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All You Need To Know About 3PL (Third-Party Logistics) Services

Fast and convenient shipping is one of your top priorities, whether you are a startup or a large e-commerce business. Fortunately, third-party logistics (3PL) allows your customers to get their orders quickly. 3PLs not only contribute to customer satisfaction but also help with managing the supply chain efficiently. In this post, we will provide a comprehensive guide on everything you need to know about third-party logistics (3PL), why you need it, and which one suits your business needs. 

What Are Third-Party Logistics (3PL)?

Third-party logistics (3PL) is a fulfillment and logistics partner that helps e-commerce companies with warehousing, inventory management, shipping, picking and packing, returns processing, and order fulfillment. By streamlining logistics management, 3PL providers also allow businesses to focus more on selling and growing their brand. 

Types of 3PL Services 

3PL services come in various forms, each specializing in different areas of the supply chain. Understanding these types can help you choose the right partner for your business needs.


Transportation services focus on the transportation of goods. They offer services such as freight forwarding, shipping, and delivery management. If your primary needs rely on moving products from point A to point B, a transportation-based 3PL is what you need. 

Warehousing, Fulfillment, and Distribution

This is the most common type of 3PL service, which provides primary fulfillment services such as storage solutions, picking and packing, fulfillment, shipping, and returns. Most 3PL providers also handle transportation for sellers, manage the relationship with the shipper, and optimize the shipping strategy. 

Financial and Information

Financial and information 3PL services prioritize optimizing the company’s logistics network. They provide inventory in their warehouses and ensure timely order fulfillment, which is ideal for businesses with fluctuating storage needs. 

How Does 3PL Work?

3PL providers work differently depending on their services and fulfillment processes. Here’s a common way on how 3PL works: 

  • You send your inventory to the 3PL from your storage facility or directly from the manufacturer.

  • The 3PL provider receives your products and stores them in their warehouse. They manage your inventory and ensure everything is accounted for and organized efficiently.

  • When a customer places an order, the 3PL handles the picking, packing, and shipping processes. They ensure accuracy through automated systems to reduce errors and delays. 

  • Most 3PLs also handle returns, ensuring businesses that returned goods are processed quickly and efficiently.  

How Much Does 3PL Cost? 

3PL services come with associated fees depending on what you need. Understanding these expenses is essential to help you make an informed decision. 

1. Receiving Fees

Receiving fees cover the costs of receiving and processing shipments. There are three types: carrier, third-party or forwarder, and warehousing receiving. 

2. Warehousing or Storage Fees

Warehousing fees are charged to store your goods in the 3PL provider’s facility. Typically, costs are based on the space your inventory occupies, such as per square or cubic foot and pallet or bin space. 

3. Picking and Packing Fees

Picking and packing fees include the labor and materials needed to pick up ordered items from inventory and pack them for shipment. Usually, these fees are charged per item and usually with an additional charge for larger items. 

4. Shipping Fees

Shipping fees are costs for transporting your products from the warehouse to your customer. The rate varies based on volume, weight, or both. 

5. Setup and Account Management Fees

Initial setup fees cover the costs of integrating your system with the 3PL provider’s operations. Depending on your business scale, it typically ranges between $100 and $1000. Meanwhile, account management fees are recurring charges covering document storage, shipping labels, tracking reports, and much more. They usually cost about $35 monthly. 

Pros and Cons of 3PL

While third-party logistics offers various advantages, there are still downsides. Let’s look at some pros and cons of 3PL services to help you decide if they are still necessary for your business. Analyze its pros to determine whether they outweigh the cons. 

Pros of 3PL 

  • 3PL reduces business operations costs. Outsourcing logistics can cut down on operational expenses such as warehousing costs, labor costs, transportation costs, and more. 

  • It saves you time and money by allowing you to focus on core business activities and operations. While 3PL handles all the logistics, you can focus on product development, business expansion, marketing, and much more. 

  • 3PL can adjust based on your business needs at any given time. You can manage your business's changing needs without the need to spend a lot on equipment or new buildings. 

  • You can test new markets with minimal risks since 3PL can take charge of distributing products in different locations. 

Cons of 3PL 

  • Outsourcing means you have no direct control over the delivery process. If the 3PL service provider has inconveniences and delays with the shipment, it may affect customer satisfaction. 

  • There are some associated upfront costs, such as initial setup fees, ongoing costs of signing a contract, and more, which can also be significant, especially for small businesses. 

  • Relying on 3PL means the physical distance between your products increases, which may complicate inventory management and quality control. 

What Are Some Must-Haves When Searching for a 3PL Provider

When looking for a 3PL provider, there are various factors you need to consider. Here are some of the must-haves when choosing one for your business: 

1. Provider’s Reputation. A solid reputation is crucial when selecting a 3PL provider. You should consider a provider with positive feedback and high customer ratings. Moreover, a reliable and experienced 3PL with a long track record reduces risks and enhances logistics operation’s success. 

2. Technological Capabilities. It is essential to find a provider with the technological capabilities to handle logistics complexities. A 3PL provider should integrate seamlessly with the technologies and processes you already have to avoid overhauling the supply chain. 

3. Customer Support. Excellent customer service is a key factor when selecting your 3PL provider. A 3PL provider should equally provide superb customer support, whether you are a large or small company. This factor should be one of your primary considerations, so you don’t have to worry when problems come up since your 3PL provider can help you resolve those issues.

4. Scalability. Your business will come to a time when it will expand. Therefore, choose a 3PL that can keep up with your business needs.  They should also grow with you by handling larger volumes of orders.  

5. Security. Data security is paramount in logistics. Ensure your chosen 3PL provider protects your data and any financial information. 

6. Safety. 3PL partners should have robust safety protocols and compliance with relevant regulations. For industries like food and beverage, the 3PL must maintain high standards to secure products.

7. Customization. One-size-fits-all does not always work in logistics. The right 3PL provider should have customization options based on your business needs. 

How to find a 3PL provider in Australia

Finding a reliable 3PL provider in Australia requires careful consideration, and you need to look at several factors. Here are some tips and ways on how to find a suitable 3PL provider for your business needs: 

1. Find a local 3PL provider with a robust local presence and network across Australia. With that, you’ll be confident they are already familiar with the regional logistics landscape and can provide comprehensive coverage.

2. You should also check Australian certifications from the 3PL provider you choose. These certifications ensure that the provider adheres to local standards and industry best practices.

3. Utilizing advanced technology is also crucial for a 3PL provider. Check if they provide real-time tracking, inventory management systems, and integration capabilities with Australian e-commerce platforms like Shopify and WooCommerce. 

4. The logistics provider must comply with Australian regulations. Also, ensure they have experience with local laws for smooth cross-border logistics.

5. Seek testimonials or case studies from Australian businesses similar to yours. This will give you a clear picture of the 3PL provider's performance, trustworthiness, and the quality of their services in the local market.

6. Scalability should always be a primary factor when choosing a 3PL provider for your business.  They should be capable of scaling alongside your business needs or expansion. Moreover, their flexibility in service offerings and the ability to accommodate peak seasons are crucial.

7. Considering Australia's commitment to sustainability, you may also opt for a 3PL that practices eco-friendly logistics. This can also enhance your brand and increase your market. 

Final Thoughts

Outsourcing your business logistics offers several advantages. From cost savings to improved efficiency and scalability, 3PL providers provide a competitive edge in the market. Leveraging 3PL providers can streamline logistics operations, reduce costs, and allow you to focus on core business activities. Furthermore, choosing the right 3PL provider for your business needs is crucial. The right 3PL partner should adapt to your business's evolving needs and provide scalable solutions that support growth and market expansion.


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