What Is a 3PL?
A 3PL (third-party logistics provider) is a company that stores your inventory and ships your orders for you. You keep selling and owning the product, while the 3PL handles receiving, storage, picking, packing, and shipping.
How a 3PL Works
A 3PL takes over the physical work of storing and shipping your goods, while you keep selling and owning the inventory:
Receiving Your Inventory
Your suppliers ship to the 3PL's warehouse, where goods are checked in against your purchase orders.
Storing It in Their Warehouse
Inventory is stored in the 3PL's racks and bins and tracked in its warehouse system.
Picking, Packing, and Shipping
Orders from your sales channels go to the 3PL, which picks, packs, and ships them to your customers.
Reporting Back to You
The 3PL sends shipment confirmations, tracking numbers, and inventory levels back to your system.
3PL Example: One Order, End to End
A brand of kitchen gadgets sells online and to retailers, and uses a 3PL in Reno to ship orders. This is how one web order moves:
| Time | Step | Document | Details |
|---|---|---|---|
| 9:02 AM | Order placed | Web order 55120 | Customer buys 2 items on the brand's online store |
| 9:03 AM | Sent to 3PL | Shipping order | Order passed to the 3PL through an integration |
| 11:40 AM | Picked and packed | Pick ticket | 3PL picks both items and packs one carton |
| 2:15 PM | Shipped | Ship confirmation | Tracking number sent back and emailed to the customer |
| 2:15 PM | Records updated | Invoice and inventory | Brand's inventory drops by 2 and the sale is invoiced |
| Month end | 3PL billed | 3PL invoice | Storage, pick and pack, and shipping fees for the month |
The brand never touches the box, but its own system still knows the order shipped, what stock remains at the 3PL, and what the order cost to fulfill. That shared record is what keeps a 3PL relationship running smoothly.
In-House Warehouse vs. 3PL vs. 4PL
The choice comes down to how much control you want and how much logistics work you want to own.
| In-House Warehouse | 3PL | 4PL | |
|---|---|---|---|
| Who Runs the Warehouse | Your team | The 3PL | One or more 3PLs, coordinated by the 4PL |
| Upfront Investment | Space, equipment, staff | Low | Low |
| Control Over Operations | Full | Shared, by agreement | Delegated |
| Cost Structure | Mostly fixed | Per activity | Management fee plus activity |
| Best For | Specialized handling or very high volume | Growing volume or new regions | Complex, multi-region supply chains |
Benefits of Using a 3PL
No Warehouse to Build
Avoid the cost of leasing space, buying equipment, and hiring warehouse staff.
Room to Grow
Add volume, seasonal peaks, or new warehouse locations without adding fixed costs.
Faster Delivery
Storing inventory closer to customers shortens transit times and can lower shipping costs.
Focus on the Business
Your team spends time on products, sales, and customers instead of picking and packing.
How to Choose and Start With a 3PL
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1
Know your numbers. Gather order volume, units per order, SKU count, storage needs, and seasonality so 3PLs can quote accurately.
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2
Check fit, not just price. Look for experience with your products, such as food, lot-tracked, oversized, or fragile goods, and locations near your customers.
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3
Confirm how systems connect. Ask how orders, ship confirmations, and inventory levels move between systems, whether by EDI, API, or a channel integration.
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4
Read the fee schedule. Compare receiving, storage, pick and pack, and minimum fees using your real order profile.
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5
Plan the move. Schedule the inventory transfer, a full count on arrival, and a short overlap so orders keep shipping.
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6
Reconcile regularly. Compare your inventory records to the 3PL's counts and invoices, and use cycle counting to catch differences early.
Common 3PL Mistakes to Avoid
Losing Sight of Inventory
If your system doesn't sync with the 3PL, you sell stock that isn't there or miss reorder points.
Comparing Rates in Isolation
A low storage rate means little if pick fees or minimums are high for your order profile.
Skipping the Integration Test
Test orders, cancellations, and returns before going live, not after the first busy week.
Never Auditing Invoices
Activity-based billing is detailed. Check charges against your own shipment and storage records.
Which Industries Use 3PLs?
Companies of every type use 3PLs, especially when they sell through several channels:
Distribution
Distributors adding regional warehouses without signing new leases.
Manufacturing
Manufacturers that ship finished goods from a 3PL instead of the plant.
Food & Beverage
Brands needing temperature control, lot tracking, and date rotation.
Furniture & Home Decor
Bulky items that need special storage and freight handling.
3PL Operations in Kechie ERP
Kechie offers a 3PL add-on for warehouses that store and ship goods for other companies, built on the same inventory and warehouse management core that runs receiving, putaway, picking, and shipping. For brands that outsource fulfillment, Kechie Inventory Management and order management keep orders, inventory, and accounting in one system, with integrations to sales channels such as Shopify and Amazon, shipping solutions such as ShipStation, and an API for connecting additional partners. Data entered once is available in every relevant module in real time.
Frequently Asked Questions
What is a 3PL in simple terms?
A 3PL, or third-party logistics provider, is a company you hire to store your inventory and ship your orders. You sell the product; the 3PL handles the warehouse work.
What does 3PL stand for?
3PL stands for third-party logistics. The first party is the seller, the second party is the buyer, and the third party is the logistics company in between.
What services does a 3PL provide?
Most 3PLs offer receiving, storage, order picking and packing, shipping, and returns. Many also offer kitting, labeling, freight management, and value-added services.
What is the difference between a 3PL and a 4PL?
A 3PL runs warehouse and transportation work. A 4PL manages the whole supply chain on your behalf, often coordinating several 3PLs and carriers.
How do 3PLs charge?
Typically by activity: receiving fees, storage fees per pallet, bin, or cubic foot, pick and pack fees per order or item, and shipping costs. Some add account or minimum monthly fees.
When should a company use a 3PL?
When order volume outgrows its own space or staff, when it needs to ship from more locations, or when it would rather not invest in a warehouse, equipment, and labor.
How does a 3PL connect to my systems?
Usually through EDI, an API, or a direct integration with your sales channels, so orders flow to the 3PL and shipment confirmations and inventory levels flow back.
Do I still need inventory software if I use a 3PL?
Yes. You still own the inventory and need to manage purchasing, orders, costs, and accounting. Your system should stay in sync with the 3PL's stock levels.
Related Guides
Keep Every Warehouse in Sync With Kechie ERP
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