How To Choose a 3PL: The Ultimate Guide for 2025

Choosing a third-party logistics (3PL) provider is one of the most critical decisions you’ll make for your ecommerce business. 

Get it right, and you’ll have a strategic partner that fuels your growth. Get it wrong, and you could face lost inventory, angry customers, and mounting costs that eat into your profits.

To help you make the right choice, we consulted five industry veterans:

Together, they’ve helped hundreds of businesses navigate the complexities of choosing and switching 3PLs.

Their insights revealed that many businesses focus on the wrong criteria when selecting a 3PL—often with costly consequences. More importantly, they provided a practical framework for evaluating potential partners, along with hard-won lessons about pitfalls that aren’t obvious until you’ve been through the process multiple times.

Drawing from their hard-won industry expertise, we’ve created this comprehensive guide to help you evaluate potential 3PL partners. You’ll learn…

How most businesses approach 3PL selection (and why it often fails)

Many businesses start their 3PL search by comparing pricing and warehouse locations. While these factors matter, leading with them often results in choosing the wrong partner—and a costly switch within the first year.

The traditional approach (and its hidden dangers)

Our experts identified several common pitfalls in the traditional approach:

• Choosing based primarily on quoted rates, without understanding total fulfillment costs
• Prioritizing warehouse network size over operational quality
• Rushing through technology evaluation due to pressure to switch quickly
• Failing to verify performance metrics beyond sales presentations
• Not thoroughly investigating the 3PL’s stability and scaling capacity

Jon Blair—former COO and CFO at Guardian Bikes—experienced some of these issues firsthand. Guardian Bikes initially chose their 3PL based on attractive shipping discounts, but Blair discovered the true cost of this approach:

The costs went far beyond just hard costs like replacement products and expedited shipping. The soft costs were possibly even more damaging: frustrated customers abandoning their brand, increased customer service workload, and team time wasted troubleshooting shipping problems instead of focusing on growth.

A better framework for evaluating 3PLs

Our industry experts recommend a more methodical approach that evaluates potential partners across six critical dimensions:

1. Fundamental requirements:
   Start by confirming that 3PL can handle your specific product types and service needs. Without this foundation, nothing else matters.
2. True cost analysis:
   Look beyond rate cards to understand the total cost of fulfillment, including hidden expenses and operational impacts.
3. Performance verification:
   Demand concrete evidence of capabilities through metrics, guarantees, and customer references.
4. Technology integration:
   Thoroughly test system compatibility and verify the 3PL’s technical capabilities match your needs.
5. Stability assessment:
   Evaluate the 3PL’s financial health and ability to scale alongside your business.
6. Operational quality:
   When possible, verify warehouse conditions and processes through site visits.

Let’s dive into the specifics.

Before diving into complex pricing comparisons or supply chain technology assessments, you need to confirm potential 3PL partners can meet your fundamental business requirements. 

Create your checklist of required capabilities

Take a step back and consider what your business absolutely cannot operate without. This isn’t about wishlists or nice-to-haves—it’s about identifying the core capabilities a 3PL must have to effectively serve your business and customers.

A common mistake is jumping at attractive pricing or impressive technology without first confirming a 3PL can handle your basic needs. This often leads to painful and costly transitions down the road.

Find true specialists for your products (not generic providers)

Not all 3PLs are created equal. While many claim to handle everything, the reality is that most excel in specific areas and struggle in others. Your products—their characteristics, handling requirements, and specifications—should drive your 3PL selection process.

Blair learned this lesson firsthand. When searching for a new 3PL, they discovered many providers offered great rates for small items but couldn’t effectively handle large, heavy products like bikes. 

Consider your product’s specific needs:

A third-party logistics provider might offer attractive locations and impressive accuracy metrics, but if they can’t properly handle your products, nothing else matters. 

The difference between quoted rates and actual costs can make or break your ecommerce business. While it’s tempting to simply compare base rates between providers, understanding the full cost structure of a 3PL partnership requires a deeper analysis.

Don’t immediately pick the cheapest option

This insight touches on a crucial truth: The lowest quote often doesn’t translate to the lowest total cost of fulfillment (TCoF).

A true TCoF analysis will often reveal that the “expensive” 3PL is actually cheaper in the long run. Compare quotes based on TCoF rather than just the rate card to avoid costly mistakes.

As Blair emphasizes:

For a detailed breakdown of how to calculate your total cost of fulfillment, read our complete guide to 3PL pricing.

Understand the full price structure

When evaluating 3PL pricing, you need to consider the entire fulfillment journey. 

Jon Blair recommends building a comprehensive cost model based on historical sales data that includes:

Beware of hidden costs

The most dangerous costs are often the ones that don’t appear on the rate card. Blair warns about several common surprises:

Key areas to investigate include:

Build a complete cost model

To accurately compare 3PL providers, create a model that includes:

Then, for each third-party logistics company:

Consider how your growth trajectory might affect future pricing

Remember that your needs will evolve as your business grows. Consider how pricing structures might change with:

A 3PL that seems cost-effective for your current needs might become expensive as you scale. Conversely, a seemingly expensive provider might offer better value as you grow.

Your 3PL provider will become an extension of your business, handling one of your most critical supply chain operations: getting products into your customers’ hands. The quality of communication between you and your third-party logistics partner can mean the difference between a thriving partnership and a constant source of frustration.

Why communication makes or breaks 3PL partnerships

Blair’s experience at Guardian Bikes illustrates what poor communication looks like: 

This kind of dismissive communication doesn’t just create frustration—it directly impacts your customers. When shipping issues arise, you need clear answers and swift resolution, not excuses and delays.

Understand exactly how communication will work

You need to know who you’ll be talking to and how quickly you can expect responses in different situations. This goes beyond just having an account manager’s email address.

Your communication framework should establish:

As Runyan explains, a 3PL’s mistakes mean bad news for your company’s reputation.

This reality means you need a 3PL that treats communication as a priority, not an afterthought.

Watch for red flags in communication

Watch carefully for these warning signs during your initial interactions with potential third-party logistics providers:

• Slow response times during the sales process often indicate even slower responses once you’re a client. If they’re not responsive when trying to win your business, they’re unlikely to improve after securing it.
• Vague answers about their communication processes might suggest a lack of established protocols. Push for specific details about how issues are handled and escalated.
• Resistance to discussing past failures or challenges could indicate a lack of transparency. The best partners are open about their mistakes and, more importantly, how they’ve learned from them.
• Outsourced or disconnected customer service teams can create communication bottlenecks. Your customer service contact should have direct access to warehouse operations. Ask specifically who makes up the customer service team and how they communicate with the operations team.

Before choosing a 3PL partner, you need a framework for evaluating their operational capabilities. As Donovan Sullivan, an Operations Manager at NFI, explains:

Request historical performance data

Ask each potential third-party logistics provider for their key metrics over the last 30/60/90 days:

Jon Blair’s experience at Guardian Bikes shows why these numbers matter: 

Poor performance directly impacts your customer experience.

Verify their guarantees

The best 3PLs back their performance promises with specific service level agreements (SLAs) and financial penalties if they don’t perform. Ask each provider:

Evaluate their quality systems

Beyond just numbers, understand how each logistics provider maintains performance:

The most sophisticated warehouse in the world won’t help if they can’t consistently meet basic performance standards. Focus on providers who can demonstrate reliable execution backed by real guarantees.

Evaluate automation capabilities

As supply chains become more digital, 3PLs increasingly rely on technology to maintain performance standards. Sullivan points to several innovations that can improve operations:

However, it’s crucial to understand that more automation doesn’t automatically equal better performance. This is especially true for large, heavy products. As Runyan points out:

The right level of automation depends entirely on your products and business needs. Sometimes, well-trained human workers with proper equipment are more efficient and cost-effective than complex automation systems. 

When researching 3PLs, you’ll encounter aggressive marketing about huge warehouse networks. But more locations aren’t always better—especially if you have a smaller operation. 

If your business is small, start with a single strategic location

As Rich Patterson, former enterprise sales director at ShipBob, explains: “If you’re not producing close to 5 million in GMV, or only ship 50-100 orders per day, you don’t need multiple locations.”

Chad Carleton, Founder and CEO of Good Company (a 3PL), confirms this:

Your location strategy should match your business size and needs. Per Patterson, “You’re chasing a ghost” if you pursue a complex multi-location strategy before you have the volume to support it.

Your initial location should balance several critical factors:

• Transportation networks.
  Choose a location with strong carrier service and major highway access
• Customer proximity.
  Position yourself close to your main customer concentrations
• Port access.
  If you import products, factor in distance from major ports
• Operating costs.
  Consider real estate expenses and local wage rates

Calculate multi-location costs

If your volume justifies multiple locations, understand the true costs before expanding. Patterson notes that brands often “need to carry 30% more inventory” when splitting across multiple locations. 

This increased inventory requirement comes from:

Beyond inventory, you’ll face additional operational costs:

Only expand your warehouse network if it’s truly warranted

Blair’s experience at Guardian Bikes demonstrates the right approach to growth: 

Even at scale, more warehouses aren’t always better. At Red Stag, we intentionally maintain just two warehouse locations. 

Only consider additional locations if:

Every 3PL will boast about their cutting-edge technology. But sophisticated features mean nothing if they don’t solve your specific challenges or integrate smoothly with your operations. 

And while technology is important, remember that successful fulfillment ultimately depends more on reliable people and proven processes than fancy software features.

Here’s how to evaluate what really matters.

Verify system compatibility first

Before examining advanced features, focus on basic integration between your systems and theirs. Your enterprise resource planning (ERP) system needs to communicate seamlessly with their warehouse management system (WMS). 

Sullivan warns that if this connection “requires a lot of manual steps or workarounds, it may not be a good choice for your business.”

Ask each potential 3PL to walk you through exactly how your systems will connect. Pay special attention to any manual processes or workarounds they mention—these often indicate integration gaps that could cause problems as you scale.

Calculate the true integration cost

The quoted cost for connecting systems rarely tells the whole story. Integration may require significant time from your team, even if the 3PL handles the technical work. You’ll need staff dedicated to testing, verification, and ongoing maintenance. Your 3PL may also charge ongoing technology fees. 

Systems also evolve over time. Updates to either your platform or your 3PL’s system can break integrations, requiring additional development work to fix. Make sure you understand how these ongoing maintenance costs will be handled.

Demand real-time visibility

Modern fulfillment requires instant access to accurate data. When evaluating potential 3PLs, ask them to demonstrate how you’ll answer crucial daily questions like: 

If getting answers requires downloading spreadsheets, manipulating data, or waiting for someone to get back to you, you’ll struggle to manage your business effectively. Insist on seeing the actual reporting interfaces and dashboards you’ll use day-to-day.

Ask if they allow technology tests before commitment

Don’t skip technology testing in your rush to get started with a new 3PL. Run a complete simulation of your business operations through their system. 

Process test orders, handle mock returns, verify inventory updates, and check that all reporting functions work as promised. Finding problems during testing is far better than discovering them after you’ve moved your inventory.

Consider future growth needs

Your technology requirements will likely expand as your business grows. A system that works perfectly today might become a constraint when you add sales channels, expand internationally, or introduce new product lines. Have detailed discussions with potential 3PLs about their technology roadmap and development priorities.

Ask specifically about their plans for:

The right choice is often a 3PL with basic but rock-solid systems that work reliably with your platform rather than one with advanced features you can’t effectively use. If a provider’s technical explanation sounds overly complicated or unclear, take that as a warning sign about the actual integration experience you can expect.

Partnering with an unstable 3PL puts your entire business at risk—they could go bankrupt, suffer catastrophic operational failures, or simply collapse under their own mismanagement. 

Beyond these existential risks, you also need a partner capable of scaling alongside your growth. Choosing the wrong provider on either front can force a costly and disruptive switch of 3PLs, potentially crippling your business at a critical moment.

Verify fundamental business stability

A 3PL’s attractive pricing means nothing if they can’t stay in business or maintain consistent operations. 

Remember that your customers don’t distinguish between you and your 3PL—every service failure reflects directly on your brand. Look for evidence of:

Choose the right-sized provider

Sullivan frames this critical choice clearly:

Plan for future scale

Your 3PL needs to handle not just your current business, but your future growth. This means understanding how they’ll support:

Many businesses learn too late that their 3PL can’t scale when needed. Take time upfront to verify their growth capacity through:

Evaluate their peak season capabilities

Many 3PLs can do a decent job when demand is lower. But what separates the great 3PLs from the rest is how well they perform during the holiday rush. These peak periods can quickly expose weaknesses in a 3PL’s operations that aren’t visible during normal times.

Peak season readiness requires more than just extra warehouse space. A truly prepared 3PL should demonstrate:

Ask potential 3PLs about their performance metrics from previous peak seasons. The concrete data about their holiday shipping times and error rates will tell you far more than promises about peak season readiness.

Focus on evidence over promises

Every 3PL will claim to be stable and growth-ready. Finding concrete evidence means:

Switching 3PLs is expensive and disruptive under normal circumstances. Having to make an emergency switch due to provider instability or failure can be catastrophic for your business. Take the time to thoroughly evaluate both stability and growth capacity before committing to a partner.

When possible, visit potential 3PLs in person. Virtual tours can be helpful, but nothing replaces seeing the operation firsthand. During your visit, don’t just follow the standard tour route—look for opportunities to see the facility’s true condition.

Every 3PL will put their best foot forward during your tour but look beyond the staged presentations to assess their true operational standards. The overall cleanliness and organization of a facility—especially in areas they don’t expect you to see—reveals a lot about their attention to detail and operational discipline.

Watch for these telling signs:

• Employee bathrooms and break areas.
  Their condition reflects how the company treats its workforce and maintains standards
• General organization beyond the tour route.
  Check storage areas and loading docks for orderliness—peek around corners when possible
• Equipment maintenance.
  Clean, well-maintained equipment suggests systematic care for all aspects of operations
• Basic housekeeping.
  Dust, debris, and clutter indicate lack of regular maintenance procedures

A disorganized or poorly maintained facility often indicates deeper operational issues. While a clean warehouse doesn’t guarantee excellent service, a dirty or disorganized one almost always predicts problems.

The importance of a methodical approach to 3PL selection

Choosing the right 3PL partner is one of the most consequential decisions you’ll make for your ecommerce business. While this guide provides a comprehensive framework for evaluation, many businesses benefit from expert guidance through the process.

At Red Stag Fulfillment, we take a consultative approach to partnership discussions. Our goal is simple: help you find the right 3PL for your business—even if that’s not us. Rather than rushing to provide generic quotes, our team invests time upfront to thoroughly understand your:

This detailed discovery process helps us determine if we can be the right long-term partner for your business. And if we’re not the best fit, we’ll tell you directly and help point you toward providers better suited to your needs. We’ll help you work through each evaluation step outlined in this guide, sharing concrete data about capabilities and performance guarantees.

Remember: Switching 3PLs is expensive and disruptive. Whether you choose Red Stag or another provider, taking the time upfront to thoroughly evaluate potential partners will help you avoid a costly transition down the road.

Ready to start a thoughtful conversation about your fulfillment needs? Reach out today.