strengths to the table. For example, some excel in certain regions, while others specialize in specific services or industries. Working with many partners helps you get the best rates and reduces dependency on a single provider.