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What is a 3PL? Definition, Examples, Advantages, and Disadvantages

If you are in the business of shipping goods, then you have probably heard of 3PLs. But what are they?

In this blog post, we will discuss what a 3PL is, the advantages and disadvantages of third-party logistics, and give some examples of 3PL companies you may consider for order fulfillment services!

3PL Definition

A 3PL is a third-party logistics provider. They provide services such as warehousing, transportation, and distribution. This can be a great option for businesses that don't have the resources to do this themselves. One of the most common 3PL options is a fulfillment center.

Benefits of 3PL Companies for Fulfillment

There are many benefits of using a third-party logistics provider. Here are some of the most common reasons why companies use a 3PL:

  • Reduced costs - 3PLs handle incredible volume, so they are able to negotiate and pass on significant shipping and packaging discounts to you. They also invest in state-of-the-art fulfillment technology to optimize the fulfillment process to reduce costs for you.

  • More time - Good companies double down on what they do well and outsource everything else. Your strengths are marketing and growing your eCommerce business. A 3PL takes the burden of fulfillment off your plate so you can get back to what you do best.

  • Faster shipping (AKA happier customers) - With streamlined processes, your 2-3 day processing times just transformed into same-day shipping. With multiple locations at scale, your actual delivery time decreases even further.

  • Ease of Scaling - Whether your business is seasonal, or just experiences the peaks and valleys most companies do, a fulfillment partner can handle the volatility in volume without wasted capital.

  • Access to international markets - Unless you are doing significant volume, high shipping costs and complicated customs documentation may be prohibitive to shipping internationally. Using a 3PL, you can access dirt-cheap international rates with no customs work required on your side.

  • No capital investment - If you open your own warehouse, you will normally have to commit to at least a 3-year lease, and invest in racking, software, and equipment. This can get really expensive and risky, especially if you are a newer brand.

  • No warehouse management - There is A LOT that goes into designing and managing a warehouse. If this is not your area of expertise, you will waste extensive time and money trying to learn this on your own. Plus. managing employees is exceptionally hard in the warehouse industry due to high turnover and volatility in volume.

Disadvantages of Outsourcing Fulfillment to a 3PL

While there are many advantages to using a 3PL, there are definitely some cons of 3PLs to consider:

  • Lack of control - You will have to learn to trust your product and final customer experience with your brand to another company. That is why it is imperative to focus on finding the best partner, and not just the best price, so you can be confident they will get your orders to your customers accurately and on time.

  • Can be expensive - Especially if you are a startup, 3PL fees can be prohibitive. Rates normally get lower as you scale, but if you have complex fulfillment needs it can still get expensive. Of course, you will always pay more when outsourcing something, so consider the opportunity cost of doing it yourself and it's normally a max of 10% more expensive.

  • Less transparency - 3PLs have varying degrees of transparency. This includes insight into inventory, fulfillment times, and billing. Your partner should give you full access to that information - if they don't or can't - that is a big red flag.

How to Choose a Third-Party Logistics Company

There are many different types of third-party logistics providers, so it's important to choose one that is a good fit for your business. Some things you may want to consider include their shipping capabilities, warehousing options, and customer service. You'll also want to make sure they are a reputable company with a good track record.

For a step-by-step guide on how to choose a 3PL, click here.

Top 3PL Companies

Here are some of the top 3PLs in the US: 1. OTW Shipping

2. Red Stag Fulfillment

3. UPS Supply Chain Solutions 4. FedEx Supply Chains 5. Shipwire 6. ShipBob 7. ShipMonk

These are all companies that have a global reach and can provide comprehensive shipping and logistics services. They specialize in fulfillment and can provide you with the resources you need to get your goods to your customers.

Why Choose OTW Shipping?

OTW Shipping offers fulfillment services for brands who need a 3PL they can trust to do the job right and be transparent with billing and communication.

  • Our services are designed to mimic in-house fulfillment. Whether you are a startup or a global brand, you will have direct access to our warehouse team who handle your product every day.

  • Our advanced software lets you see every item on your bill and integrates with all your selling platforms for a seamless fulfillment experience.

  • Our best-in-class SLAs back up our promise to ship your product out on time and accurately.

Looking for a 3PL Provider?

If you are looking for a third-party logistics provider, there are many options to choose from. Be sure to do your research and select a company that is a good fit for your business needs. When you have some quotes, you can plug them into our free 3PL price comparison template.

And if you have any questions, feel free to contact us! We would be happy to analyze your needs and see if we are a good match. If not, we have a great network of 3PLs that we can connect you with to ensure you find the right partner for your brand.


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