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Businesses grow. While that’s certainly a welcome notion, it also comes with various challenges that could throw a wrench into your day-to-day operations. Handling all processes in-house can become inefficient and difficult to scale.
This is where third-party logistics (3PLs) become useful.
These expert providers serve a crucial role in moving products from businesses to customers’ doorsteps. Instead of managing warehousing, packing, and shipping by themselves, many companies partner with 3PLs to handle these complex logistics tasks.
In this guide, we’re breaking down what 3PLs are, how they work, and how you can utilize them to make smarter operational decisions to scale your enterprise faster and easier.
Third-party logistics providers, or 3PLs, are companies that offer logistics services to other businesses. They’re also known as fulfillment companies, which help businesses store, pack, and ship products to customers.
In effect, 3PLs can act as an extension of your business’s supply chain, shouldering tasks that require valuable time, effort, labour, and money.
By including 3PLs in your operational arrangement, your company can focus its resources on things that actually matter, such as sales, marketing, and product development.
Alongside basic fulfillment services, third-party logistics providers may also track inventory, coordinate transport, and process returns, making them a worthwhile investment.
Companies working with 3PLs have seen a substantial reduction in logistics costs and delivery times.
Retail, e-commerce, and manufacturing industries, where order volume fluctuates throughout the business year, can particularly benefit from a 3PL.
There are different models of logistics. They’re often split into three types: first-party (1PL), second-party (2PL), and third-party logistics (3PL). Each of these refers to a different level of outsourcing.
A first-party model means all logistics tasks are handled internally, giving you full control. However, this also means businesses must invest in warehouses, vehicles, and staff, which can be costly and time-consuming.
Second-party logistics, on the other hand, focus on providing transportation services. They’re what’s commonly called carriers, such as shipping lines, trucking companies, and rail operators. They typically only move goods from one location to another.
In contrast, 3PLs offer a system-wide bundle of logistics services. They take on multiple logistics functions, making them a strategic partner for many growing businesses.
3PL providers serve various key functions, including managing inventory, processing orders, and coordinating transportation.
They may also take charge of reverse logistics, which means moving products in the opposite direction—from the customers to the distributor. These instances can happen in returns, repairs, and resales.
In most cases, these services are carried out in fulfillment centers or warehouses, designed to handle large quantities of ongoing and incoming orders.
Many modern fulfillment warehouses implement Warehouse Management Systems (WMS). This is a combination of software and protocols for tracking inventory in real time, reducing errors, and optimizing routes.
Compared to in-house alternatives, centralizing logistics activities with 3PLs allows companies to achieve higher order accuracy and significantly faster order fulfillment.
Partnering with a third-party logistics provider typically begins with a system integration and an inventory transfer. Products are moved from the suppliers or manufacturers to the 3PL’s fulfillment center.
The items will be stored in secure fulfillment warehouses until orders are placed. Using an integrated software, when a customer makes a purchase, their information is forwarded to the 3PL.
After receiving the order request, the third-party logistics provider selects, packs, and ships the appropriate products through its carrier network. Tracking information is shared with both the seller and buyer.
Many providers follow preset guidelines for order returns.
To give you a clearer understanding of how 3PLs work, here are a few examples of how they operate in the e-commerce and international manufacturing spaces:
A small online clothing brand experiences order surges during the holiday season. Instead of hiring temporary staff and renting an extra warehouse for the peak season, the owner decided to partner with a 3PL provider.
The third-party logistics company stores the online boutique’s clothing stock. They then pick the ordered items, package them, and deliver them to the customers.
This allows the online retailer to scale quickly and on demand during the holidays without worrying about internal logistics management.
Manufacturers based outside the country can similarly benefit from 3PLs. For instance, an electronics company in the US can work with 3PL providers with international fulfillment warehouses and shipping networks.
By storing inventory in strategic locations, businesses can ensure their products hit major markets worldwide—and quickly.
The services of a 3PL provider can vary. That said, many of them offer end-to-end fulfillment support, which often involves:
These are the core services of third-party logistics. Their expertise in warehousing and storage means they’re the perfect partner for both routine operations and seasonal demand spikes.
Third-party logistics providers employ controlled facilities for their operations. Automation, barcode scanning, and Warehouse Management Systems keep every step accurate and efficient.
These fulfillment centers are typically located near major transportation hubs, cutting transit times and overall costs.
You no longer need to lease commercial spaces and hire labour to manage your warehouses. Ultimately, 3PLs convert fixed costs into variable costs, making your operations financially flexible.
From a customer’s perspective, order fulfillment is where 3PLs stand out. Once they place their order, warehouse staff locate, pick, and package the items, preparing them for delivery.
In some 3PLs, packaging can be custom-made to match business branding or meet quality compliance. Some also offer extra services, including labelling, kitting, and quality inspections.
Due to their workflow, third-party logistics providers significantly reduce the risks of shipping errors and delays.
These aspects are especially vital in the e-commerce space, where customer satisfaction is often linked to shipping speed, accuracy, and packaging personalization.
Freight forwarding and shipping are standard parts of many 3PL services. This entails picking reliable carriers, negotiating shipping rates, and handling documentation for both local and international transactions.
High shipment volume often allows them to secure better carrier rates than individual businesses.
Third-party logistics models involve optimizing routes and monitoring carrier performance. Their expertise can be beneficial for businesses shipping across borders or companies that manage multiple distribution streams.
Reverse logistics, that is, moving goods from the customer to the seller, can be challenging in several ways.
Collecting, sorting, and processing returns isn’t only expensive and laborious, but also adds another layer of complexity to your inventory processes. Not to mention its impact on your resource allocation.
Fortunately, many 3PLs include reverse logistics as a key part of their offerings. When unsatisfied customers return items, the third-party logistics provider will do all the hard work for you.
This can include inspecting, restocking, refurbishing, or disposing of products, which helps companies recover value and maintain customer trust.
Third-party logistics providers all aim to move goods quickly and effectively between sellers and buyers. However, no 3PL is the same, and many of them specialize in different aspects of logistics.
Choosing the right 3PL depends on your organization’s needs, whether you require transportation, storage, inventory management, or technology-related solutions.
This type of logistics service refers to the physical transport of goods. Often, it involves moving raw materials suppliers to factories or bringing products from warehouses to the buyer’s doorsteps.
Some well-known logistics providers in this category are UPS, FedEx, and DHL, with which many customers interact frequently.
Freight companies can be asset-based, that is, they own the vehicles and facilities required to move freight safely. On the other hand, non-asset-based logistics leverage other carriers.
Beyond simple delivery, transport 3PLs may offer other services for an extra loonie, such as shipment tracking, multimodal transport support, and last-mile delivery.
These are freight forwarders that serve as intermediaries between transport providers and businesses. Compared to asset-based logistics teams, forwarder-based 3PLs rarely move goods themselves.
Instead of transport, they coordinate the shipment process, negotiate rates, select reputable carriers, plan routes, and manage documentation.
While they don’t own trucks and ships, forwarders are invaluable in international transactions. They make cross-border shipping smoother, ensuring your customs clearance and import-export regulations are in order.
Some 3PLs focus on warehousing and distributing products. They specialize in inventory storage, stock level management, order fulfillment, and reverse logistics.
When products arrive in their warehouse, this 3PL inspects, sorts, and stores them securely. They then arrange for shipping whenever an order is placed.
If you’re an e-commerce company or an organization that offers subscription services, this type of 3PL could streamline your order fulfillment without investing in a warehouse yourself.
As its name suggests, a full-service 3PL is an end-to-end logistics provider. It combines transportation, warehousing, order fulfillment, and returns management in a single, comprehensive system.
You don’t need to subscribe to everything they offer, though.
Most full-service 3PLs allow clients to pick and choose what logistics services to outsource, whether you need simple warehousing or a complete takeover of your supply chain operations.
One benefit of a full-service 3PL is the logistics technology and experience they bring to the table. For companies preparing for rapid scaling, the logistics solutions of a full-scale 3PL partner can be strategic.
Rather than the physical movement of goods, financial 3PLs are experts in the finance and information-based aspects of supply chain management.
They track logistics expenses, audit invoices, manage claims, and arrange favourable shipping contracts for their clients.
Overall, by providing clear insight into your spending, financial 3PS can help you make smarter and data-driven decisions for your business, reducing operational risks.
Tech logistics services don’t transport goods or handle documents. However, these tech-driven 3PLs can be crucial in connecting businesses with other logistics teams.
A common example of tech 3PLs is a platform where companies can make vital logistical transactions, such as requesting quotes, comparing providers, and booking shipment deals.
“Disruptive” iterations of these information-based 3PLs have emerged over the years, breaking the traditional 3PL model and eliminating intermediaries from the picture.
Some rideshare companies, for example, utilize this technology to connect their drivers with transport businesses.
By combining multiple logistics functions in one provider, 3PLs help businesses achieve better visibility and coordination across their supply chains.
One of the most compelling reasons to work with a 3PL is the ability to scale your operations without taking on long-term serious risks for your business.
Instead of committing to leasing warehouses, investing in storage equipment, and hiring new staff, 3PLs let you adjust your space and order fulfillment needs as product demand changes—and it often does.
If your business experiences seasonal sales peaks or is gearing for expansion, third-party logistics services are a smart option to consider.
For online retailers, fast and accurate product delivery is essential. Ensuring customers get what they want and quickly nurtures satisfaction and loyalty.
Many 3PLs have fulfillment centers positioned closer to customers. With their assistance, you can shorten delivery times, reduce last-mile shipping expenses, and expand to more regions without investing in new infrastructure.
Most 3PL providers work with industry experts versed in logistics operations. Not to mention, they’re usually equipped with state-of-the-art technologies to streamline your supply chain logistics.
Whether you need real-time inventory tracking or warehouse management systems, 3PLs have the tools to optimize your operations. Access to an experienced logistics team also reduces costly errors.
If your team struggles to manage your logistics budget, a 3PL could help manage your finances. Because third-party logistics companies ship high volumes of goods, they typically enjoy lower carrier rates and better service terms.
By offloading complex logistics to a 3PL, you can focus on making better products, marketing your services, or improving customer experience—all crucial areas that impact your growth more directly.
Partnering with a 3PL definitely solves many logistics issues. However, they’re far from perfect, and can come with certain challenges you should consider.
Naturally, one major concern for businesses is the loss of control over some critical aspects of their supply chain. By relying on a third-party service provider, you may have less visibility into the day-to-day logistics, which can affect your business decisions.
While often reliable, third-party logistics providers aren’t perfect. Over-reliance on their services can have repercussions on your operations.
For instance, if your partner experiences delays, outages, and other disruptions, this can affect your customer experience. Additionally, some 3PLs charge hidden costs for special requests, change orders, and extra perks.
Operating under standardized systems and protocols, 3PLs can limit customizations for teams that require unique or complex logistics solutions.
Aligning your needs to their offerings can be challenging, and custom services may come at a hefty price.
Numerous 3PLs are operating in Canada and the US.
In the United States, one major fulfillment company is C.H. Robinson, which is based in Minnesota. They offer full logistics, multimodal transport, and freight forwarding services across various countries.
FedEx Supply Chain, a division of FedEx, is another major logistics player in the US space. Their main offers include warehousing, fulfillment, and reverse logistics.
On the Canadian side, firms like GoBolt have grown into a trusted logistics partner for expansions and last-mile shipments. Their focus typically lies on e-commerce.
JORI Logistics is another trusted customs brokerage, freight forwarding, and warehousing firm in Calgary, Alberta. We have fulfillment centers in Canada, the US, Central Asia, and Southeast Asia.
Alongside our logistics expertise, we provide trade consulting and logistics training to optimize your operations.
Numerous scenarios can indicate your organization needs a 3PL. If your team faces the following challenges, you may want to consider partnering with a third-party fulfillment company:
Whether or not your team is facing these logistical hitches, a 3PL partnership can only improve your business operations in the long run.
When choosing the best 3PL companies, always start by assessing their experience and technologies.
You want a third-party provider that can integrate seamlessly with your e-commerce platforms and order management systems. Look for automated reporting and real-time inventory tracking, too.
Industry experience is a must, so pick a provider familiar with the ins and outs of your specific sector.
Consider their warehouse locations. The goal is to get closer to key customers, markets, ports, and transportation hubs.
Lastly, evaluate the fulfillment company’s customer support and transparency. They should be responsive to customer queries, set clear pricing, and provide detailed performance reports.
JORI Logistics is a top choice for business owners in Canada seeking warehousing, fulfillment, or multi-modal transport support. Our expert logistics team is ready to provide end-to-end services to suit your unique needs.
3PL stands for third-party logistics provider. They refer to companies that provide warehousing, order fulfillment, and shipping services, acting as intermediaries between buyers and sellers.
The difference between 1PL 2PL 3PL 4PL 5PL is in the scope of responsibilities they entail. For example, a 3PL performs vital logistical functions, but a 4PL manages the entire supply chain.
Third-party logistics providers fulfill warehousing and shipping orders for businesses. On the other hand, dropshipping refers to sellers who work with third-party vendors, which means they don’t need to stock products.
Freight forwarders primarily arrange transportation, particularly on cross-border shipments. 3PL involves a wider range of logistics services, including freight forwarding.
Amazon can be considered a 3PL through its Fulfillment by Amazon (FBA) service. They collect, store, pick, pack, and ship products for their sellers.
Yes, FedEx is a 3PL as it serves several logistical functions, including shipping, warehousing, and fulfillment.