4 Types of 3PL Providers and How They Differ

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Third-party logistics providers have been around for centuries but only received their handy three-letter abbreviation, 3PL, sometime in the 1970s. As an eCommerce retailer, you’re likely familiar with different types of 3PLs and what they do, such as handling inventory management, warehousing, and fulfillment for other companies.

Of course, over the years, the definition of what they do has broadened. The Council for Supply Chain Management Professionals (CSCMP) even laments in their online glossary that it’s “to the point where these days, every company that offers some sort of logistics service for hire calls itself a 3PL.” 

With so many options to dig through, it’s helpful to accurately break down the different types of 3PL providers into their categories.

As Rick Nelson, CEO of The Fulfillment Lab says,”To hire the right providers for your business, you need to know exactly what services they bring to the table and how it will make operating your business easier and help you attain better results.”

In this article, we’ll explore the different types of 3PLs out there and why businesses choose them, and discuss possible advantages of 3PL providers.


What are 3PLs?

3PL stands for third-party logistics and refers to companies that provide logistics services to businesses. Companies that rely on 3PL carriers do so to supplement their in-house logistics efforts or to operate them completely on their behalf. 

These services can include transportation, warehousing, packing, inventory forecasting, order fulfillment, and freight forwarding. Roughly 86% of domestic Fortune 500 companies rely on 3PL services.

Essentially, a 3PL provider allows businesses to outsource logistical operations, which can help them afford high-value logistics solutions without heavy internal investments or to focus on core business functions without the hassle of overseeing shipping, warehousing, and other key logistics.


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Why Businesses Choose 3PL Service Providers

There are a number of reasons why a company would prefer to outsource their logistics rather than handle them in-house. 

For instance, a small ecommerce company that sells handmade goods may not have time to manage shipping logistics in addition to keeping up with customer orders. A 3PL provider would allow the retailer to focus solely on product production and customer orders while they handled the logistics of getting goods into customer hands.

Another ideal example to leverage 3PL is Dropshipping, a business model worth over $240 billion in 2023. 

Dropshipping allows goods to flow directly from a supplier to the end customer without the intermediary retailer having to stock, store, and ship the products themselves. Instead, they rely on 3PL providers to handle inventory, kitting, warehousing, shipping, and more.

To clearly understand why businesses choose 3PL logistics over in-house operations, take a look at the table below.


Why Choose 3PL?

Benefits of Leveraging 3PL Providers

Cost Reduction

3PLs can perform logistics at lower costs due to economies of scale, better negotiation capabilities, and specialized networks, helping businesses save on operational expenses.

Focus on Core Competencies

Outsourcing logistics allows businesses to concentrate on their primary areas like product development and customer service, enhancing overall business focus and performance.

Expertise and Experience

3PL providers offer specialized knowledge and stay updated with the latest in logistics technology, regulations, and practices, ensuring efficient and compliant operations.

Improved Flexibility and Scalability

3PLs provide the ability to scale logistics needs based on business demand without the need for large capital investments, making operations more adaptable to market changes.

Enhanced Service Quality

Professional logistics services can improve delivery speed and reliability, enhancing customer satisfaction and retention.

Access to Advanced Technology

Businesses can utilize advanced logistics technologies such as TMS, WMS, and analytics tools through 3PLs without the direct costs of acquiring and maintaining these systems.

Risk Management

3PLs manage risks in supply chain logistics, including compliance and disruption management, reducing potential negative impacts on the business.

Leverage Fulfillment Marketing

3PL providers can help companies enhance their marketing efforts by ensuring products are delivered in a timely and efficient manner, supporting promotions, and adapting to marketing strategies that may require quick changes in distribution or special handling.

4 Types of 3PL Companies

As logistics has grown over the years, especially with the advent of the eCommerce business model, so too have the services logistics providers offer. Today, there are four common types of 3PL logistics providers; the type you choose will depend on the unique needs of your individual business.

1. Standard 3PL Providers

eCommerce retailers needing only the most basic logistics would turn to a standard 3PL company. These companies offer minimal services such as storage and transportation of products. Because their services begin and end there, it’s usually a very low-cost option.

2. 3PL Service Developers

In addition to standard storage and shipping, 3PL service developers offer additional IT infrastructure and management. They provide their clients with safety and reliability value-adds such as security, shipment tracking, and compliance management. 

They may also offer features such as package selection and cross-docking (unloading materials from an incoming truck and loading them directing onto an outbound truck, with little to no storage necessary). 


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3. 3PL Customer Adapters

This type of 3PL company handles nearly all of the logistics activities for their client, managing the shipping process from beginning to end – even providing rate maintenance and negotiation with carriers. 

Clients are provided access to technology, such as a transportation management system, which provides visibility into the processes and allows them to customize shipments as needed, but can remain hands-off if they so desire.

4. 3PL Customer Developers

This type of 3PL has the fewest, but often largest, companies. That’s because 3PL customer developers completely take over a company’s logistics activities at the request of their client; they’re basically considered their clients’ logistics department. 

Using a 3PL customer developer is quite costly due to the heavy amount of work, personnel, and responsibility involved in “running the show” for the client.


3PL Services Through The Fulfillment Lab

While The Fulfillment Lab is generally sourced as a 3PL service developer, we don’t like to box ourselves in! We consider ourselves a customizable 3PL, working with our clients to best meet their logistics and fulfillment needs. 

Here are some of the services we offer:

  • Customized mass-volume fulfillment
  • On-demand product capabilities
  • Proprietary fulfillment software
  • Global shipping
  • Complete order transparency
  • White and private label manufacturing
  • Dynamic integration with shopping carts
  •  Lighting fast scalability
  • Fulfillment marketing

Have a specific question or are you ready to get the best fulfillment experience on the planet? Let’s connect!

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