Third-party logistics, usually shortened to 3PL, is a way for businesses to outsource some or all of the physical work involved in storing, preparing and distributing products.
Instead of operating its own warehouse, employing fulfilment staff and managing every parcel internally, an ecommerce retailer might use a 3PL provider to hold inventory, pick and pack orders and prepare them for delivery.
For growing businesses, that can remove a significant operational burden.
But “3PL” is also used very broadly. One provider may offer warehousing and fulfilment only, while another may manage inventory, returns, freight and delivery as part of a much larger logistics operation.
Understanding exactly what a 3PL does — and what it doesn’t do — is important before deciding whether outsourcing logistics makes sense for your business.
What Is a 3PL?
A third-party logistics provider (3PL) is an external company that performs logistics activities on behalf of another business.
Depending on the provider, these activities can include:
- receiving inventory
- warehousing
- inventory management
- order fulfilment
- picking and packing
- freight management
- parcel dispatch
- returns processing
- delivery coordination
For example, imagine an Australian ecommerce business selling skincare products.
Instead of storing thousands of products in its own premises, the retailer sends stock to a 3PL warehouse.
When a customer places an order:
- The order is sent to the 3PL.
- Warehouse staff locate the products.
- The order is picked.
- The products are packed.
- A shipping label is generated.
- The parcel is handed to a delivery provider.
- The parcel travels through the delivery network.
- The customer receives the order.
The retailer still owns the products and the customer relationship.
The 3PL performs agreed logistics activities on its behalf.
What Does “Third-Party” Mean?
The term becomes easier to understand when you look at the parties involved.
First party: the business selling the product.
Second party: the customer purchasing the product.
Third party: an external logistics business helping move the product between them.
In reality, modern supply chains can involve considerably more than three organisations.
A retailer might use:
- a manufacturer
- an importer
- a 3PL warehouse
- a freight company
- a delivery provider
- a returns provider
So “third-party logistics” shouldn’t be interpreted as meaning that exactly three companies are involved.
It describes the outsourcing relationship.
What Services Do 3PL Providers Offer?
There is no single service package shared by every 3PL.
Some providers specialise in one part of the logistics process, while others provide much broader solutions.
Here are some of the most common functions.
1. Receiving Inventory
Before products can be fulfilled, they need to arrive at the warehouse.
A 3PL may receive:
- pallets
- cartons
- individual products
- imported stock
- stock transferred from another warehouse
The provider then records the inventory and places it into appropriate warehouse locations.
Accurate receiving matters because errors at this stage can affect everything that follows.
If the system says 500 units were received but only 450 are physically available, fulfilment problems can begin immediately.
2. Warehousing
Warehousing is one of the services most commonly associated with 3PLs.
Instead of leasing and operating its own facility, a business can store products in the provider’s warehouse.
This can reduce the need for the retailer to manage:
- warehouse leases
- racking
- warehouse equipment
- utilities
- warehouse staff
- workplace processes
- security
- additional space during growth
However, warehousing isn’t simply about finding somewhere to put boxes.
The warehouse needs processes for locating and controlling inventory efficiently.
3. Inventory Management
Many 3PL providers use a warehouse management system, often referred to as a WMS.
The system may help track:
- stock received
- stock locations
- available inventory
- allocated inventory
- orders
- dispatched stock
- returns
Depending on the systems involved, inventory information may also synchronise with the retailer’s ecommerce platform or other business software.
Accurate inventory data is important because selling stock that isn’t actually available can create cancellations, delays and unhappy customers.
4. Order Processing
When a customer completes an online purchase, the order needs to reach the fulfilment operation.
This may happen through an integration between:
Ecommerce store → Order system → 3PL/WMS
The objective is to minimise unnecessary manual handling.
If staff have to download spreadsheets, re-enter addresses and manually create every order, the process becomes slower and creates additional opportunities for errors.
Automation can be particularly valuable as order volumes increase.
5. Picking
Picking means retrieving the correct products from warehouse locations for an order.
A simple order might contain one item.
Another could contain:
- several products
- different sizes
- different colours
- promotional inserts
- bundled products
Picking accuracy is critical.
Sending the wrong item doesn’t just create a warehouse problem.
It can create:
- a customer complaint
- return shipping
- replacement delivery
- additional fulfilment work
- inventory discrepancies
- potential loss of the customer
6. Packing
Once the products have been picked, they need to be prepared for transport.
Packing can include:
- selecting an appropriate box or mailer
- protecting products
- sealing the parcel
- including documentation
- applying labels
- preparing the parcel for dispatch
Good packaging needs to balance protection with efficiency.
Oversized packaging can increase material use and, depending on the delivery arrangement, potentially affect shipping costs.
Insufficient packaging can increase the risk of damage.
For ecommerce businesses, packaging can also contribute to the customer’s perception of the brand.
7. Dispatch
Completed orders need to leave the warehouse.
This is the point where fulfilment and delivery begin to connect.
Depending on the operation, parcels may be:
- collected by a carrier
- injected into a parcel network
- transferred to another depot
- allocated to local delivery routes
- handed to a last-mile delivery partner
Dispatch cut-offs can be extremely important.
An order completed shortly before the carrier collection may leave that day.
An order completed just after the collection may remain in the warehouse until the next dispatch opportunity.
That is why warehouse cut-offs and delivery promises need to work together.
8. Delivery
Not every 3PL operates its own delivery network.
This distinction is important.
A 3PL may manage warehousing and fulfilment extremely well but rely on external delivery providers to complete the journey to the customer.
That means the customer experience can depend on both organisations.
The 3PL might:
Store → Pick → Pack → Dispatch
while the delivery provider handles:
Collect → Sort → Transport → Deliver
This relationship is particularly important for ecommerce and high-volume parcel operations.
GoPeople works with businesses and 3PL operations that require business delivery services, including GoEXPRESS next-day delivery in supported areas.
For a more specific discussion of this part of the supply chain, see our guide to last-mile delivery for 3PLs in Australia.
9. Returns
The logistics process doesn’t necessarily finish when the parcel reaches the customer.
Ecommerce businesses may also need to manage returns.
Depending on the provider, a 3PL may help with:
- receiving returned products
- checking returned stock
- updating inventory
- returning eligible products to stock
- separating damaged products
- coordinating information with the retailer
Returns can become a substantial operational task for businesses with high order volumes.
How Does a 3PL Work?
Although every operation is different, a typical ecommerce 3PL workflow might look like this:
Supplier → 3PL Warehouse → Inventory → Customer Order → Pick → Pack → Dispatch → Delivery Provider → Customer
The process starts before the customer orders anything.
Step 1: Stock Arrives
The retailer or supplier sends inventory to the 3PL warehouse.
Step 2: Inventory Is Recorded
The warehouse receives the products and records them in its system.
Step 3: The Customer Orders
A customer purchases through the retailer’s ecommerce store or another sales channel.
Step 4: The Order Reaches the 3PL
The order information is transmitted to the warehouse.
Step 5: Products Are Picked
Warehouse staff or automated systems identify and retrieve the required items.
Step 6: The Order Is Packed
Products are packaged and labelled.
Step 7: The Order Is Dispatched
The parcel enters the appropriate delivery process.
Step 8: Delivery Takes Place
The delivery provider transports the parcel to its destination.
Step 9: Delivery Information Is Recorded
Depending on the delivery service, tracking and proof-of-delivery information may be available.
This final part of the journey can be especially important because it is often the only physical part of the logistics operation the customer sees.
3PL vs Fulfilment: What’s the Difference?
The terms are often used interchangeably, but they don’t necessarily mean exactly the same thing.
Fulfilment usually refers specifically to processing customer orders.
That can include:
- picking
- packing
- preparing orders
- dispatching them
Third-party logistics can be broader.
A 3PL might provide fulfilment while also handling:
- warehousing
- inventory
- freight
- transport coordination
- returns
- other logistics functions
So a fulfilment provider can perform 3PL-like activities, but you shouldn’t assume every provider offers the same scope.
Always examine the actual services included.
3PL vs Courier: What’s the Difference?
A 3PL and courier generally perform different roles.
| Function | 3PL | Courier / Delivery Provider |
|---|---|---|
| Warehouse inventory | Common | Usually no |
| Store products | Common | Usually no |
| Pick customer orders | Common | Usually no |
| Pack customer orders | Common | Usually no |
| Manage warehouse stock | Common | Usually no |
| Collect parcels | Sometimes | Yes |
| Transport parcels | Sometimes | Yes |
| Final delivery | Sometimes / partner | Yes |
| Delivery tracking | May integrate | Common |
| Proof of delivery | May receive data | Common |
There can be overlap.
Some large logistics organisations operate warehouses and delivery networks.
Others specialise.
The important question isn’t what the company calls itself.
It is:
Which part of my supply chain will this provider actually manage?
3PL vs Operating Your Own Warehouse
Businesses don’t have to outsource fulfilment.
Some operate their own warehouses successfully.
The choice depends on factors such as:
- order volume
- product type
- operational expertise
- available capital
- geographic requirements
- growth plans
- level of control required
In-House Fulfilment
Operating internally can provide greater direct control.
But the business may need to manage:
- premises
- equipment
- systems
- staff
- recruitment
- training
- capacity
- processes
3PL Fulfilment
Outsourcing transfers agreed activities to a specialist provider.
This can reduce the operational workload, but it also means relying on another organisation to perform an important part of the customer experience.
Neither approach is automatically better.
The right model depends on the business.
When Does a Business Need a 3PL?
There isn’t a specific order volume at which every business should switch to a 3PL.
Instead, look for operational signals.
Your Team Is Spending Too Much Time Packing Orders
In the early stages of ecommerce, founders often fulfil orders themselves.
That can work when volumes are small.
As the business grows, the same process can consume hours every day.
Eventually, the question becomes:
Is packing parcels still the best use of our team’s time?
You’re Running Out of Space
Products can quickly outgrow:
- a home
- small office
- retail storeroom
- small warehouse
A 3PL can provide an alternative to taking on a larger facility yourself.
Order Volumes Are Becoming Difficult to Manage
Growth can expose operational weaknesses.
For example:
- orders are being missed
- dispatch is becoming late
- picking errors are increasing
- stock is difficult to locate
- staff can’t keep up with peaks
Outsourcing may provide access to established warehouse processes and additional capacity.
Demand Is Highly Variable
Some businesses experience major seasonal peaks.
Examples include:
- Black Friday
- Christmas
- product launches
- promotional campaigns
- seasonal products
Building an internal operation for peak volume can leave excess capacity during quieter periods.
A 3PL may offer more flexibility, depending on its commercial model and available capacity.
You Want to Focus on Other Parts of the Business
Every hour spent managing warehousing is an hour not spent on:
- product development
- marketing
- customer acquisition
- merchandising
- partnerships
- strategy
For some businesses, logistics is a core capability they want to own.
For others, it is a function they would rather outsource.
What Are the Benefits of Using a 3PL?
The benefits depend on the provider and business, but several potential advantages are common.
Reduced Infrastructure Requirements
The retailer may not need to build the same level of warehousing infrastructure internally.
That can reduce the need to directly manage premises, equipment and warehouse staffing.
Operational Expertise
An experienced 3PL may already have established processes for:
- receiving
- storage
- picking
- packing
- inventory
- dispatch
Businesses can benefit from that existing operational capability rather than developing every process themselves.
Scalability
A 3PL may make it easier to handle increasing volumes without immediately moving into a larger warehouse.
However, businesses should still confirm the provider’s actual capacity and peak-period arrangements.
“Scalable” should never simply be assumed.
Technology
Many 3PL providers use systems that integrate warehouse activity with ecommerce and order-management platforms.
Good integrations can reduce manual administration and improve visibility.
Potentially More Predictable Fulfilment Processes
Standardised warehouse workflows can help create consistency.
That can be particularly useful as a business grows beyond the point where a few staff members can manage everything informally.
What Are the Disadvantages of Using a 3PL?
Outsourcing logistics also creates trade-offs.
Less Direct Control
Your products are being handled by another organisation.
That means processes, staffing and warehouse operations aren’t under your direct day-to-day control.
Additional Dependencies
Your customer experience now depends partly on another company.
A warehouse problem can become your customer problem.
Integration Complexity
Systems need to communicate correctly.
Problems can arise when:
- orders fail to sync
- stock levels are inaccurate
- addresses are transferred incorrectly
- status updates aren’t returned
- systems use different product identifiers
Technology should be evaluated just as carefully as warehouse capability.
Contract and Pricing Complexity
3PL pricing can contain several components.
Understanding the total cost requires more than comparing a single headline rate.
Less Flexibility for Unusual Processes
A business with highly customised packing or fulfilment requirements may find that a standardised 3PL operation doesn’t accommodate every request efficiently.
Discuss special requirements before signing an agreement.
How Much Does a 3PL Cost?
There isn’t one universal 3PL pricing model.
Businesses may encounter charges for:
- onboarding
- receiving stock
- storage
- pallet storage
- bin or shelf storage
- picking
- additional items per order
- packing
- packaging materials
- labelling
- kitting
- returns
- account management
- technology
- freight
- parcel delivery
Some providers may also have:
- monthly minimums
- minimum order volumes
- peak-period charges
- long-term storage charges
That means comparing 3PLs requires understanding your own order profile.
Calculate the Total Cost Per Order
Rather than focusing only on storage or pick fees, estimate the full cost.
For example:
Receiving + Storage + Pick & Pack + Packaging + Delivery + Returns + Other Fees
Then compare that with your current internal cost.
Remember that internal fulfilment also has costs that can be easy to overlook:
- rent
- labour
- superannuation
- equipment
- software
- management time
- recruitment
- utilities
- errors
- wasted space
A meaningful comparison needs to consider both sides.
Questions to Ask a 3PL Provider
Before choosing a provider, ask detailed questions.
Warehouse and Operations
- Where are your warehouses?
- What types of products do you handle?
- How is inventory stored?
- How do you manage stock accuracy?
- What are your receiving processes?
- What happens during peak periods?
Orders
- What are your order cut-offs?
- How quickly are orders normally dispatched?
- How do you handle priority orders?
- What happens when an order contains an error?
Technology
- Which ecommerce platforms do you integrate with?
- Do you provide an API?
- How quickly do orders sync?
- Can we see inventory in real time?
- How are tracking updates returned?
Packing
- What packaging is available?
- Can we use branded packaging?
- Can you include inserts?
- Can you support kitting or bundles?
Delivery
- Which delivery providers do you use?
- What delivery options are available?
- Is tracking available?
- Is proof of delivery available?
- What happens after an unsuccessful delivery?
- Can different delivery services be used for different order types?
Returns
- How are returns received?
- Who assesses returned stock?
- How quickly is inventory updated?
- What happens to damaged products?
Commercial Terms
- What are all the fees?
- Are there monthly minimums?
- Are there peak surcharges?
- What is the contract term?
- Are there minimum volumes?
- How is pricing reviewed?
These questions make it easier to compare providers on actual capability rather than marketing claims.
Delivery Should Be Part of Your 3PL Evaluation
Businesses sometimes focus heavily on the warehouse and treat delivery as an afterthought.
That can be a mistake.
From the customer’s perspective, the warehouse is mostly invisible.
Customers experience:
- the delivery promise
- tracking
- notifications
- whether the parcel arrives when expected
- condition on arrival
- proof of delivery
- support when something goes wrong
That makes the connection between the 3PL and delivery provider extremely important.
Warehouse Cut-Offs and Delivery Services Need to Align
Imagine a retailer promises next-day delivery.
That promise only works if:
- The customer orders before the relevant cut-off.
- The order reaches the 3PL correctly.
- The warehouse picks it in time.
- The order is packed before dispatch.
- The delivery provider collects it.
- The parcel enters the correct delivery process.
If any one of those stages misses its cut-off, the customer promise may fail.
Warehouse and delivery operations therefore need to be designed together.
Tracking Data Should Flow Back to the Customer
A strong fulfilment process shouldn’t become invisible once the parcel leaves the warehouse.
Where systems allow, delivery information should flow through the broader ecommerce experience.
That can include:
- collection status
- delivery progress
- customer notifications
- delivery completion
- proof of delivery
This is particularly valuable for 3PLs serving multiple retailers.
The retailer wants visibility.
The 3PL wants visibility.
The customer wants visibility.
A fragmented tracking process creates additional support work for everyone.
Different Orders May Need Different Delivery Services
Not every parcel has the same urgency.
A business might have:
Standard orders
Use the normal delivery process.
Next-day orders
Require faster dispatch and delivery.
Same-day orders
Need fulfilment and dispatch within the same day.
Urgent individual jobs
May require an on-demand courier.
Multiple local deliveries
May suit a multi-drop model.
This is why delivery flexibility can be useful for 3PLs.
GoPeople provides several business delivery models, including:
- GoEXPRESS — next-day delivery
- GoBUNDLE — multi-drop delivery
- GoSAMEDAY — same-day delivery
- GoVIP — on-demand courier
Availability and suitability depend on the service, pickup location and delivery requirements.
Businesses can use the GoPeople service eligibility checker to check available options.
How Should a 3PL Choose a Delivery Partner?
A 3PL is effectively placing part of its own service reputation in the hands of the delivery provider.
Important factors can include:
Service Coverage
Can the provider serve the locations required by the 3PL’s customers?
Pickup Requirements
Can collections work with warehouse dispatch schedules and volumes?
Delivery Speed
Does the provider offer the delivery timeframes required by the retailer?
Tracking
Can the 3PL and retailer see meaningful delivery progress?
Customer Communication
Can recipients receive useful delivery updates?
Proof of Delivery
Can delivery completion be verified?
Integration
Can systems exchange the information needed to manage deliveries efficiently?
Exception Handling
What happens when:
- nobody is available
- an address is incorrect
- access isn’t possible
- a parcel can’t be delivered
- the recipient reports a problem
A delivery partner should be evaluated on the entire process, not simply the initial price.
3PL Performance Metrics Worth Monitoring
Once a business begins using a 3PL, performance should be measured.
Useful metrics may include:
Order Accuracy
How often is the correct order picked and packed?
Inventory Accuracy
Does recorded stock match physical stock?
Dispatch Performance
Are orders leaving within the agreed timeframe?
Damage Rate
How frequently are products damaged?
Return Rate
Why are customers returning products?
Delivery Performance
Are parcels reaching customers within expected delivery timeframes?
Failed Delivery Rate
How often can’t deliveries be completed?
Support Contacts
Which fulfilment or delivery problems generate the most customer enquiries?
Metrics should help identify where problems actually occur.
A high level of “delivery complaints”, for example, doesn’t necessarily mean every problem started with the delivery provider.
The root cause could be:
- late warehouse dispatch
- incorrect address data
- wrong item
- poor packaging
- missed cut-off
- carrier delay
Understanding the full chain matters.
Should Your Business Use a 3PL?
A 3PL can make sense when outsourcing logistics allows the business to operate more effectively.
But outsourcing shouldn’t be treated as an automatic milestone every ecommerce business must reach.
Consider:
- current order volume
- expected growth
- internal fulfilment cost
- warehouse requirements
- operational complexity
- product characteristics
- required customisation
- delivery requirements
- technology
- customer expectations
Then compare the available options.
The right question isn’t:
“Are 3PLs better than doing fulfilment ourselves?”
It is:
“Which model best supports our business, customers and growth?”
Frequently Asked Questions About 3PLs
What does 3PL stand for?
3PL stands for third-party logistics. It generally describes outsourcing logistics activities such as warehousing, inventory management, order fulfilment and distribution to an external provider.
What does a 3PL company do?
Services vary, but a 3PL may receive and store inventory, manage stock, pick and pack customer orders, prepare parcels for dispatch, coordinate delivery and process returns.
Always confirm exactly which services a provider includes.
Is a 3PL the same as a courier?
No. A 3PL typically focuses on logistics functions such as warehousing and fulfilment, while a courier or delivery provider focuses primarily on transporting goods.
Some companies provide both, while many 3PLs use external delivery partners.
Is a fulfilment centre a 3PL?
A fulfilment centre operated by an external provider may form part of a 3PL service, particularly when it stores inventory and processes orders on behalf of businesses.
However, terminology varies between providers, so the actual services matter more than the label.
When should an ecommerce business use a 3PL?
A business might consider a 3PL when order fulfilment is consuming too much internal time, warehouse space is becoming limited, order volumes are becoming difficult to manage or the business wants access to established fulfilment infrastructure.
There is no universal order-volume threshold.
How do 3PLs make money?
3PL providers generally charge businesses for the logistics services they perform. Fees may include receiving, storage, picking, packing, packaging, returns and other services.
Delivery charges may be separate depending on the arrangement.
How does last-mile delivery work with a 3PL?
After the 3PL has picked and packed an order, the parcel is handed into a delivery process. A delivery provider then transports the parcel through the relevant network and completes delivery to the recipient.
Read our guide to last-mile delivery for 3PLs in Australia for a more detailed explanation.
The 3PL Is Only One Part of the Customer Journey
Third-party logistics can remove a substantial amount of operational work from a growing business.
But a 3PL doesn’t operate in isolation.
A successful ecommerce logistics process connects:
Inventory → Warehousing → Orders → Pick & Pack → Dispatch → Delivery → Tracking → Customer
Every stage affects the next.
A warehouse can pick an order perfectly, but the customer may still have a poor experience if delivery fails.
Likewise, an excellent delivery operation can’t compensate for an order that was packed incorrectly or dispatched too late.
The strongest logistics operations therefore treat fulfilment and delivery as connected parts of the same customer experience.
For businesses and 3PL operations looking for delivery options, GoPeople provides next-day, multi-drop, same-day and on-demand services in supported areas.