Seventy-one percent of businesses that work with third-party logistics (3PL) providers say that the partnership has improved their customer service. Another 66% report reduced logistics costs, while 68% say 3PL logistics services introduced a new and innovative way to boost operational efficiency. But what is 3PL logistics?
3PL refers to outsourcing your organization’s supply chain operations to an external logistics provider. In the modern supply chain, 3PL providers play a critical role in helping businesses scale and stay agile so they can quickly adapt to shifts in customer demand.
Types of 3PL Services
While all 3PL logistics providers are involved, in some capacity, in getting products from sellers to customers, the specific services they offer fall into three core categories:
Fulfillment Services
Fulfillment services involve end-to-end logistics management services:
- Receiving inventory
- Storing inventory
- Picking and packing items once a customer places an order
- Shipping and label generation
- Returns and reverse logistics management
However, you can determine the level of fulfillment support you need.
Freight Services
Freight services involve transporting goods. It can be shipping raw materials from a supplier to your factory, or delivering finished products from your warehouse or distributor to the customer. Common freight services include:
| Freight Service | What It Is |
| Full Truckload (FTL) | Shipping using an entire truck for one shipment, usually for large volumes |
| Less-than-Truckload (LTL) | Combining shipments from multiple clients in one truck to reduce costs for smaller loads |
| Freight Forwarding and Carrier Selection | Coordinating shipments and selecting the best transport providers based on cost, speed, or route |
| Customs Clearance and Documentation | Handling import/export paperwork and verifying shipments meet all regulations |
| Shipment Tracking and Consolidation | Real-time monitoring and combining smaller shipments into one for efficiency |
Warehousing Services
3PL warehousing services provide the physical space and systems to store inventory before you sell or ship it. Beyond storage, you can get 3PL warehouse management services, including inventory management, stock rotation, cross-docking, barcode scanning, and cycle counting.
How 3PL Works
3PL service is an extension of a company’s operations, taking on critical supply chain functions so you can focus on growth. But how does it work? First, identify a specific logistics need in your organization, then evaluate potential providers based on your business needs and budget.
Integration with Business Operations
Once you’ve picked a partner, integrate their systems with your existing operations. Most providers offer 3PL logistics software to sync with your supply chain infrastructure.
Technology and Innovation in 3PL
Modern 3PL providers rely heavily on tech for supply chain optimization and efficiency. Depending on your partner, you can expect them to use several technologies.
| Logistics Technology | Use |
| Warehouse Management System (WMS) | Tracking and managing inventory and warehouse optimization |
| Transportation Management System (TMS) | Optimizing routing and carrier coordination |
| API integration | Enabling smooth data exchange |
| IoT and automation tool | Real-time tracking and error reduction |
Supply Chain Optimization Techniques
Beyond basic logistics, your 3PL provider can offer you strategic support to strengthen your entire supply chain:
- Inventory optimization: Your partner can monitor stock levels across all storage locations and help balance inventory based on demand and storage costs.
- Route planning: Using advanced logistics software, your provider can determine the most efficient delivery routes for faster, more cost-efficient delivery.
- Demand forecasting: With real-time sales data and historical trends, your 3PL can help forecast demand and adjust inventory strategies ahead of seasonal shifts or spikes in customer orders.
- Returns management: Your 3PL can handle reverse logistics to simplify the return process for your customers and reduce the time and cost of managing it internally.
Benefits of Using 3PL
Eighty-seven percent of businesses have increased their use of outsourced logistics to improve efficiency and meet current market demand. Beyond relieving that pressure, 3PL services offer a host of strategic advantages.
Cost Reduction and Efficiency
Eighty percent of 3PL users say their partnership has reduced overall supply chain costs. Through shipment consolidation and economies of scale, 3PLs lower transportation and warehousing costs, while route optimization saves on fuel expenses.
Access to Expertise and Resources
3PL providers bring in-depth logistics knowledge and the latest technology. You also get immediate access to established carrier networks and proven processes you’d otherwise spend years building. Taking advantage of such expertise and resources enhances efficiency and can give you a competitive edge.
Scalability and Flexibility
Whether you’re scaling up for peak seasons or testing a new market, a 3PL partner can quickly adjust resources to match your needs. You only pay for the service you use.
Focus on Core Business Activities
Outsourcing logistics saves time and lets your internal team focus on core priorities instead of supply chain tasks.
Challenges of 3PL
To prepare you for potential setbacks, it’s essential to understand the common challenges of 3PL partnerships.
Defining Roles and Responsibilities
Dividing tasks between internal teams and your 3PL can create overlaps or gaps when it’s unclear who owns each part of the logistics process. Set expectations early and document responsibilities in the service agreement so nothing gets missed.
Managing Quality and Service Standards
Maintaining consistent service standards can be challenging with 3PL. Run regular performance reviews and track agreed-upon KPIs to monitor your provider’s alignment with your standards.
Ensuring Data Privacy and Security
Sharing sensitive operational data exposes your business to third-party security risks. Vet your provider’s data protection policies and use secure integration methods to protect your information.
Impact of 3PL on Modern Supply Chains
3PL is transforming the modern supply chain.
Expanding Market Reach
By tapping into a provider’s network of warehouses and carriers, businesses expand their market reach to new regions without the cost of building their own infrastructure.
Enhancing Customer Experience
Through 3PLs, companies offer:
- Faster delivery times
- Real-time order tracking
- Reliable returns management
These capabilities help businesses meet market expectations and strengthen the overall customer experience.
Driving Business Growth
Outsourcing logistics enables businesses to focus their time and resources on core priorities, instead of daily supply operations. With a 3PL managing logistics, companies scale quickly during peak seasons or enter new markets. The resulting cost savings and efficiency gains free up capital for innovation and business expansion.
Is 3PL Right For Your Business?
3PL logistics has become a critical part of modern supply chains. But success depends on choosing the right partner. At Surgere, we bring together deep supply chain expertise and advanced IoT-enabled solutions to help you get the most from your 3PL partnerships.
From inventory optimization to real-time tracking, our platform gives you complete visibility into your 3PL operations, delivering actionable insights that improve efficiency at every stage of the supply chain. Learn more about how Surgere can help you maximize the impact of 3PL in your business.
