What is 3PL? A plain-English guide to third-party logistics for growing online shops

3PL is one of those terms that everyone in logistics uses and nobody outside it explains. It stands for third-party logistics, and the idea is simple. Instead of storing stock and packing orders yourself, you hand that part of the business to a company that does it all day, every day. You keep selling. They keep shipping.

We are a 3PL, so we are hardly neutral. But we also talk to a lot of business owners who are trying to work out whether they are ready for one, what it will cost and what could go wrong. This guide is the conversation we usually have.

What a 3PL actually does

The day-to-day work breaks into a handful of jobs. A good 3PL will do all of them under one roof and on one system.

• Goods in. Your suppliers deliver to the warehouse. The team counts what arrived, checks it against what was expected, scans it in and puts it away in a known location.
• Storage. Your stock lives on their shelves, racking or pallet spaces. You pay for the space you use rather than a whole unit.
• Pick and pack. When an order comes in from your website or marketplace, someone picks the items, checks them and packs them the way you have asked.
• Shipping. The parcel gets the right label for the right carrier and goes out the door the same day.
• Returns. When something comes back, it is inspected, photographed and either put back into stock or set aside, according to your rules.
• Extras. Kitting, bundles, subscription boxes, relabelling, gift wrapping, inserts. Anything that happens to the product between the supplier and the customer.

Underneath all of that sits a warehouse management system, or WMS. It connects to your sales channels, pulls orders in automatically, tells the pickers where everything is and pushes tracking numbers back out to your customers. You get a login too, so you can see your stock and orders without having to ask.

How a 3PL charges

Pricing varies, but nearly every 3PL charges for the same things. Ours are on our pricing page, and this is what the categories mean.

• Receiving. A charge for checking in a delivery, usually by time or by pallet.
• Storage. A weekly or monthly charge per pallet, bin or cubic metre.
• Pick and pack. A fee per order, plus a smaller fee for each additional item in that order. This is usually the biggest line.
• Packaging. Boxes, mailers and protective material, charged per item or per order. Some brands supply their own branded packaging instead.
• Shipping. The carrier cost, which a 3PL often gets at better rates than a small business could on its own.
• Systems. A flat fee for the software, integrations and support.
• Returns and projects. Charged per return or per job.

The important thing is that almost all of it scales with what you sell. A quiet month costs less than a busy one. That is the trade you are making: you give up the fixed cost of your own space and staff, and take on a variable cost that tracks your orders.

Signs you are ready

Businesses usually come to us at a recognisable moment. If two or three of these sound familiar, it is probably time to have the conversation.

• You or your team spend more time packing orders than selling them.
• Stock has spread into a spare room, a garage, a storage unit, or all three.
• Seasonal peaks mean late nights and temporary staff you have to train from scratch.
• You are getting "where is my order" emails because dispatch is slipping.
• You want to sell on a new marketplace or into a new country and do not want to build the process yourself.
• The next step up is a lease on a unit and a forklift, and you would rather not sign it.

You do not have to be big. Some of our clients ship a few dozen orders a week. What matters is whether fulfilment has started to get in the way of growing the business.

What could go wrong

Outsourcing anything means trusting someone else with a part of your customer experience, so it is worth being clear-eyed about the risks.

• Picking errors. The wrong item in the box is the classic 3PL complaint. Ask how a warehouse prevents it. The honest answer involves barcodes scanned at pick and again at pack, not "our staff are very careful".
• Losing visibility. If you cannot see your stock levels without ringing someone, you will feel out of control very quickly. Insist on a live portal.
• Lock-in. Read the notice period and what it costs to get your stock out. A reasonable 3PL will not make it painful to leave, because they would rather you stayed because you want to.
• Hidden costs. Ask for a worked example of a typical order, all in, rather than a rate card on its own.

Questions to ask before you sign

1. Which sales platforms do you integrate with, and how long does setup take?
2. What is your cut-off time for same-day dispatch?
3. How do you check picks? Can I see it?
4. What happens to a return when it comes back?
5. Can I use my own branded packaging?
6. Which carriers do you use, and can I choose services per destination?
7. Where are you based, and which countries can you ship to without customs charges?
8. Are you registered with the UK Fulfilment House Due Diligence Scheme?
9. What does a typical order cost me, end to end?
10. Who do I actually talk to when something goes wrong?

That seventh question matters more than it used to. Where a warehouse sits now decides which of your customers pay import charges. Fulfilling from Northern Ireland, for instance, means orders reach Great Britain, Ireland and the EU with no customs on the way, which is something a warehouse in Birmingham or Barcelona cannot offer. We explain why on our Why Northern Ireland page.

What it looks like when it works

A supplier delivers a pallet on Tuesday. By Tuesday afternoon it has been counted, scanned and put away, and your stock level has updated in your portal. On Wednesday morning forty orders come in overnight from your website and Amazon. They are picked, checked, packed in your branded boxes and collected by the courier by three o'clock. Tracking numbers go back to the customers automatically. On Thursday a return arrives; it is photographed, checked and back on the shelf before lunch. You have looked at none of this, because you have been on the phone to a new stockist.

That is the job. If you think you are close to needing it, we are happy to talk it through with no pressure either way. Pick a time and one of the team will give you a call.