A third-party logistics provider (3PL) is a company that manages warehousing, order fulfillment, and transportation services for ecommerce brands and other businesses. Instead of building your own warehouse operation—hiring staff, leasing space, managing shipping carriers—you outsource fulfillment to a 3PL provider that handles the entire supply chain from receiving inventory to delivering packages to your customers’ doorsteps.
Most growing ecommerce businesses hit an inflection point around 500–1,000 orders per month. At that volume, in-house logistics becomes a liability: inventory management breaks down, fulfillment errors spike, and you spend 40+ hrs a week on supply chain operations instead of growing the business. Third-party logistics providers solve this by taking the entire fulfillment process off your plate—so you can focus on product development, marketing, and customer acquisition.
This guide covers what third-party logistics (3PL) services actually include, how 3PL warehouses work, what the fulfillment process looks like from receiving to last-mile delivery, and how to evaluate 3PL providers to find the right fit for your supply chain management needs. No consultant jargon—just practical guidance on what changes for your business, how much it costs, and what separates a reliable 3PL partner from one that damages your reputation.
3PL Meaning
3PL stands for “third-party logistics provider.” The “third party” refers to the fact that the provider operates between you (the seller, or first party) and your customers (the second party)—handling the physical supply chain management so you don’t have to manage logistics in house.
You’ll hear these terms used interchangeably across the industry:
- 3PL Provider: The third-party logistics company itself—the service provider offering warehousing, fulfillment, and transportation services.
- 3PL Warehouse or Fulfillment Center: The physical facility where your inventory is stored and customer orders ship from. The best fulfillment centers are located in strategic geographic positions to minimize shipping times across the supply chain.
- 3PL Fulfillment: The full order fulfillment service—receiving, warehouse storage, picking, packing, shipping, and returns processing (reverse logistics).
- Third-Party Logistics Company: A broader term for any supply chain organization that provides warehousing services, inventory management, transportation management, and supply chain coordination.
- Fulfillment House: Older terminology for the same concept; less common today but still used in some industry circles.
The distinction matters because some service providers call themselves “3PLs” but only handle shipping coordination—essentially acting as middlemen. Real third-party logistics providers own or operate actual warehouse space, take physical custody of your inventory, and manage the full workflow from inbound receiving to last-mile delivery.
What Does a 3PL Do?
A 3PL provider receives your inventory, stores it in their fulfillment centers, picks and packs customer orders, coordinates supply chain transportation services to ship them out, and handles reverse logistics when returns come back. The third-party logistics company owns the warehouse management software, labor force, and carrier relationships—you don’t.
More specifically, working with a third-party logistics provider delivers four primary outcomes for your business:
- Inventory removed from your operation: No more trying to manage inventory in your own warehouse or tying up capital in storage space. Your 3PL provider helps you store products across one or more warehouse locations and manages every supply chain and logistics function on your behalf.
- Quicker fulfillment and shipping: Third-party logistics providers with national coverage deliver to customers in 2–3 days instead of 5–7. This faster delivery directly impacts customer satisfaction and repeat purchase rates.
- Higher order accuracy: Professional fulfillment operations with barcode scanning, quality checkpoints, and warehouse management software catch mistakes before they reach customers—reducing complaints, errors, and the cost savings you lose to re-ships.
- Time freed for core competencies: Your team stops functioning as warehouse workers and refocus on marketing, launches, customer retention, and scaling your core business. This is the operational efficiency gain that makes outsourcing fulfillment worthwhile.
| 3PL Service | What It Covers | Why It Matters |
|---|---|---|
| Warehousing & Storage (3PL Services) | Secure climate-controlled warehousing (if needed), inventory organization across warehouse locations | Inventory is protected, insured, and accessible without you leasing your own warehouse |
| Inventory Management | Real-time tracking via warehouse management software, cycle counts, stock-level alerts, inventory data synced across sales channels | You never oversell, avoid stockouts, and see real-time inventory levels at every location |
| Order Fulfillment (Pick & Pack) | Picking, packing, and preparing orders with barcode verification at every step | High precision rates reduce customer complaints, refund requests, and re-ship costs |
| Transportation Services & Shipping | Freight forwarder and carrier negotiation, label generation, shipment tracking, discounted shipping rates through carrier leverage | Lower per-order shipping costs; cost savings of 15–30% versus retail carrier rates |
| Returns & Reverse Logistics (3PL Services) | Processing returned merchandise, quality inspection, restocking sellable inventory, disposition of damaged goods | Efficient returns management recovers value and keeps stock records accurate |
Why Do You Need a 3PL?
You need a third-party logistics provider when the cost of managing your own fulfillment exceeds the cost of outsourcing it—or when you physically can’t scale operations without one.
The inflection point: Most ecommerce businesses shipping 500+ orders per month spend at least 20 hrs weekly on logistics operations: managing inventory, coordinating with shipping carriers, resolving fulfillment errors, and handling reverse logistics. That time comes directly from activities that grow the business. Once internal logistics labor, facility costs, and error rates climb together, outsourcing fulfillment to a 3PL provider almost always costs less than doing it yourself. The pattern is consistent across industries: self-managed fulfillment gets more expensive per order as you grow, while third-party logistics pricing gets cheaper per order as scale increases.
Speed drives customer satisfaction: If you sell consumer goods, home décor, fitness equipment, or outdoor gear, delivery speed directly impacts retention. Customers expect two day shipping as standard. Operating a single warehouse can’t reach large portions of the country without expedited shipping surcharges. A 3PL provider with geographic coverage delivers to the majority of US homes in 2 days using standard ground shipping—improving customer experience while reducing shipping costs.
Seasonality and scale operations: When your business grows significantly during peak seasons—holiday gifting, back-to-school, summer outdoor—your warehousing and volume needs can spike 3–4x. Leasing additional warehouse space just for Q4 is wasteful. 3PL providers scale operations on demand, absorbing seasonal spikes without requiring you to invest capital in extra space or temporary staff.
Complex product requirements: If you sell heavy or bulky products (furniture, appliances, fitness equipment), ship hazardous materials, or need kitting and assembly services, most internal setups can’t handle these logistics functions safely or cost effectively. Specialized service providers absorb that complexity through industry expertise, regulatory compliance certifications, and purpose-built fulfillment solutions.
Returns are a money drain: Processing returns in house means sorting, inspecting, making restocking decisions, and coordinating shipping logistics for reshipping. A 3PL provider automates return intake, restocks sellable merchandise, and disposes of damaged goods according to your rules—delivering efficient returns management that frees time every week you’d otherwise spend on reverse logistics.
3PL Services
Third-party logistics providers offer a modular menu of 3PL services. You don’t have to use all of them—some client companies use only warehousing and shipping; others add returns processing, kitting, and freight forwarding. Here’s the breakdown of the most common 3PL services that providers offer and logistics solutions typically include:
Warehousing & Storage
Your merchandise arrives at the 3PL’s facility and is logged into their WMS (warehouse management software). Each SKU gets a bin location, and the WMS tracks quantity, expiration dates (if food or pharma), and placement in real time. Temperature-regulated storage space is available for perishables or sensitive goods that require cold chain logistics. You’re charged a monthly warehousing fee based on the warehouse space your inventory occupies—typically calculated per pallet, per cubic foot, or per bin. This converts what would be a fixed-cost warehouse lease into variable costs, letting you save money as your business scales—a straightforward way for growing businesses to save money on warehousing.
Inventory Management (3PL Services)
The 3PL’s WMS is the source of truth for your inventory data. You integrate via API, your platform’s app, or your sales platform so that when you sell on marketplaces, your own online store, or a wholesaler’s platform, counts stay synced across all channels. This real time visibility prevents overselling and stockouts—two of the most expensive inventory management failures in ecommerce.
Cycle counts (physical audits on a regular schedule) catch shrinkage and discrepancies before they cause problems. The best 3PL providers offer real-time dashboards where you can monitor levels, bin positions, and movement trends in your own app or theirs. This this information feeds directly into demand forecasting and reorder planning, helping you optimize inventory management across your entire supply chain.
Order Fulfillment (3PL Services)
When a customer places an order on your site, the order flows to the 3PL’s system through your ecommerce platform integration. A warehouse associate picks the correct items from their assigned spots, scans them for verification, and packs them into appropriate packaging. The system selects the optimal shipping carrier for that destination based on speed and cost, generates a label, and hands the package off for last-mile shipping. Most third-party logistics providers commit to same-day or next-business fulfillment and ship orders received before a cutoff time.
This fulfillment process—from order receipt through carrier handoff—is where the operational efficiency of a 3PL provider compounds. Trained warehouse workers and fulfillment teams, proven fulfillment technology, and bulk carrier relationships mean your orders ship faster, with fewer errors, at lower cost than most online sellers can achieve managing their own fulfillment.
Freight Shipping (3PL Services)
For heavy or bulky products—furniture, fitness equipment, appliances, industrial goods—standard parcel shipping is prohibitively expensive. 3PL providers offer Less-Than-Truckload (LTL) shipping, where your freight shares a truck with other businesses’ shipments, and Full-Truckload (FTL) for large wholesale transfers between fulfillment centers or distribution services.
A 3PL provider’s freight forwarding and freight brokerage relationships give you access to discounted shipping rates you’d never negotiate as an individual shipper. For online retailers shipping heavy goods regularly, this cost savings alone can justify working with a 3PL and save money on every shipment. Some lead logistics providers also connect you with freight forwarders for international shipping, working with freight forwarders and customs brokers to manage regulations and cross-border logistics on your behalf.
Returns Processing & Reverse Logistics
Customers ship returns back to the 3PL warehouse. The provider receives the package, inspects the merchandise, and follows your return rules: restock sellable merchandise, return it to you, or dispose of damaged goods per your specifications. The system updates your records immediately so you know what’s recovered and sellable.
Efficient returns management is a differentiator. Returned merchandise represents a loss, but a 3PL provider with strong reverse logistics processes minimizes that loss by quickly restocking good merchandise, providing clear customer refund records, and reducing the supply chain time your team would otherwise spend on sorting and disposition. For online businesses with return rates above 10%, outsourcing reverse logistics to a service provider is almost always more cost effective than handling it yourself.
Kitting & Assembly (3PL Services)
If you sell bundles, subscription boxes, or promotional sets, your 3PL provider can assemble those kits at their facility and fulfill orders as a single package. Bundling services are common among online sellers offering gift sets, starter kits, or seasonal bundles. Co-packing goes further—the 3PL can assemble, repackage, or relabel your merchandise as part of value added services. Co-packing goes further—the 3PL can assemble, repackage, or relabel your merchandise as additional value added services.
These value added services require specialized knowledge and careful inventory management (tracking both individual components and assembled kits), so not all 3PL providers handle it well. If bundling is core to your business model, look for a provider with dedicated bundling operations and experience in your specific industry.
Same-Day & Fast Shipping (3PL Services)
Some third-party logistics providers offer same-day shipping on orders placed before a cutoff time (usually 2 PM local time). This capability requires warehouses in regions with dense carrier networks and high customer concentration. Red Stag Fulfillment, for example, offers same-day fulfillment from their facilities and reaches 96% of US homes within 48 hours through their multi-location network strategy—without requiring expedited shipping surcharges.
For online brands competing against Amazon Prime expectations, working with a 3PL that offers 2-day delivery capability is increasingly a baseline requirement rather than a differentiator. Ask prospective 3PL providers for transit-time maps showing what percentage of your customer base they can reach within 24, 48, and 72 hrs from their warehouse locations.
Ecommerce Integration (3PL Services)
A 3PL provider connects directly to Shopify, WooCommerce, BigCommerce, Magento, and custom APIs through system integration so orders auto-sync, inventory updates in real time, and shipment tracking flows back to your customer. This integration—powered by the 3PL’s fulfillment software—eliminates manual CSV uploads and email back-and-forth. Seamless integration between your sales channels and the 3PL’s fulfillment technology is what makes the outsourced supply chain actually work at scale.
Reporting & Analytics (3PL Services)
Modern 3PL providers offer dashboards tracking key performance indicators: throughput, shipping costs, stock turnover, fulfillment speed, error rates, and carrier performance. This data informs your shipping strategy, marketing spend, and purchasing decisions. The best 3PL providers proactively share these key performance indicators and use them to optimize your supply chain operations over time—not just report on them after the fact.
Specialized 3PL Services
Not all 3PL providers offer the same service offerings. Some providers specialize in specific categories or handling requirements that demand specialized knowledge, regulatory compliance certifications, and purpose-built fulfillment solutions. If your products fall into any of these categories, working with a specialist 3PL provider dramatically reduces risk compared to a generalist.
Cold Chain & Temperature-Controlled Logistics
If you ship fresh food, supplements, or temperature-sensitive pharmaceuticals, the 3PL provider must maintain cold storage (36–46°F) and document temperature throughout the supply chain. Failure risks spoilage and FDA violations. Cold chain 3PL providers charge a premium over ambient warehousing because of refrigeration equipment, energy costs, and regulatory compliance overhead. These specialized services are essential if your product requires it—general 3PLs cannot handle temperature-controlled fulfillment safely.
Dangerous Goods & Regulated Materials
Batteries, aerosols, paints, chemicals, and cleaning products require dangerous goods certifications and specialized packaging for transportation services. A DG-certified service provider has DOT training, proper segregated and ventilated facilities, and freight forwarder and carrier relationships that accept regulated materials. If your supply chain includes hazardous goods, this specialized knowledge and regulatory compliance is non-negotiable—non-specialist service providers will either refuse these shipments or create compliance liability.
Heavy, Bulky & Oversized Products
Furniture, fitness equipment, appliances, and outdoor gear are heavy, consume significant storage space, and frequently sustain damage in transit. Most standard third-party logistics providers optimize for small parcels under 50 lbs and charge by cubic footage—making heavy goods cost effective for neither party—economics are terrible for both the 3PL and the client company. Providers that specialize in heavy and bulky fulfillment have dock equipment for oversized freight, LTL carrier and freight forwarder relationships for cost-effective transportation, and the warehouse operations capabilities to protect large goods through the entire shipping journey. If you regularly ship goods over 50 lbs, a specialist 3PL provider dramatically reduces your per-unit shipping costs and damage claims compared to a generalist provider.
Food & Beverage Fulfillment
Food and beverage products require HACCP or SQF certification, allergen segregation, and shelf-life tracking within their WMS. A food-specialized service provider has inspected facilities, can manage allergen cross-contamination risks, and tracks expiration dates so you never ship expired goods. General 3PL providers cannot legally store food—only certified providers can safely fulfill orders in this category.
How Do 3PL Warehouses Work?
A 3PL warehouse—also called a fulfillment center—runs a choreographed sequence: receive, store, pick, pack, and ship. Understanding how these warehouse operations work helps you evaluate whether a third-party logistics provider can meet your supply chain management requirements. Here’s the warehouse workflow step by step:
1. Receiving & Inbound Logistics
Your inbound shipment arrives at the 3PL warehouse—whether it’s a pallet from a domestic supplier, a container from overseas, or an LTL freight delivery from another warehouse. A receiving associate scans the tracking information and cross-references it against your pre-notification (a shipment manifest uploaded to the WMS in advance). They count and inspect each unit, verify for damage, and scan barcodes to confirm quantities match your manifest. Discrepancies are flagged before anything enters the facility. Most 3PL providers commit to completing intake within 24–48 hrs of arrival.
2. Putaway & Warehouse Storage
Once verified, the system assigns each product a bin location based on putaway logic—FEFO (First Expiration, First Out) for perishables, FIFO for most other goods. Associates physically move stock to the assigned spot, which might be a shelf position, a pallet rack, or deep bulk storage depending on dimensions and order velocity. The WMS updates in real time so your stock data reflects the new placement immediately. This is where effective inventory management begins: high-velocity products get placed in easily accessible forward-pick locations to streamline order fulfillment, while slower-moving inventory goes to back storage.
3. Inventory Management & Cycle Counts
The WMS tracks every unit’s location, quantity, and status (available, quarantined, damaged) on site. A reliable 3PL provider performs cycle counts on a schedule—weekly, monthly, or quarterly—to ensure physical totals match system totals. If discrepancies surface (shrinkage, misplacement, or data-entry issues), the team investigates and adjusts. This prevents the costly scenario where your system shows 500 units available for sale but the facility actually has 480—leading to overselling, stockouts, and damaged customer satisfaction.
4. Order Receipt & Fulfillment Trigger
When a customer places an order on your online store, the order data flows to the 3PL’s WMS via API or direct integration with your ecommerce platform (Shopify, WooCommerce, BigCommerce) or sales platform. The software reserves availability to prevent overselling and assigns the order to a pick wave—a batch of orders to be fulfilled together, typically processed in multiple waves. The system generates pick lists or pushes work to mobile devices on the warehouse floor.
5. Picking & Packing
A warehouse associate navigates to the bin spots the WMS specifies, scans each barcode to confirm the right item and quantity, and moves the order to a packing station. Depending on the 3PL provider’s operation, they may use zone picking (associates own specific aisles) or batch picking (one person collects for multiple orders simultaneously) to maximize throughput.
At the packing station, the associate selects appropriate packing materials, secures the order with appropriate packing materials, and generates a shipping label. The carrier selection algorithm built into the WMS chooses the fastest or most cost-effective shipping option for each destination. At service providers with high accuracy guarantees—like Red Stag Fulfillment’s 100% accuracy guarantee, backed by a $50 credit per error—a quality check step verifies every order before it leaves the fulfillment center.
6. Shipping & Last-Mile Delivery
The 3PL provider coordinates with shipping carriers (USPS, UPS, FedEx, DHL, or LTL carriers for freight) to hand off packaged orders for last-mile transit. Carriers collect palletized packages from the fulfillment center before daily carrier pickup. The system pushes tracking information back to your sales platform and directly to your customer in real time—so customers see shipment tracking shortly after dispatch.
7. Returns & Reverse Logistics
When a customer initiates a return, they ship the merchandise back to the 3PL warehouse or a dedicated returns address. Upon arrival, the provider scans the return, inspects the condition, and follows your disposition rules: restock sellable goods, ship it back to you, or dispose of it. The WMS updates your inventory data immediately so you know whether you’ve recovered sellable merchandise or absorbed a loss. Efficient returns management through your third-party logistics provider turns what would be a chaotic in-house process into a controlled, data-driven operation.
Security & Compliance
Throughout the fulfillment process, a reliable fulfillment partner maintains physical security (camera surveillance, restricted access, restricted entry points), data security (encrypted systems, SOC 2 compliance), and insurance coverage (general liability and cargo). Your merchandise is protected from theft, damage, and data breaches. Most 3PL providers supply certificates of insurance upon request—if they hesitate, that’s a red flag.
The WMS: Warehouse Management Software
The WMS (warehouse management software) is the technology backbone of every third-party logistics operation. It tracks every product, every location, every transaction, and every movement across the fulfillment center. When integrated with your sales channels via API, it provides real-time visibility into current stock levels, bin positions, aging data (FIFO), and movement trends. This inventory data is essential for supply chain management: it shows inventory levels, which products are stagnant, which are moving quickly, and when to reorder. Without strong WMS technology, a 3PL provider is operating blind—and so are you.
3PL vs. Drop Shipping
Drop shipping and third-party logistics (3PL) are fundamentally different business models, not just variations on the same fulfillment service. With the drop-ship model, you never touch or own inventory—the manufacturer ships directly to customers. With a 3PL provider, you own the inventory, store it in your partner’s fulfillment centers, and they manage logistics on your behalf.
| Comparison | 3PL Fulfillment | Dropshipping |
|---|---|---|
| Inventory Ownership | You own inventory; 3PL provider stores and manages it | Supplier owns inventory; you never take custody |
| Upfront Investment | Wholesale inventory purchase + storage fees | Near zero—pay per order after the sale |
| Profit Margins | Higher—you control wholesale pricing and cost savings through volume | Lower—limited negotiating power with suppliers |
| Fulfillment Speed | 1–2 days typical from multiple fulfillment centers; same-day shipping available | 3–7 days; vendor-dependent delays common |
| Quality & Brand Control | Full control over packaging, inserts, and customer experience | Minimal—supplier controls quality and presentation |
| Returns Management | 3PL handles reverse logistics; full visibility and stock tracking | Supplier handles; difficult to track or influence |
| Best For | Ecommerce brands with product-market fit, recurring customers, margin-sensitive business models | Testing new products, minimal capital risk, early-stage validation |
Choose a 3PL provider if: You have consistent, repeatable demand; profit margins that justify storage and fulfillment charges; customers who value fast, reliable delivery; or goods you plan to sell for more than a year. An ecommerce brand selling 500+ units monthly almost always improves both profitability and customer satisfaction by working with a third-party logistics provider versus dropshipping.
Choose drop shipping if: You’re validating a product concept with fewer than 50 orders per month, you want to test multiple items without upfront capital risk, or your vendor has faster shipping than you could achieve with a 3PL. Dropshipping is a testing ground and a legitimate business model for early-stage ecommerce companies—but it’s not a long-term margin play for brands that want to scale operations and build customer loyalty.
The hidden cost of the drop-ship model is customer experience. When a supplier ships your branded merchandise in plain packaging with a 5-day delivery window, you lose the speed and presentation quality that drives repeat purchases. A 3PL gives you control over the entire customer experience—from custom packaging to 2-day delivery—which compounds into more customers returning and higher lifetime value over time.
How Much Does a 3PL Cost?
3PL pricing is modular. You’re not paying one flat fee to a third-party logistics provider—you’re paying for discrete logistics services. Understanding these cost components helps you compare 3PL providers accurately and avoid surprises on your first invoice.
There’s no universal price sheet for third-party logistics—costs depend on your dimensions, weight, order complexity, storage needs, and the 3PL’s fulfillment center locations. Two ecommerce brands with identical order profiles can pay very different amounts if one ships lightweight apparel and the other ships 80-pound furniture. That said, the pricing structure is consistent across the industry.
Most 3PL providers charge across five core fee categories:
Per-order fulfillment charges (also called “pick and pack”) are assessed each time the 3PL helps fulfill orders and ship. The fee depends on how many products are in the order, total weight, what packaging is required, and whether bundling or assembly is involved. A single-item, lightweight order costs far less to fulfill than a multi-item order with custom packaging and inserts.
Storage fees are charged monthly based on the warehouse space your inventory occupies—usually per pallet position, per cubic foot, or per bin. The more stock you store and the longer it sits, the higher your monthly bill. Climate-controlled or temperature-regulated space costs more than ambient. This fee structure incentivizes fast stock rotation and discourages holding surplus goods that aren’t generating revenue.
Receiving charges are assessed when new merchandise arrives at the 3PL warehouse. The 3PL provider needs to count, inspect, barcode, and shelve your products—and that labor has a cost. Costs are typically based on the number of units, cases, or pallets received. Consolidating your incoming deliveries (fewer, larger batches) reduces this cost and streamlines the entire process.
Special handling fees apply to anything outside a standard pick-pack-ship workflow. This includes oversized or heavy merchandise requiring freight handling, fragile goods needing extra protection, regulated materials with compliance requirements, temperature-controlled logistics, or kitting and assembly work. If your products need specialized services, expect this to be a meaningful portion of your total cost—ask specifically what qualifies as special handling during your 3PL evaluation.
Monthly minimums are common across most third-party logistics providers. If your per-order and storage charges don’t reach a baseline amount, the minimum applies instead. This covers the 3PL’s fixed overhead for maintaining each client company’s account, dedicated space, and system integrations. Minimums vary widely and are worth negotiating, especially if you’re a growing ecommerce brand with increasing volume.
| Fee Category | What It Covers | What Increases the Cost |
|---|---|---|
| Per-order fulfillment | Pick, pack, ship for each order | Heavier products, multi-item orders, custom packaging, kitting |
| Storage | Monthly space for your merchandise | More products, slower inventory turnover, climate control, peak season |
| Receiving | Intake and shelving of new inventory at the warehouse | Frequent small shipments, individual unit scanning, case breakdowns |
| Special handling | Non-standard fulfillment requirements and specialized services | Hazmat compliance, fragile packaging, oversized dimensions, assembly |
| Monthly minimum | Baseline account fee | Varies by 3PL provider—tied to committed space and service level agreements |
What Drives 3PL Cost Up
Several factors push your total 3PL cost higher. Heavy or oversized products require more labor and freight-class shipping. Temperature-controlled or hazmat-certified storage adds regulatory compliance overhead. High product counts increase complexity across the warehouse. Slow stock rotation means you’re paying monthly fees on merchandise that isn’t generating revenue. And geographic mismatches—storing inventory far from your customer base—inflate transportation services costs on every shipment.
What Drives 3PL Cost Down
Higher throughput earns better per-order fulfillment rates from most 3PL providers. Consolidating inbound shipments lowers intake charges. Keeping inventory lean (fast turnover, fewer dead products) minimizes warehousing costs. Choosing a third-party logistics provider with fulfillment centers located closer to your customers cuts carrier costs through shorter shipping zones. And standardized packaging—rather than custom inserts on every order—simplifies operations and reduces cost per shipment.
How to Compare 3PL Pricing
Don’t compare headline rates between third-party logistics providers. Compare your total cost per order shipped, which combines fulfillment, storage (allocated per order), and shipping into a single number. Ask each prospective 3PL provider to quote your specific mix, order profile, and volume. A service provider that looks inexpensive on per-order fees but charges heavily for storage and receiving could cost more overall than one with higher per-order rates but lower total cost.
Questions to ask about 3PL pricing:
- Can you provide a fully itemized quote based on my actual dimensions, weights, and order volume?
- Does the quote include API connectivity and ecommerce platform integrations, or are those additional?
- Are there onboarding costs, setup surcharges, or charges for warehouse changes?
- What exactly counts as “special handling” for my product category?
- How are shipping rates structured as my volume increases—are there volume tiers or automatic discounts?
- What are your performance guarantees for fulfillment precision, ship time, and receiving turnaround?
- What’s included in the monthly minimum, and how does it adjust as my business grows significantly and I ship more orders?
Benefits of Using a 3PL
Lower shipping costs through carrier leverage. 3PL providers negotiate discounted shipping rates with UPS, FedEx, DHL, and regional carriers that individual ecommerce businesses never access. Because a 3PL provider ships thousands of packages per shift across all client companies, carriers offer rates far below retail. The cost savings are especially dramatic for heavy or bulky products, where carrier pricing punishes small shippers. Many online sellers reduce shipping costs by 15–30% simply by moving to a 3PL with strong carrier relationships.
Warehouse costs become variable, not fixed. Leasing your own warehouse locks in rent for 3–5 years. 3PL storage is month-to-month: when demand drops, you shed warehousing costs; when it spikes, a good 3PL provider scales operations within weeks, not years. This converts the fixed cost of in-house logistics into variable costs that flex with your business—dramatically improving cash flow for growing online businesses.
2-day delivery from multiple fulfillment centers. Red Stag Fulfillment’s facilities deliver to 96% of US homes within 48 hours. A solo seller shipping from one location averages 4–6 business shipping windows unless they build regional warehouses—a massive capital investment most growing ecommerce businesses can’t justify. Having warehouses located strategically across the country reduces delivery time and increases customer satisfaction without expedited shipping surcharges.
Your team focuses on core competencies, not logistics. A founder managing supply chain tasks—reverse logistics, incoming deliveries, warehouse hires, and shipping carrier disputes doesn’t scale the business. Outsourcing fulfillment to a 3PL provider offloads these logistics operations entirely, freeing your team to concentrate on your own core competencies: growth initiatives, marketing, customer acquisition, and strategic growth. This is the operational efficiency gain that separates businesses that scale from those that plateau.
Industry expertise in complex fulfillment. Heavy, bulky, or hazardous products require specialized packaging, carrier relationships, regulatory compliance knowledge, and logistics solutions that take years to develop internally. Red Stag guarantees 100% order accuracy and reimburses you $50 for every error—that level of confidence reflects deep industry expertise, not luck. Building equivalent fulfillment capability within your own operation requires dedicated logistics hires and years of trial and error.
Scale operations without capital expenditure. Adding 10,000 orders per month doesn’t require buying shelving, leasing additional space, or hiring new staff when you work with a third-party logistics provider. Your 3PL partner absorbs the growth. That capital stays available for marketing, R&D, expanding into new markets, or reaching more customers—and as your volume increases, per-order fulfillment costs typically decrease, making a 3PL one of the few investments that helps you reduce costs and grow revenue at the same time.
Improved satisfaction and loyalty. Faster delivery, higher precision, professional packaging, and efficient returns management all compound into measurably better customer satisfaction scores. For online retailers, customer satisfaction is the ultimate competitive advantage—and a strong 3PL partner directly improves every step between the purchase and the doorstep across your entire supply chain.
How to Find the Best 3PL for Your Business
Not all third-party logistics providers serve every product type or specific industry equally. A furniture e-commerce company needs different logistics solutions than a beauty brand. Some providers specialize in lightweight DTC goods; others focus on heavy, high-value products; and others handle regulated materials requiring specialized knowledge and regulatory compliance certifications. Evaluate prospective 3PL providers on these six dimensions:
1. Industry Expertise & Specialization
Does the third-party logistics company have proven experience in your specific industry? A 3PL provider experienced in furniture fulfillment understands white-glove handling, damage prevention, and heavy freight logistics. A beauty-focused provider knows temperature control, breakage patterns, and regulatory compliance for cosmetics. Ask for three references in your exact product category and call them. Generic third-party logistics providers optimize for volume, not the specific pain points of your supply chain. If your products require specialized services—cold chain, hazmat, oversized freight—only providers that specialize in those areas will deliver consistent results.
2. Fulfillment Center Locations
Map your customer base geography. If 70% of your orders go to the West Coast and your 3PL provider has only an East Coast fulfillment center, you’re paying premium shipping on every order and with 4–5 transit windows instead of 2. The best third-party logistics providers operate multiple fulfillment centers located in strategic regions. Red Stag’s distributed network reaches 96% of US addresses within 48 hours—that’s geographic advantage built into the supply chain. Ask each prospective 3PL for a transit-time map showing coverage from their warehouse locations relative to your customer distribution.
3. Technology, System Integration & WMS
Can the 3PL provider connect directly to Shopify, WooCommerce, BigCommerce, your ERP, or your order management system? Manual data entry creates fulfillment errors and delays. Ask about API connectivity, real-time inventory visibility through their WMS, and the reporting dashboards available for monitoring key performance indicators. Poor system integration between your sales channels and the 3PL’s fulfillment operations feels like a minor issue during onboarding—until it costs you a missed reorder, an stock discrepancy, or a wrong shipment that damages customer satisfaction.
4. Customer Support & Account Management
Will you reach a dedicated account representative or a chatbot queue when levels drop or a shipment goes wrong? Email support that responds in 24 hours is unacceptable for time-sensitive fulfillment issues. The best service providers offer phone support during business hrs and on-call escalation for urgent supply chain problems. Test their support responsiveness during the sales conversation—how quickly they respond before you’re a client is the ceiling of how quickly they’ll respond after.
5. Pricing Transparency & Service Level Agreements
If the 3PL’s quote is vague—”competitive rates” or “call for details”—keep looking. Trustworthy 3PL providers quote itemized fees upfront, explain what’s included and what isn’t, and define clear service level agreements for order accuracy, ship time, and receiving turnaround. If you can’t calculate your total cost per order, you can’t compare service providers accurately. Ask for performance guarantees in writing—they protect both parties and set clear expectations for the logistics partnership.
6. Fulfillment Guarantees & Accountability
Does the 3PL provider guarantee order accuracy? Red Stag Fulfillment’s 100% accuracy guarantee—backed by a $50 credit per error—signals operational confidence. A service provider unwilling to guarantee basic fulfillment quality is telling you something about their operations. Financial guarantees align incentives: the 3PL profits only when your supply chain runs smoothly, which means they invest in the processes needed to deliver consistent results for your business.
Questions to Ask Prospective 3PL Providers
- What’s your precision rate, and how do you measure it? What are your key performance indicators for fulfillment quality?
- What’s your average pick-to-ship time, and do you offer same-day shipping from your fulfillment centers?
- Can you guarantee two day shipping to my target markets, or is that aspirational? Show me the transit-time data.
- Which ecommerce platforms do you integrate with natively through your order management system (no middleware)?
- How do you manage inventory and stock across warehouses? Can I see real-time availability across all locations?
- What happens financially when your team makes a fulfillment error—who absorbs the cost?
- Can you provide references from three ecommerce businesses similar in size, category, and order volume to mine?
3PL FAQs
What is a 3PL?
A 3PL (third-party logistics provider) is a company that stores your inventory in their fulfillment centers and stores your inventory and helps fulfill orders on your behalf. You own the goods; the 3PL provider helps you manage inventory through their warehouse, technology systems, and fulfillment process. Third-party logistics is a service model—the provider manages logistics operations for your supply chain, not a partnership where they own your products or take margin on sales.
What does 3PL stand for?
3PL stands for third-party logistics. “First party” is the shipper (you, the ecommerce business). “Second party” is the buyer (your customer). “Third party” is the company managing warehousing, inventory management, order fulfillment, and transportation services in between—handling the supply chain operations so you can focus on your core business instead of trying to manage inventory.
How much does a 3PL cost?
Third-party logistics pricing is modular—you pay separately for order fulfillment (per order), warehouse storage (monthly), receiving (per intake), and any specialized services. Your total cost depends on dimensions and weight, order complexity, storage volume, and the 3PL provider’s fulfillment center locations relative to your customer base. The best way to compare third-party logistics providers is to request a fully itemized quote based on your actual product mix and order profile, then calculate your total cost per order shipped.
What’s the difference between a 3PL and a fulfillment center?
A fulfillment center is a physical facility where inventory is stored and orders are processed. A 3PL (third-party logistics provider) is the company that operates the warehouse and manages the logistics operations inside it. All 3PL providers operate warehouses, but not all warehouses are run by third-party logistics companies—some are owned and operated by the brand directly. “3PL” implies outsourced logistics; “warehouse” describes the physical location.
Is FBA (Fulfillment by Amazon) a 3PL?
FBA functions as a third-party logistics service. You send inventory to Amazon’s fulfillment centers; they fulfill orders through picking, packing, and shipping. The key difference from traditional 3PL providers: Amazon FBA is primarily designed for the Amazon.com sales channel, and Amazon’s combined fees (referral + FBA + storage) take a significant percentage of each sale. A traditional third-party logistics provider fulfills orders from your own online store, marketplaces, and anywhere else—and you’re billed only for the logistics services themselves, not a revenue share.
What’s the difference between a 3PL and dropshipping?
With a 3PL provider, you own and stock inventory at the provider’s warehouse; the third-party logistics company stores and ships it on your behalf. With dropshipping, the supplier owns inventory and ships directly to customers—you never take custody. Third-party logistics offers faster shipping, better profit margins, and full quality oversight over the buyer experience. Dropshipping requires no upfront inventory capital but delivers slower fulfillment and lower margins. 3PL fits established ecommerce brands; drop-ship fits early-stage product validation.
What is a 4PL, and how is it different from a 3PL?
A fourth-party logistics provider (4PL) operates one level above a third-party logistics company. Where a 3PL provider executes specific logistics operations—warehousing, fulfillment, shipping—a 4PL acts as a single point of contact that designs, manages, and optimizes your entire supply chain strategy. Fourth-party logistics providers may source and coordinate multiple 3PL providers on your behalf, manage transportation management across carriers and regions, and provide supply chain management consulting. Lead logistics providers (also called 4PLs) are most common among large enterprises with complex, multi-region supply chains spanning international shipping, customs regulations, freight forwarders, and multiple distribution services. If your logistics operations are concentrated in one or two regions, a strong 3PL partner is usually sufficient. If you’re managing a global supply chain across dozens of fulfillment centers and carriers, a lead logistics provider brings order to that complexity. Lead logistics providers coordinate every moving piece across your supply chain.
When should I outsource fulfillment to a 3PL?
Most ecommerce businesses benefit from working with a third-party logistics provider once they reach 500+ orders per month—the point where a business grows beyond what in-house logistics starts consuming more time and money than outsourcing. Signs you’re ready include: spending 20+ hours weekly on fulfillment, precision declining as volume grows, inability to offer 2-day delivery from your current setup, or needing to scale operations for seasonal demand without long-term warehouse commitments. If logistics operations are preventing you from focusing on business growth, it’s time to evaluate 3PL providers.
Work with Red Stag Fulfillment
Red Stag Fulfillment specializes in heavy, bulky, and complex products—furniture, fitness equipment, appliances, automotive parts, outdoor gear—where standard third-party logistics providers fall short. We guarantee 100% order accuracy, reimbursing you $50 for every fulfillment error. Our distributed fulfillment center network reaches 96% of US homes in 2 days, and we offer same-day shipping for time-sensitive orders.
If you’re an ecommerce brand shipping products that weigh more than 10 pounds, require specialized handling, or demand fast delivery in competitive categories, Red Stag eliminates the friction that generic third-party logistics companies create. Request a custom quote from our team to see how our 3PL services can reduce your costs, improve your shipping costs, streamline order fulfillment, and improve the customer experience for your business.
