What Is the Difference Between 2PL, 3PL and 4PL?

Jul 14, 2023 | Blog

You’re probably familiar with the term third-party logistics (3PL). But did you know there are other logistics services like second-party logistics (2PL) and fourth-party logistics (4PL)?

So, what are the differences, and which one is the best? Read on to find out.

Successful eCommerce Needs Strong Logistics

An eCommerce business lives or dies at the hands of its logistics. Smaller local businesses can operate fine with first-party logistics, handling deliveries in-house. However, many eCommerce businesses get customers from all over the world, making in-house deliveries nearly impossible.

If you can’t get products to customers safely and punctually, customer satisfaction will drop and you’ll likely lose sales. To ensure that doesn’t happen, you must partner with great logistics solutions providers.

What’s The Difference Between 2PL vs 3PL vs 4PL?

The main differences between 2PL, 3PL and 4PL are the complexity and parties involved. Here’s a quick breakdown of each logistics operator type and how many parties are involved:

• A 2PL involves your company and the freight forwarding or transportation service. This means you handle receiving and order processing yourself, only working with the shipper when you’re sending things out to customers.
• A 3PL is more hands-on in that the third-party logistics provider takes over most, if not all, of your order fulfillment process. The 3PL company will receive, store, pick, pack and send items out to customers through shipping companies. 3PL companies are the most popular logistics operator with eCommerce businesses because companies can be hands-off with their logistics and inventory management operations.
• A 4PL expands the scope of 3PLs by managing your company’s entire supply chain management. This means offering a wide range of services, including finance, procurement, IT and logistics assistance.

2PL – Second-Party Logistics

Second-party logistics are mostly responsible for transporting your items from the warehouse to customers. As far as logistics go, second-party logistics operators have the simplest task since they only do one thing – get your products to customers.

2PL Pros

The advantages of working with 2PL companies are:

• You can reduce your business workload.
• You can minimize risk of product loss or damage.
• You can offer multiple methods of transportation you couldn’t offer in-house.

2PL Cons

Meanwhile, the disadvantages of working with 2PL companies are:

• Your shipping performance is entirely dependent on the shipping carrier
• 2PL companies don’t support other aspects of your logistics operations, like warehousing.

3PL – Third-Party Logistics

Third-party logistics are much more involved with your operations since they’re responsible for receiving, storing, picking, packing and sending your products. Some of them even handle customer returns and complaints.

Lots of companies work with third-party logistics companies since they don’t have the space or budget to run their own warehousing operations. Instead, they send their products to 3PL fulfillment centers where the logistics operator will take care of everything.

Some of the best print-on-demand companies also offer 3PL-like services where they take customer orders, print the items and send them out without the client’s intervention.

3PL Pros

Here’s what you get by working with 3PL companies:

• You can outsource an entire section of your business to experts with years of experience.
• You get timely shipping and professional warehouse management.
• You can focus on other aspects of your business.

3PL Cons

On the other hand, 3PL also has some drawbacks, like:

• Your business will be dependent on a vendor to ship items out.
• It can be tough to change the way your vendor works if you receive complaints.

4PL – Fourth-Party Logistics

A fourth-party logistics provider is even more hands-on in managing your supply chain operations. They offer integrated logistics solutions – they don’t just work with what’s there but also come up with new ideas and offer additional services to address possible issues to achieve efficient supply chains.

Essentially, fourth-party logistics companies are supply chain operators and consultants. They’ll advise you on whether you need discreet shipping and packaging for products, what kind of shipping you should offer and many other aspects of logistical operations.

4PL Pros

Working with a 4PL service provider gives you most benefits offered by a 3PL, in addition to these perks:

• You get the best shipping rates without negotiating with carriers yourself.
• You can receive advice on how to manage a comprehensive supply chain solution.
• You can take advantage of their professional project management services.

4PL Cons

Meanwhile, the disadvantages of working with 4PLs are:

• 4PLs have higher costs, which makes them prohibitively expensive for smaller companies.
• You have less say in your supply chain operations since 4PL companies are more like strategic partners than vendors.

Examples and Practical Applications

How these logistics providers work might seem a bit abstract, especially if you’ve just now heard about them. Here, we cover simple examples of how 2PL, 3PL and 4PL companies work.

How 2PL Works

If Company X works with a second-party logistics provider, how it gets goods to customers would go something like this:

1. Company X receives its products from the vendor or manufacturer.
2. The company’s warehouse team stores products in the warehouse.
3. When an order comes, Company X’s warehouse team picks and packs the items in preparation for shipping.
4. The warehouse team takes the products to a shipper for delivery.
5. The shipping company sends the items to customers.

How 3PL Works

If Company X works with a third-party logistics company instead, you’d see a process like this:

1. Company X sends its products to the 3PL company’s fulfillment center.
2. The 3PL provider’s warehouse crew stores the product.
3. Company X’s online storefront forwards orders to the fulfillment center, where the warehouse crew picks and packs items for shipping.
4. The 3PL company’s warehouse team passes the items to a shipping company.
5. The shipping company takes the items to customers.

How 4PL Works

If Company X works with a fourth-party logistics company, the workflow will look a lot like the 3PL version. However, the 4PL partner will find the most affordable shipping companies and may communicate with Company X’s vendor to increase or decrease production, depending on how many products are in the warehouse.

2PL, 3PL and 4PL By the Numbers

Costs matter in choosing a logistics strategy, especially when it comes to prices. 2PLs are usually the cheapest because they only ship your items. Depending on the company, you might pay for every shipment individually or get subscriptions for discounted shipping costs.

3PLs usually work on a monthly or yearly subscription model, but some may charge per item delivered. Costs vary depending on the size of your business and can be as low as a few cents per item to thousands of dollars per month.

4PLs are the most expensive of the three options since they offer consultancy services and logistics assistance. 4PL companies usually offer custom pricing, so each partner will charge you differently.

What Software Does Your Business Need?

Your business needs different types of logistics providers and software, depending on your business goals and needs. A 3PL is the most common option, but you can opt for a 2PL if you’re already doing in-house logistics management or a 4PL if you want to outsource your entire supply chain and logistics process.

If you don’t know which one to pick, meet with 3PL consultants and ask them about which option is best for your company.

Key Takeaways

The main difference between 2PL, 3PL and 4PL companies is their scope of work. 2PL providers are essentially shipping carriers, 3PL companies take over your inventory and warehousing operations while 4PL companies control almost your entire supply chain network.

All three logistics company types offer different things, so talk to consultants and do some research before choosing which type of logistics provider is the best for you.

2PL vs 3PL vs 4PL FAQs

What are the 3 Types of Logistics?

The three main types of logistics are:

• Inbound logistics, which involves moving goods from suppliers to producers. An example of this is sending car parts to car manufacturers.
• Outbound logistics, which involves moving finished products to customers. For instance, sending a handbag from the warehouse to the person who ordered it.
• Reverse logistics, which involves moving products from the customers back through the supply chain. This usually happens when the customer returns their product due to defects or other reasons.

What is the Difference Between 3PL and 4PL?

The main difference between 3PL and 4PL is its scope. 3PL companies take over your supply chain and logistics operations but don’t have the power to make decisions on their client’s behalf. Meanwhile, 4PL companies are more like partners in that they can negotiate with shipping carriers and influence production for the client’s benefit.

Is a Freight Forwarder a 2PL?

Freight forwarders are a 2PL because their main business activity is sending products from a company to the customer.

What Does 2-Day Shipping Mean?

Jul 14, 2023 | Blog

How 2-Day Shipping Works and Why You Should Offer It

Today’s shoppers want the convenience of buying online with the gratification of getting their orders ASAP. And you can’t blame them. Giants like Amazon and Walmart have set the norm for the eCommerce industry by offering their customers two-day and even same-day shipping options.

As a small retailer, you risk losing your customers if you can’t guarantee their ‘inalienable right’ to expedited delivery. Studies have shown that 26% of online shoppers abandon their carts due to slow shipping, and 53% consider delivery time an essential factor when evaluating their orders.

The most intriguing part of the puzzle is that customers expect expedited shipping but still crave free deliveries, with 75% of U.S. shoppers expecting free shipping. Considering their lower order volume and lack of fulfillment infrastructure, the big question is, can small businesses compete with the giants?

Well, the answer isn’t straightforward. But we can tell you it’s not impossible. In this article, we let you in on the most important things you need to know about two-day shipping and how you can offer it to your customers. 

What Does 2-Day Shipping Mean?

When you offer two-day shipping, you deliver consumer purchases within two days of the order. Today’s online consumers tend to be impatient, so two-day shipping is essential to your eCommerce strategy.

The Benefits of 2-Day Delivery

How can you benefit from two-day deliveries? Here are some ways two-day delivery can provide a business advantage:

Meet Customer Expectations and Boost Loyalty

Many customers expect two-day shipping ability from all online businesses thanks to Amazon. Whether you like it or not, two-day shipping is a must. If customers don’t receive their items within two days, they may not return to your business again.

On the flip side, consistently delivering within two days shows that you’re a reliable online business. If you keep fulfilling your two-day delivery promises, customers are more likely to continue shopping at your business.

Reduce Lost Sales and Cart Abandonment

There’s something undeniably thrilling about waiting for a package to arrive in the mail, especially when it comes to last-minute holiday gifts or items that just can’t wait. We’ve all experienced that sense of urgency, and it’s no wonder that slow delivery speeds can be a deal breaker for many eCommerce platform users. 

In fact, a snail-paced shipping process can lead to customers abandoning their carts, causing businesses to lose out on potential sales. However, the simple solution of offering two-day delivery can work wonders. This speedy promise not only eases the minds of those eager customers but also makes them much more likely to hit that “purchase” button, knowing that their precious items will be in their hands in just a few days.

Gain Another Selling Point

Fast shipping speed is marketable. If you promise two-day delivery and consistently fulfill it, you can make it a selling point. Writing something like “free two-day delivery” on your marketing materials can attract attention and increase clicks. More clicks mean more people visit your online store, potentially increasing your sales.

How Does 2-Day Shipping Work?

Depending on the seller, two-day delivery can be two business days or two full days. And the time can start counting from either the order cutoff time or the checkout time.

For example, Walmart uses two business days and an order cutoff time model. So, if a buyer places an order after the cutoff time on Friday, they can expect to receive it on or before Tuesday since Saturday and Sunday are not business days. On the other hand, some other companies start counting the days once the order is packed, not minding whether it’s a business day.

Whichever the model, deliveries eligible for two-day shipping usually vary between two shipping methods: air and ground. Each shipping method has different advantages and disadvantages, so let’s dive in:

Air Shipping

Air shipping entails using an airplane or jet to transport packages from the warehouse or fulfillment center to the customer. It’s mainly used for international shipping or shipping to customers far from fulfillment centers. Of course, airborne shipping costs can be pretty steep, making it almost impossible to offer free two-day shipping to customers.

Ground Shipping

Ground shipping uses vans, trucks, or cars to move orders from the fulfillment center to the customer’s doorstep. You may use your delivery vehicles or rely on an external shipping carrier, depending on your logistics approach. Ground shipping is easily the cheapest delivery model, and you can offer free two-day delivery without hurting your bottom line.

It’s a harsh reality for many businesses that ground shipping isn’t suitable for delivering orders to remote areas far from fulfillment hubs. If you don’t have fulfillment centers spread across many regions, offering 2-day delivery via ground shipping can be next to impossible.

How 2-Day Shipping Grows eCommerce Businesses

A report from EtailInsights revealed that there are 2.1 million online retailers in the United States alone, and this number is expected to grow in the coming years. If anything, this stat tells you that eCommerce businesses have become just as competitive as brick-and-mortar retail, if not more. You’ll need to stay on top of your game to thrive in the space as a business owner. Here are a few ways two-day shipping can boost your eCommerce business:

Keep up With Shoppers’ Expectations

On average, online customers feel three days is an acceptable waiting time for an order. Once your delivery time exceeds three days, your customers will likely leave you for businesses that offer faster delivery. However, you’ll have a better chance of retaining your customers and expanding your customer base if you offer two-day shipping.

Improve Conversion Rates and Make More Sales

Your ads become more attention-grabbing if you include a promise of expedited shipping. Add tags and banners to all your ad copy, including emails, paid ads, and social media posts. When you do this, get ready for a considerably improved conversion rate and more sales.

Get Better Retention Rates

Customers who get their orders on time will likely make a repeat purchase. Moreover, you can offer 2-day shipping as part of a paid membership program like Amazon Prime to offset the costs of faster deliveries.

Stop Losing Sales to Amazon

Many online shoppers now regard Amazon’s free two-day shipping as standard. According to Metapack’s report, 27% of shoppers will choose the retailer with the best delivery option. Unless you sell an exclusive product, you’ll likely lose customers to the eCommerce giants.

Should You Offer 2-Day Shipping?

Yes, offering two-day shipping to as many customers as possible would be best. It’s the easiest way to reduce cart abandonment and order cancellation rates. However, two-day shipping for all orders can be detrimental to business, especially if you plan to keep the shipping costs low.

If expedited delivery costs are too high, you can offer two-day shipping alongside other options and leave the decision to the customer. Another helpful strategy is restricting the service to a select group of customers like Amazon Prime.

Typically, How Much Is 2-Day Shipping?

The cost of shipping within two days depends on several factors. Here are some things that affect the price of a 2-day shipping program.

• Type and amount of mailable items you are shipping
• Peak period on the delivery calendar
• Time and day delivery shipments are scheduled
• Delivery carrier and service used
• Zip code for the location of origin
• Zip code and destination addresses
• Dimensional weight
• Package characteristics (e.g., hazardous materials, fragile items)

Also, note that the cost that a seller charges customers for two-day shipping can vary because of factors like fulfillment fees and channel costs.

Fulfillment fees are the cost that a company or individual seller may incur for packing, processing orders, stocking inventory, and shipping. These fulfillment fees, in turn, can also vary based on pricing models, orders placed, and additional services like individual packaging.

This explains why when you order an item for two-day shipping from an online marketplace, the cost may be more or less than ordering the same item directly from the item manufacturer’s site.

How to Keep 2-Day Shipping Costs Low

Two-day shipping doesn’t come without extra costs. If you’re not careful, you could lose all the gains you’ll make from offering two-day shipping if the costs eat too deep into your bottom line. And transferring the total cost to customers isn’t a viable option. As mentioned earlier, your customers want their delivery fast and free! The best you can do is to keep the shipping cost as low as possible. Here are some tips that can help:

Use Ground Shipping

Ground shipping is the easiest way to keep shipping costs low while delivering fast. However, it can only work if the fulfillment center is close to the customer. It’s essential to know your customers well. That way, choosing locations near them will be a breeze and save you money in the long run. You could even offer one-day or overnight shipping to customers living closer to your fulfillment center.

Offer 2-day Shipping to Customers on a Membership Plan

Even with Amazon’s logistics prowess, only Amazon Prime members enjoy guaranteed two-day shipping. You can also work on a similar model for your eCommerce business. When you offer this perk to customers on a membership plan, more customers are likely to join, and the subscription cost may offset some shipping costs.

Leverage Distributed Warehouses

Operating from just one warehouse or fulfillment center will severely restrict your two-day delivery capabilities. If you cannot manage multiple fulfillment centers, you should consider partnering with a 3PL company. You’ll be reducing the transit time of customers’ orders and ensuring faster delivery.

Examples of 2-Day Shipping Options

Below are a few shipping methods you can use if you’re planning to start two-day shipping:

DIY: Negotiate Shipping Discounts With Carriers

If you handle fulfillment in-house, you’ll have to take the goods to your preferred carrier. The top carriers, such as FedEx and USPS, have two-day shipping plans you can subscribe to. If your business is big enough, you could even get them to pick the packages up from your warehouse with shipping discounts.

Outsourced: Partnering With a 3PL

Online sellers that choose this option store their inventory at the third-party logistics company’s fulfillment center, and the company ensures it’s shipped on time. This arrangement allows sellers to leverage distributed warehouses and reduce shipping costs. You get to retain customer information since all orders will pass through.

Best Shipping Options for Small Businesses

If you’re a small business looking for affordable, fast shipping providers, these are some of the best options you can choose from.

USPS

If you’re considering going for flat-rate shipping, USPS has pre-made boxes in sizes ranging from small to large, each with a different price. If your items fit the pre-made boxes, you may consider offering them as a parcel service option.

Because of its pre-made box fees, flat-rate shipping through USPS will also help you accurately estimate your shipping prices ahead of time. This means you won’t be surprised by extra fees and end up losing money.

USPS is also a top choice for those doing in-house fulfillment for their orders. If you have small order volumes, USPS offers the best value for money as a shipping option. Some services like Priority Mail Express have a money-back guarantee if your products don’t arrive on time.

USPS offers free pickup services from your home or office, with tracking services and up to $50 insurance for most parcels. There are also no surcharges for Saturday deliveries, rural or resident deliveries, or fuel.

UPS

For small businesses sending large packages that weigh 70 pounds or more, UPS is the most cost-effective option. Unlike USPS, this is because it doesn’t have a size limit for its services. 

UPS can pick up your package from your office or warehouse for an additional fee. It also has two-day and three-day delivery shipments, guaranteed day ground delivery, and international shipping services to over 220 countries and territories. 

DHL

While DHL is smaller than UPS, FedEx, and USPS, it’s one of the best options for international shipping. DHL can ship your customers’ orders to 220 countries and territories. It also has an easy-to-use quote calculator that can help you choose the best shipping rate and delivery times for orders, depending on your chosen service.

DHL typically estimates costs based on the destination country and your items’ dimensional weight. Fragile or costly items can get either cargo or freight shipping insurance, depending on which applies to the order. For those needing help with customs clearance, DHL also has brokerage offices worldwide.

FedEx

Do your customers need 1-3 delivery speeds? FedEx is one of the most reliable choices for businesses where prime delivery speeds are the highest priority. FedEx has overnight shipping, same-day shipping for cross-country deliveries, and two to three-day shipping.

FedEx Express may have fewer locations than UPS, but it’s still reasonably easy to find a location for dropping off shipments. FedEx Express also offers priority international deliveries, tracking, and insurance for shipments up to $100. This gives international customers the peace of mind to place orders from your small business.

2-Day Shipping FAQs

Below are answers to some frequently asked questions about two-day shipping:

What is second-day shipping?

Second-day shipping is when a company or seller ships the order within two days of it being placed. It is different from second-day delivery, which means that the order must reach the customer within two days of being placed.

Note that this should also be distinct from 2-day shipping, which typically means the order should reach the customer within two business days of shipment out of the fulfillment center.

Is 2-day shipping actually two days?

2-day shipping doesn’t mean the customer will receive the package within 48 hours of placing the order – instead, it means they’ll receive it within two business days once the item is shipped to them.

For instance, fulfillment center workers must pick, pack and label an order before it’s ready for shipping. So, if the customer places the order late, it may not be possible to ship the order on that day. In such cases, the two days will start counting the next day. For companies that work only on weekdays, the two days will not begin counting until Monday if the order is placed on Friday evening.

If the seller drops off the package at the post office, two-day shipping will mean two days after the seller drops off the package. In some contexts, two-day shipping may suggest that the seller will get the order in the mail within two days. If you’re ever in doubt, you should ask your seller or service provider to explain their interpretation of two-day shipping.

What is the Amazon Prime Effect?

The Amazon Prime Effect refers to the two-day shipping service that most online customers now expect. Amazon set the expedited delivery standard via its Amazon Prime service. Prime customers typically get their goods within two days of placing the order.

Is 2-day shipping guaranteed?

Two-day shipping isn’t always guaranteed because it hinges on many factors, including the shipping carrier, days of operation, cutoff time, weather, and additional factors. Many online sellers only use two days as a delivery estimate. However, some sellers are bold enough to provide a money-back guarantee if your order does not arrive within two days.

Even in cases where the seller provides a money-back guarantee, they still leave room for mishaps such as missing or stolen packages or lousy weather. You shouldn’t hastily provide guarantees around two-day shipping as an online seller. However, you should try to uphold your promises as much as possible.

What is the benefit of offering free 2-day shipping?

The main benefit of offering free two-day shipping is attracting many customers. However, you should know someone will have to pay for the free shipping and supplies, and that person is you. 

If it doesn’t make sense for your margins, you could be better off dropping the idea. Or, better still, offer it to a small subset of customers that may exceed a minimum purchase threshold or have subscribed to a particular service.

How to Offer 2-Day Shipping

Most small businesses need help handling the complexities of order fulfillment and expedited shipping. Thus, outsourcing your fulfillment services to a specialist company or another company with great logistics prowess makes excellent sense. Below are a few outsourcing options you can consider.

Fulfillment by Amazon (FBA)

Fulfillment By Amazon is available to a select group of Amazon sellers. To become FBA-eligible, you have to meet some preset criteria. Once you meet the requirements, your customers can expect guaranteed two-day shipping and could even upgrade to one-day shipping for a small fee.

The downside to Amazon FBA is that the service is only available for orders placed on the Amazon marketplace. Unfortunately, you won’t have the contact information to remarket to your customers. Amazon could even use your order information to build competing products; there’s nothing you can do about it.

Furthermore, you’ll incur considerable seller fees, despite Amazon using its branded packages for shipping. In essence, you have little control over the customer experience, and shoppers are likely to remember that they bought the item from Amazon than from you. In summary, it’s not a great option to boost brand visibility.

ShipHero

ShipHero is a third-party logistics (3PL) company with fulfillment centers nationwide, lowering last-mile delivery costs. We help sellers fulfill orders from business websites, third-party marketplaces, and other sales channels.

When you partner with ShipHero, you’ll get guaranteed two-day shipping that doesn’t come with all the negatives of FBA. You’re also likely to pay less on deliveries, and you can distribute your inventory across the numerous fulfillment centers in the country to save on shipping costs. If you want to scale your fulfillment operations and gain access to powerful 3PL software without breaking the bank, there’s hardly any better option than partnering with ShipHero.

Stay Competitive

Offering fast and cheap delivery options is now central to attracting and retaining online customers. Unfortunately, many small businesses don’t have the logistics capabilities necessary to match the expedited delivery services provided by eCommerce giants like Amazon, Walmart, and eBay.

Outsourcing your fulfillment needs to a 3PL company is the best way to remain competitive. If you can partner with the right logistics company, you can offer guaranteed two-day shipping and enjoy all the benefits of it.

Third-Party Logistics Definition and Analysis: 3PL Guide

May 9, 2025 | Blog

What Is a Third-Party Logistics Company?

3PL companies are companies that offer various eCommerce logistics processes to online businesses. Some services they offer include warehousing, inventory management, and order fulfillment.

3PL involves the business, the logistics provider, and the shipping carrier. In simple terms, a 3PL provider offers logistics services to manage certain aspects of a company’s shipping operations. 3PLs are renowned for their logistics industry expertise and can help companies better fulfill orders to keep their customers happy.

Some people think 3PLs and freight brokers are essentially the same. However, 3PL companies are more active than freight brokers because they take over your fulfillment operations. Meanwhile, freight brokers only connect you to shipping carriers without touching your products.

A 3PL becomes integrated into the company’s inventory storage and transportation procedures. Rather than storing, packaging, and shipping orders, companies hire a 3PL to manage the entire process. The 3PL owns or leases its storage and transportation assets to fulfill the client’s orders remotely, ensuring you can focus on growing your business.

Third-party supply chain models first appeared in the 1970s when intermodal marketers took packages from businesses and brought them to rail stations for delivery. People developed 3PL software to help companies manage inventory and deliveries as the field grows. Nowadays, all kinds of businesses, from Fortune 500 to small businesses, use third-party logistics.

Benefits of Third-Party Logistics in Supply Chain Management

Here are the benefits of working with a 3PL company:

Reduce Logistics Costs

Third-party logistics companies often have connections in the sector, meaning they have better access to vendors and can negotiate higher discounts for you. By partnering with them, you can use their contacts and influence to reduce shipping supply and warehousing expenses, ultimately saving you money.

Receive Logistics Experience

Many third-party logistics service experts have decades of combined experience in the industry. When you hire a 3PL company, you get access to this expertise to get insights on transport documentation, shipping regulations and other logistics issues. They can also answer your questions about how to increase operational efficiencies.

Focus on Critical Functions

Running an in-house logistics division takes a lot of time and money. By hiring a 3PL company, you can instead focus on core business processes like developing marketing materials and improving sales channels. Better yet, you can do this without dedicating any internal staff or resources to run an in-house logistics division.

Scale With Your Business Capabilities

3PLs provide custom-made services based on your company’s needs and performance. If your business grows and product orders increase, you can sign them for a more significant contract with more benefits. Conversely, considering downscaling your business, you can opt out of some of their services.

Third-Party Logistics Business Model

As the name implies, 3PL involves three parties that help bring products to the market. Here are the three parties involved in the 3PL model:

• The Business: The business is your company – you’re responsible for producing goods and running the eCommerce business. Once people buy your products, you send the orders to your logistics company.
• The Logistics Company: The logistics company is the intermediary between your company and the shipping providers. Third-party logistics companies offer many services, including warehousing, packaging and inventory management.
• The Shipper: The shipper carries your products to physical stores or the buyers’ doors. Major shippers include USPS, UPS and DHL.

What Services Does a 3PL Provide?

A 3PL can scale and customize its services according to the client’s specific needs. The client still retains some oversight when managing shipping operations. Before signing a contract, you can outline what services you want the 3PL to provide and what services you will maintain in-house. As your business grows, your 3PL provider can take over a significant role in expanding your supply chain and procurement operations.

Here’s an overview of the services a 3PL typically provides:

Product Storage Solutions

3PL companies provide warehouse spaces to handle order fulfillment for multiple companies in one place. This improves efficiency and reduces costs because they don’t have to switch between numerous warehouse locations to finish orders. Moreover, you don’t have to lease warehouse space, buy forklifts, or rent trucks to handle your merchandise.

Inventory Management and Organization

Managing inventory involves more than simply storing your company’s products. Integrative technology also syncs your inventory with your online store in real-time, so you can track inventory and predict demand to avoid sell-outs. Your 3PL also helps organize items with multiple parts into proper categories, ensuring nothing is misplaced.

Inventory Distribution

Most 3PL providers have fulfillment centers across the country to store your products. 3PL companies distribute your inventory across the country to ensure fast shipment times.

A 3PL automatically routes orders to fulfillment centers based on where the customer resides. 3PLs use extensive automation to save hundreds and thousands of dollars on inventory distribution, raising their clients’ profits.

Picking and Packing

Alongside storage, 3PL companies assign staff to pick products for each order and package them for delivery.

Freight Forwarding

Once the products are picked and packaged, the 3PL forwards them to a shipping carrier for delivery. Different 3PLs work with other carriers, and a good 3PL will choose the one that offers the best price and delivery speed. Some 3PLs even work with local carriers for less than truckload (LTL) shipping for local orders.

Expedited Shipping

By partnering with a 3PL, your company can offer expedited shipping options to your customers since fulfillment centers send out orders daily. 3PLs often negotiate discounts with carriers like FedEx, DHL, USPS and others to offer faster delivery speeds at a manageable cost.

Shipment Tracing/Tracking

In addition to handling the shipping process, a 3PL will also manage the tracing and tracking process. Customers will receive shipping information to track their orders throughout the fulfillment process.

Reverse Logistics (Returns)

Not only do 3PLs offer shipment services, but they can also provide reverse logistics to handle returns. A 3PL can provide customers with return labels to drop the item off with a carrier for return to the fulfillment center.

Again, when you sign a contract with a 3PL company, you can customize its services according to your business’s needs. An experienced 3PL provider will be able to handle the logistics of the entire supply chain from when your customer submits their order to when it arrives on their doorstep.

How 3PLs Handle Order Fulfillment

So you can visualize what this looks like, here is an outline of the order fulfillment process from a 3PL provider’s perspective:

Step 1: Receiving

A 3PL needs inventory to complete customer orders, so your first act should be moving inventory to their warehouse. Depending on your business size, your inventory may be divided into several fulfillment centers. Each 3PL has its process for receiving and storing inventory. Most providers can customize this service according to the client’s needs.

Step 2: Picking

Depending on the 3PL’s software, your partner may get the orders automatically, or you may have to send them manually. After placing the order, the 3PL starts the order fulfillment process by picking the items at the warehouse and then passes it to the next stage of the supply chain for packaging.

Step 3: Packing

Once the 3PL has picked up all ordered items, they are prepared for packing.

Standard shipping materials for your products include cardboard boxes, poly mailers, bubble wrap, packing tape and bubble mailers. The best 3PL company can balance package protection and small dimensional weight, so your products arrive safely and within budget.

Some 3PL companies charge extra for packing material, but others fold the costs into the service fee. Depending on your working relationship, 3PL companies may also let brands customize their packaging.

Step 4: Shipping

After the products are prepared, they’re handed off to a courier for final delivery.

Some 3PLs partner with specific shipping carriers, while other companies have a rotation of transportation services to get the best deals. Either way, 3PL partners are responsible for brokering deals with freight forwarders to bring you the best rates. The courier fleet usually picks items up from your 3PL partner’s warehouses.

Step 5: Returns

The order process doesn’t always finish once the package is delivered to the customer’s door. Specifically, product returns can get complicated if you manage inventory stock levels yourself. When you’re working with a 3PL partner, they receive all returned products to be restocked, scrapped or processed.

To make the return process more manageable, you can ask the 3PL company to provide shipping labels for every package. Customers can fill them out and return their packages if something goes wrong.

It should be clear by now that 3PL partnerships benefit companies, but how do you determine whether yours will? Keep reading to learn the signs that it’s time to hire a 3PL.

When Do You Need a 3PL?

3PLs are needed when you can’t handle order fulfillment by yourself. Unless you’re running a small retail business out of your garage with no more than a dozen orders a week, the chances are good that your company could benefit from hiring a 3PL provider. To help you decide, here is an overview of the advantages associated with working with a third-party logistics provider:

• Time savings: Outsourcing your company’s logistics means you have more time to focus on critical business processes.
• Cost savings: 3PL companies offer lower warehousing, shipping, and inventory management prices, which is cheaper than building in-house logistics departments.
• Improved compliance: 3PL companies help you stay updated with the latest logistics technologies and regulations.
  • Service customization: When it comes to warehousing, shipping, and distribution, a 3PL provider can customize its services according to your needs and adjust as you grow.
  • Access to resources: Hiring a 3PL gives you access to the best inventory management software and other integrative technology you might not get on your own.
• Expanded reach: 3PL companies have more experience negotiating with shipping carriers and other vendors so that you can get the best logistics services at low rates.
• Risk reduction: Outsourcing operational logistics to a 3PL company means fewer labor and financial risks than building an in-house logistics department.

Still unsure whether hiring a 3PL provider is the next logical step for your business? Here are some of the top reasons to hire a third-party logistics provider:

You’re Shipping More Than 100 Orders Per Month

There is nothing magical about the number “100” – the point is that your company is receiving more orders than you can efficiently manage in-house. Shipping a large volume of items per month means your team spends more time and effort fulfilling orders than doing core business tasks. Once you’ve reached over 100 shipments per month, it’s a good idea to hire a 3PL company to support your operations.

You’ve Run Out of Storage Space for Your Inventory

Any retail company’s goal is to have enough orders that it becomes necessary to increase inventory levels. Of course, when this happens, you’ll need space to store all of that extra inventory. Rather than dealing with this predicament each time you add a new product to your store, turn over storage logistics to a 3PL.

You Want to Offer Your Customers Expedited Shipping

Suppose you’re currently managing your order fulfillment in-house. In that case, you may struggle to make it to the post office even once a day, let alone often enough to give your customers expedited shipping options. With a 3PL handling your order fulfillment logistics, you can suddenly offer one-day, two-day, and maybe even same-day delivery.

You Want to Save Money on Storage and Shipping

Working with 3PL providers isn’t cheap, but it could save you loads of time and money. Instead of spending a lot to lease storage space and build an in-house logistics division, consider hiring a 3PL so you can spend the savings on building your business. Additionally, 3PL services speed up product deliveries and give you a competitive advantage.

You Want Your Company to Have Room to Grow

Every good business person is forward-thinking. From the moment you start your business, you should know where you want to go and how you want to get there. Suppose you expand your offerings throughout the country or around the globe. In that case, a 3PL can help you get there with inventory distribution services. For example, some 3PLs can leverage 2-day or overnight shipping to help eCommerce businesses keep up with Amazon and other giants.

Hiring a 3PL provider to manage your supply chain’s logistics is smart if any or all of the signs above are coming into play. Before you start shopping around for a 3PL, however, you should take a moment to consider whether doing so is enough. You may want to consider taking things one step further and hiring fourth-party logistics service providers – keep reading to learn more.

What’s the Difference Between a 3PL and 4PL?

First and foremost, you should know that 3PLs and 4PLs are professional, hired services that help businesses like yours plan and execute inventory management and order fulfillment logistics. You get much more flexibility than you would if you managed fulfillment in-house.

As you well know by now, a third-party logistics provider is a company that handles the logistics of your company’s supply chain and order fulfillment processes. Depending on how much control you want to hand over to your 3PL, they can do everything from storing and managing your inventory to picking, packing, and shipping your orders. They can even handle the returns management process for you.

So, what is a fourth-party logistics provider, and how does it differ from a 3PL?

A fourth-party logistics provider adds another element to the equation, combining various resources and technologies to optimize your supply chain’s design and execution. You can still keep your 3PL to manage the day-to-day details of order fulfillment. Still, a 4PL will become the “control tower” that oversees supply chain management. They will supervise your 3PLs and any other resources or providers you use to ensure your supply chain operates smoothly, efficiently, and cost-effectively. For businesses that want total supply chain visibility, a 4PL provider can be a great option.

The critical difference between a 4PL and a 3PL is that many 3PLs are asset-based – they own or lease equipment and warehouses that they use to provide services. As such, a 3PL is concerned with its costs and may not always seek the best deal for you if it means a better deal for them. In contrast, a 4PL’s only concern is integrating and optimizing your supply chain operations.

The Different Types of 3PL Providers

A third-party logistics provider can offer many services, though many focus on specific supply chain solutions. As a business, this might mean hiring multiple 3PLs to fulfill your supply chain’s different aspects – this is when hiring a 4PL may come in handy.

Here is a quick overview of the different types of 3PL providers you may come across:

Transportation

As part of your transportation 3PL search, you need to consider several factors, including: the company’s location, where your customers are located, delivery timelines, shipping methods, service options, and pricing and discounts. This type of 3PL deals with shipping inventory between locations.

Warehousing/Distribution

The most common type of 3PL is warehouse and distribution-based. These providers handle the storage, shipment, and returns of your orders. When considering a warehousing 3PL, you’ll need to consider the number of locations and their geographical locations, the pricing model for storage, negotiated shipping rates, delivery insurance, daily cutoffs for order fulfillment, and management tools.

Financial/Information

Once your company expands beyond the eight or nine-figure mark in annual revenue, you may want to bring a financial 3PL on board to help you optimize your operations for the industry and to evaluate current trends. These 3PLs offer freight auditing, cost accounting, bookkeeping, tracking, tracing, and inventory management.

How 3PL Pricing Models Work

Now that you better understand the different types of 3PL providers, you may wonder how much it costs to hire a 3PL. Third-party logistics pricing depends on the services you require and the scope. Several factors that determine 3PL pricing include:

• Onboarding: Getting a 3PL partnership up and running can take 3 to 6 months, so some companies charge onboarding fees to set your company up with integrated technology to manage order fulfillment services.
• Inventory Receiving: Before a 3PL can start managing its supply chain, it must receive its inventory from suppliers or manufacturers. Some companies charge per unit or pallet, while others charge by the hour or a flat rate for receiving and storing inventory.
• Inventory Storage: Different 3PLs offer different storage fees depending on the warehouse. You may be charged a lower rate for shared storage but will share the fulfillment center with other companies. You may be charged per item, bin, shelf, or pallet for storage.
• Order Picking and Packing: Many 3PLs charge a fee for picking each item, while others include this cost in the total order fulfillment price. Some companies offer discounted rates for orders under a certain number of items.
• Packaging: Some 3PLs include packaging materials in their shipping costs, while others charge a fee. You may have the option to customize your packaging materials, or you may not.
• Kitting: Refers to any unique accommodations you request for assembling, arranging, or packing orders before shipping. Assembly fees vary according to your individual needs.
• Shipping: Most 3PLs have relationships with shipping carriers to reduce costs, which means more significant savings. These costs consider various factors, such as shipping speed, shipping zones, and packages’ dimensional weight.

In addition to considering these individual costs, you should also know that most 3PLs offer three pricing models. Here is a quick overview of their differences:

1. Total Fulfillment Cost: This pricing model reflects the total fulfillment cost for direct-to-consumer orders, charging only for receiving, storing, and shipping inventory instead of fees for individual services.
2. Fulfillment by Amazon: Abbreviated to FBA, Fulfillment by Amazon is a model in which products are sold on the Amazon marketplace, and Amazon fulfills orders on behalf of your company. Because Amazon receives a cut of every sale, they can offer discounted fulfillment fees. This offer is convenient for some companies, but for others, it means sacrificing a portion of their bottom line and losing the ability to highlight their brand. Amazon also charges long-term storage fees for unsold items.
3. Pick and Pack: As you can guess from the name, this pricing model is based on separate charges for each item picked and packaged. Most 3PL providers charge between $0.15 and $5.00 for each pick, so that costs can add up quickly with this pricing model.

When choosing a 3PL provider, consider all aspects, including costs. Keep reading to receive some additional tips for selecting a 3PL provider.

Tips for Choosing a 3PL Provider

If you’ve decided that hiring a third-party logistics provider is the next logical step in expanding your business, congratulations! Now comes the hard work – choosing the perfect provider to meet your business’s current needs while offering room for growth.

Here are some simple tips to keep in mind when choosing a 3PL provider:

• Ask the provider if they have an enforceable non-disclosure agreement (NDA).
• Look at the company’s financial stability and client satisfaction track record.
• Book a consultation to visit a nearby 3PL warehouse or distribution center to see if their operations are up to code.
• Consider the company’s hours of operation, including weekends and holiday hours.
• Ask what services the company provides and which, if any, they consider their specialty.
• Determine what third-party logistics software they use and examine its features.
• Ask how the company differs from other 3PLs and what differentiates them from the competition.
• Consider the options for customization and scalability of services.
• Inquire about their relationships with shipping carriers and their negotiated rates.
• Ask about their options for expedited shipping as well as guaranteed deliveries.
• Determine how many warehouses they operate and their locations.
• Ask about their customer service policies and how they help you when an issue occurs.
• Ask what the costs and process is. If you’re not happy, choose to switch to another 3PL.
• Find out what their typical customer profile is. If their profile is disjointed or you’re not similar to their other customers, they might not be the right 3PL.
• Try to find reviews and talk to existing or past customers.

Examples of 3PL Companies for eCommerce and Small Businesses

There are dozens of 3PL companies vying for your business, so choosing one is challenging. To help you decide, here are four premiere 3PL company options for your eCommerce and small business:

ShipHero

ShipHero is one of the best third-party logistics services for online retailers providing order fulfillment for more than 4,000 eCommerce businesses. Here are some of the benefits you’ll get when partnering up with ShipHero:

• Warehouse management services
• Robust 3PL software system
• Nationwide fulfillment center network
• Professional returns management
• eCommerce platform integration
• A variety of delivery options
• Simple pricing model and flat fees
• No-contract services

ShipHero also integrates with major eCommerce platforms like Shopify Plus, BigCommerce, Shopify, Amazon, and WooCommerce.

ShipBob

ShipBob is a third-party logistics company that helps you ship products worldwide. It promises shipping to all areas of the world through fulfillment centers in North America, Australia, and Europe.

ShipBob offers these 3PL services:

• Warehouse storage
• Pick and pack
• Product receiving
• Standard product packaging
• Product shipping

ShipBob offers integrations with major eCommerce platforms like Shopify, BigCommerce, and Squarespace.

Whitebox

Whitebox offers end-to-end 3PL services to help your products go from the factory floor to the buyers’ doorstep. Whitebox even has an in-house advertising agency to help you market your business.

The services offered by Whitebox include:

• Product packaging
• Shipping
• Quality assurance
• Warehouse management
• Order fulfillment
• Product description creation
• Professional product photography

FedEx Fulfillment

FedEx Fulfillment is the 3PL subsidiary of FedEx, which offers third-party logistics to small businesses. It boasts excellent customer service and a resource hub to help new business owners learn entrepreneurship.

Here are the services you’ll get from FedEx Fulfillment:

• Order fulfillment
• Product packaging
• Reverse logistics
• Warehouse and storage management

How to Choose the Best Third-Party Logistics Company

Choosing the right 3PL company can help you cut costs and improve efficiency. Follow these tips to pick the right 3PL provider:

• Research the company’s reputation and track record.
• Find a company that offers all the services you need.
• Look into the 3PL company’s technology.
• Ask about their inventory and packaging customization offerings.
• Pick a company that provides multiple fulfillment centers across your target regions.

Closing Thoughts

Once you’ve narrowed your list to a few different 3PL options, it’s time to start digging deeper to find the best match for your company. Before talking to any 3PL in-depth, ensure they have and sign a non-disclosure agreement to protect your company.

In addition to talking to the 3PL’s representatives, you should also ask for references in the industry to determine whether the company has a solid track record and a positive reputation. Over time, it will become clear whether any of the 3PLs on your list are the right fit for your company or not.

Of course, the most important matter when choosing a 3PL partner is the value it offers. Find a 3PL company that caters to your order fulfillment needs at a reasonable price.

Finding the perfect third-party logistics partner that will keep your company’s best interests in mind may not be a quick and easy process. Still, it is important that you do it right.

For help finding a 3PL provider, check out our online directory or contact ShipHero directly to learn how we can help you with fulfillment.

Third-Party Logistics FAQs

What are Third-Party Logistics (3PLs)?

Third-party logistics involves handing your logistics operations over to another company. A third-party logistics company usually offers warehousing, shipping, and inventory management services.

What’s the Difference Between 3PL vs. 4PL?

The main difference between 3PL and 4PL is the number of parties involved. A 3PL company still works under your management to handle your inventory and shipments. In contrast, a 4PL company contracts different 3PL providers to take your products.

What are the Benefits of Working with a 3PL?

The main benefits of working with 3PLs are cost and time savings. You also gain access to their expertise. You don’t have to train in-house logistics employees to handle warehousing and shipping.