3PL stands for third-party logistics. A 3PL is a company that stores your inventory and handles your orders, shipping and returns for you, so you do not have to run your own warehouse. This guide explains what 3PL logistics services include, how working with a 3PL works step by step, what it costs and how to tell if your business is ready for one.
What does 3PL mean?
In logistics, the “parties” are the business selling the goods (first party), the customer buying them (second party) and an outside logistics company that moves and stores the goods between them (third party). When you hire a 3PL, you outsource some or all of your warehousing and fulfillment to that outside company, while you keep ownership of your products and your customer relationships.
What services does a 3PL provide?
| Service | What it means |
|---|---|
| Warehousing and storage | Your products are stored on pallets, shelves or bins in the 3PL warehouse |
| Receiving | Supplier and container shipments are unloaded, counted and checked for damage |
| Inventory management | Stock levels are tracked in real time so you know what you have and when to reorder |
| Order fulfillment | Online orders are picked, packed and shipped, often the same or next business day |
| Kitting and packaging | Bundles, gift sets and custom packaging are assembled for you |
| Marketplace prep | Inventory is labelled and prepared for Amazon FBA or Walmart WFS |
| B2B distribution | Pallet and case orders are shipped to retailers and wholesale customers |
| Shipping and freight | Parcels, pallets and containers are moved with carrier rates the 3PL negotiates |
| Returns | Returned items are inspected, restocked or set aside |
How 3PL logistics works, step by step
- Integration: your online store or marketplace is connected to the 3PL, so orders flow in automatically. See our integrations.
- Receiving: your supplier ships inventory to the 3PL warehouse, where it is counted and put away.
- Storage: products are stored and tracked by SKU.
- Order processing: when a customer orders, the 3PL picks the items, packs them and prints the shipping label.
- Shipping: the order is handed to a carrier and tracking goes back to your customer.
- Returns and reporting: returns are processed and you see stock levels and order status in your dashboard or reports.
Benefits of using a 3PL
- No warehouse lease or staff: you pay for the space and work you use instead of running your own building.
- Lower shipping costs: 3PLs ship large volumes and pass on better carrier rates.
- Faster delivery: a warehouse close to your customers shortens delivery times.
- Room to grow: busy seasons are handled without hiring and training extra staff.
- More time to sell: you spend your time on products and marketing, not packing boxes.
3PL vs other logistics models
| Model | Who does the work |
|---|---|
| In-house | You run your own warehouse and staff. Read 3PL vs in-house fulfillment |
| Dropshipping | Your supplier ships directly to customers. Read dropshipping vs 3PL |
| 3PL | An outside company stores your stock and runs fulfillment for you |
| Marketplace fulfillment | Amazon FBA or Walmart WFS fulfill orders for that marketplace only |
How much does a 3PL cost?
Most 3PLs charge for receiving, storage, pick and pack, packaging materials and shipping, plus extras like kitting or returns. The total depends on your products, order volume and how long stock stays in storage. Our guide how much a 3PL costs in Canada breaks down typical fees, or see our pricing.
When is the right time to use a 3PL?
- You are packing orders at home or in the office and it is taking over your day.
- You ship more than a few dozen orders a week, or expect to soon.
- You are running out of space for inventory.
- You sell on several channels and need one stock to serve all of them.
- You want faster delivery or lower shipping costs.
If several of these sound familiar, it is worth getting a quote. Our checklist on how to choose a 3PL lists the questions to ask before you sign.
3PL logistics services in Canada
Newsom 3PL provides warehousing, e-commerce fulfillment, Amazon and Walmart prep, kitting, B2B distribution and cross-border shipping from our warehouse in Mississauga, near Toronto Pearson. We serve businesses across Toronto, Mississauga, Brampton and the rest of the GTA, and ship orders across Canada and to the US. Request a quote.
Frequently asked questions
What does 3PL stand for?
3PL stands for third-party logistics: an outside company that handles storage, fulfillment and shipping for another business.
What is the difference between a 3PL and a warehouse?
A warehouse only stores goods. A 3PL stores them and also runs services around them, such as order fulfillment, shipping, kitting and returns.
Do small businesses use 3PLs?
Yes. Many 3PLs work with growing online brands, not only large companies. The key is finding a provider whose minimums and pricing fit your volume.
Can a 3PL handle Amazon and Shopify orders together?
Yes. A 3PL can fulfill your Shopify orders and prepare inventory for Amazon FBA from the same stock.