Every growing ecommerce business reaches a point where doing everything yourself stops working. Orders pile up, storage space runs out, and the hours you spend packing boxes are hours you don’t spend on product, marketing, or customers.

Third-party logistics (3PL) is one way through that point. This guide explains what 3PL is, how it differs from related models, what a 3PL does at each stage of fulfillment, and how to decide whether it fits your business.

What is 3PL?

Third-party logistics (3PL) is the practice of hiring a specialist company to handle logistics tasks for your business. For an agreed fee, a 3PL provider typically manages inventory storage, order fulfillment, and shipping, and many also handle returns. Each provider varies in its services, expertise, and ability to take on more complex supply chain work.

The main appeal is time. When you’re no longer packing orders, you can spend your hours on higher-value work that draws on your own expertise.

Demand for these services keeps growing. Analyst estimates of the global 3PL market in 2025 range from about $1.24 trillion (Fortune Business Insights) to about $1.6 trillion (Global Market Insights), and both forecast growth of roughly 10% a year through the mid-2030s. In Inbound Logistics’ 2026 survey, 84% of 3PL providers reported sales growth, and 77% grew their customer base.

2PL, 3PL, and 4PL: what’s the difference?

The numbers describe how many steps sit between your business and the end customer.

Type	What it does	Examples
2PL (second-party logistics)	Owns and operates transportation assets, such as trucks, aircraft, and ships, and leases that capacity to businesses	FedEx, UPS, Maersk
3PL (third-party logistics)	Manages some or all of your logistics, including warehousing, inventory, fulfillment, shipping, and returns	Amazon FBA, Walmart Fulfillment Services, ShipBob
4PL (fourth-party logistics)	Designs, oversees, and optimizes your whole supply chain, often coordinating several 3PLs, carriers, and warehouses on your behalf	Varies by provider

A 3PL generally focuses on discrete functions of your supply chain. A 4PL concentrates on designing the overall system and overseeing its moving parts, and it often works with multiple 3PLs and asset-based carriers at once. 4PLs suit large ecommerce companies that want to stay hands-off in logistics.

What’s the difference between a 3PL and a freight broker?

A freight broker works on one part of the pipeline: negotiating rates with transportation carriers for your business. A 3PL often manages the entire process, and some 3PLs include freight brokerage among their services, automatically selecting the most cost-effective and fast shipping method for each order. So a 3PL may offer brokerage, but a broker doesn’t offer full 3PL services.

What’s the difference between 3PL and dropshipping?

No inventory in your hands, and a third party handling logistics? 3PL sounds a lot like dropshipping, but the two work very differently.

In dropshipping, you list products you don’t hold. When a customer orders, the supplier ships directly to them, and you never touch the inventory. That model is attractive and low-cost to start, but it limits you:

• Product choice: dropshippers mostly sell other companies’ products, and it’s hard to sell custom or bespoke goods when you never handle them.
• Quality control: you’re relying on the supplier’s word, and your customers’ experience sits in their hands.
• Returns and support: suppliers have little interest in working with unhappy customers, so you’re largely on your own when something goes wrong.

A 3PL stores, processes, and ships your finished products. You send inventory to the provider in advance, usually in bulk, and they get it to paying customers. Many (though not all) 3PLs also handle returns, so you can fix poor experiences quickly. 3PL suits brand-focused companies that want to grow.

Examples of 3PL providers

The most widely recognized 3PL is Amazon FBA (Fulfillment by Amazon). You send finished products to Amazon, which stores, picks, packs, ships, and processes returns, and you gain access to Amazon’s shipping network and shopper base. Walmart Fulfillment Services offers a similar service for sellers on Walmart’s marketplace. Independent providers include ShipBob and Stord, which acquired Shipwire from CEVA Logistics in January 2026.

The 3PL landscape changes quickly. Shopify, for example, built its own fulfillment network and then sold its logistics business to Flexport in 2023. Check that any provider you shortlist is operating as described before you commit.

Each provider has its own strengths. Some full-service options cost more, while bare-bones logistics providers are easier on the budget. The right choice depends on your goals.

What services do 3PLs offer?

The most common services include:

• Inventory management
• Receiving and warehousing
• Multi-site warehousing
• Picking and packing
• Shipping, including negotiated carrier rates and freight
• Kitting, assembly, and customization
• Reverse logistics (returns)
• Inventory forecasting and reporting

The typical 3PL fulfillment process

What each provider offers varies. Most cover the essentials of warehousing, receiving, and shipping, and some go well beyond them. A typical flow looks like this.

1. Production and purchasing

You purchase or produce your product, pack it, and ship it to the 3PL, usually in bulk. This is one of the biggest differences from dropshipping.

2. Receiving

Before the warehouse accepts your inventory, you’ll usually complete an order form with expected quantities and weights. On arrival, the 3PL checks the goods for quality, scans them in, and logs your on-hand inventory.

3. Warehousing and distribution

The 3PL stores your stock in its fulfillment centers, with each SKU assigned its own storage location. Some providers let you choose where your products sit to match customer demand, while others distribute stock according to your sales patterns. Read the fine print on how this works, so their warehousing strategy matches your goals. Many 3PLs have warehouses across the country, and some abroad, which helps them ship quickly and affordably to distant customers.

4. Order management

If inventory management software acts as the hub for your sales channels, such as Amazon, eBay, and your own website, order management becomes straightforward. Orders from every channel flow to the 3PL to be picked, packed, and shipped.

5. Picking and packing

Once the order reaches the warehouse, a picker collects the items from their locations, and the packing team boxes them using materials chosen for your products. Many brands care about a distinctive unboxing experience, so ask whether the provider supports custom packaging and inserts before you sign. Support for these varies widely between providers.

6. Shipping and freight

The packed order goes to a carrier for delivery. Because 3PLs ship for many businesses, they can negotiate better carrier rates than you could alone, and some offer same-day shipping, typically with an order cutoff time and a fee for later cutoffs.

If you regularly ship wholesale orders to retailers or large orders to commercial customers, ask whether the 3PL arranges full truckload (FTL) and less-than-truckload (LTL) freight. A 3PL can negotiate those rates and move product between warehouses or distribution centers. For the B2B side of freight, see our guide to third party logistics providers.

7. Reverse logistics

When a customer returns an order, most 3PLs receive the return, inspect it, restock it if it’s undamaged, or send it back to you for repair or refurbishment. Since the network is spread across several locations, returned stock often re-enters circulation faster.

Benefits of using a 3PL

3PL saves you time

Every hour spent stocking inventory, printing labels, or processing orders is an hour not spent on marketing, product development, or partnerships. Most of us went into ecommerce to build a brand, not to run a warehouse. Outsourcing storage, processing, and shipping can take significant hours out of your week and give that time back to growth.

3PL can save you money

A 3PL can lower costs in several ways:

• Opportunity cost: say your time is worth $150 an hour. Packing boxes and printing labels is rarely the best use of it.
• No warehouse of your own: you avoid renting space and hiring warehouse staff.
• Better carrier rates: providers negotiate on the strength of their combined shipping volume.
• Flexible capacity: as demand rises and falls, you don’t have to expand or shrink your own warehouse.

Shipping costs also affect sales directly. In Baymard Institute’s February 2024 survey, 48% of US adults said they had abandoned an online cart because extra costs such as shipping, tax, and fees were too high. A distributed warehouse network can help keep your delivery costs down.

3PL brings expertise

Freight rates, returns processing, par levels, and reorder points are a lot to hold in your head, and most of us weren’t trained in warehousing. With a 3PL, you’re working with people who’ve built their careers in supply chain management. When something goes wrong in transit, they work to fix it, and many providers compensate you for damaged goods or missed shipping deadlines.

3PL expands your reach

Managing inventory in-house can put entire regional markets out of reach. Say you run an outdoor clothing brand on the East Coast, and customers on the West Coast expect two-day shipping. Sending that weight across the country in two days is expensive, and cutting your price to win the sale cuts into profit.

Most 3PLs have warehouses spread across the country, and many have international sites. Some use data to decide how to distribute your stock, so if 80% of your sales come from the East Coast, most of your inventory sits there. International warehouses also let you test new markets while the 3PL handles customs and import requirements.

3PL improves the customer experience

Customers expect fast, low-cost shipping, and they expect returns to be just as easy. If a product isn’t right, they want to send it back for free and get a replacement or refund as quickly as the original order arrived. A 3PL’s network makes that speed possible anywhere you find customers, and you pay a premium for that distribution network.

Downsides of using a 3PL

You give up some control

Depending on your personality and goals, that may be a plus. For many owners, letting go of any part of the business is hard, and you’re entrusting much of the customer experience to someone else. If you agonize over packaging, product aesthetics, or assembly details, 3PL may not suit you. This is especially true for sellers of highly customized products.

The investment can be steep

3PL is expensive, though “expensive” is relative to the benefits. Migrating to a 3PL means changing your supply chain, which takes time and money in onboarding. Plan to:

• Integrate your inventory management software with the 3PL
• Work through the provider’s onboarding steps
• Troubleshoot problems
• Ship your first inventory
• Create new systems and processes where needed

Ask every provider for a written onboarding timeline. Pricing also varies with your needs: storing bulky items that need assembly costs far more than storing pre-assembled jewelry.

You’re further from your products

If your products need kitting or assembly, or might need repair or modification that depends on your skills, 3PL can feel risky. When you’re cut out of the physical supply chain, problems can affect your customers’ experience.

Customer satisfaction can suffer

If you’ve built a close rapport with your customers, 3PL can feel like outsourcing your social capital. When you’re small, you can respond to each customer personally. After the move, customers have to process returns and shipping issues through the 3PL, and they’ll still come to you with problems, whoever caused them. Choose a provider with strong references from other businesses, and tell your customers how returns work.

Which ecommerce models can’t a 3PL support?

Most ecommerce businesses can use a 3PL, but some should build an in-house team instead. A 3PL is probably the wrong fit if:

• You have proprietary formulas that require in-house equipment to produce and package
• You sell extra-large items that would cost too much to store in a third-party warehouse
• You’re a brand-new business without the capital or demand forecasts to inform a fulfillment strategy
• Your items are prohibited by the terms and conditions of most 3PL providers
• Your products are so small that outsourcing storage and logistics wouldn’t add significant value

A worked example: how a jewelry maker grows with a 3PL

Consider a fictional jewelry maker named Laura. She starts by making each piece at her kitchen table and selling on Etsy. As demand grows, she adds her own website and sells on Amazon too. Orders from three platforms arrive each day, and she packs them at her dining room table and drops them at the post office twice a week. Customers sometimes ask for next-day shipping, and when Laura is away, she has to say no.

Soon she spends all her time fulfilling orders. Her kids help on weekends, her supplies are scattered through her house and garage, and she has no time left to design new pieces, which is why she started the business.

Laura partners with a 3PL. She ships her stock to the 3PL’s warehouse, where it’s logged into the inventory system, and orders from every platform are fulfilled directly. She can check her dashboard at any hour to see stock levels, and the software alerts her when popular items run low and projects how much inventory she’ll need in the months ahead.

With the 3PL’s network, Laura offers free two-day shipping and same-day shipping, starts selling abroad, and adds new sales platforms without adding work. Finally, she spends her time designing jewelry and growing the company.

Who should use a 3PL?

Ask yourself these questions about your own business:

• Are you spending a large share of your working week on orders and logistics tasks?
• Is order volume growing faster than you can ship comfortably?
• Have you hired, or are you planning to hire, warehouse employees?
• Are you reaching the capacity of your storage space?
• Does your product ship without customization, complex kitting, or expert assembly?
• Are shipping costs and complications keeping you out of certain markets?

If you answered yes to most of them, you’ll likely benefit from a 3PL.

Next steps: finding a 3PL

A 3PL is a strategic business partner, so choose one deliberately. Our guide to choosing a 3PL fulfillment partner walks through the evaluation process, and our guide to 3PL inventory management systems covers the software that keeps your stock records accurate once inventory leaves your building.

Before you move, get your own house in order. Inventory management software such as Linnworks becomes the hub for your sales channels and connects to your 3PL, so you can monitor orders and stock from one place. See how Linnworks works with 3PLs, or request a demo to talk through your goals with our team.