What does a 3PL do?
A 3PL provides outsourced logistics services. Common services:
- Warehousing and inventory storage
- Pick, pack, and ship
- Carrier rate negotiation and label generation
- Returns processing
- Inventory reporting and integrations with ecommerce platforms
How do 3PL fees work?
Pricing varies by provider, so request a full fee schedule before signing. Most 3PLs charge a mix of the following:
| Fee type | How it is usually charged | What to ask |
|---|---|---|
| Setup / onboarding | One-off fee | Is it waived above a volume commitment? |
| Receiving (inbound) | Per pallet, carton, or hour | How are mixed or unlabelled cartons handled? |
| Storage | Per pallet, bin, or m³ per month | Is there a minimum, and what is the long-term storage rate? |
| Pick and pack | Per order plus per extra item | Do kitting or inserts cost extra? |
| Packaging materials | Per order or at cost | Can you supply your own boxes? |
| Shipping | Carrier rates, sometimes with markup | Are discounted carrier rates passed on? |
| Returns | Per return processed | What is the restock and inspection process? |
| Minimums | Monthly minimum spend | What happens if volume dips? |
Illustrative monthly cost example
Assume 500 orders a month, an average of 1.5 items per order, and 4 pallet spaces of stock. The figures below are illustrative, not market rates.
| Line item | Calculation | Monthly cost |
|---|---|---|
| Storage | 4 pallets × $20 | $80 |
| Pick and pack (first item) | 500 orders × $2.50 | $1,250 |
| Additional items | 250 items × $0.50 | $125 |
| Packaging materials | 500 orders × $0.60 | $300 |
| Inbound receiving | 2 deliveries × $30 | $60 |
| Total (excluding postage) | $1,815 | |
| Cost per order | $1,815 ÷ 500 | $3.63 |
Compare this figure to your true in-house cost per order: rent, staff time, packaging, software, and errors.
What are the pros and cons of using a 3PL?
| Pros | Cons | |
|---|---|---|
| Cost | Turns fixed costs (space, staff) into variable costs | Per-order fees can exceed in-house costs at very low volume |
| Speed | Faster dispatch and multiple locations possible | Less control over daily priorities |
| Scale | Absorbs peaks such as holidays and sales | Onboarding takes time |
| Quality | Trained teams and systems | Errors are harder to spot without your own eyes on stock |
| Focus | Frees you to work on product and marketing | Product presentation and unboxing are harder to control |
What are the signs you are ready for a 3PL?
- Packing orders takes hours you need for growth work.
- Stock is taking over your home, garage, or office.
- Shipping mistakes or late dispatches are generating complaints.
- You are turning down growth, such as retail orders or new regions, because you can’t fulfil it.
- Your monthly order volume is steady enough to compare a per-order fee to your own cost.
When should you not use a 3PL?
- Very low order volume where a minimum monthly fee outweighs the savings
- Highly custom, handmade, or personalised products that need hands-on packing
- Products with special handling needs the 3PL cannot support, such as temperature control or dangerous goods, unless the provider specialises in them
How to choose a 3PL
- Request a full fee schedule and a sample invoice.
- Ask about integrations with your store platform and accounting tools.
- Check service levels: order cut-off times, accuracy rate, and how errors are compensated.
- Read the contract: minimum terms, notice period, and how stock is returned to you.
- Start with a small pilot of one product line before moving everything.
Key takeaway: A 3PL makes sense when your time and space are worth more than the per-order fee. Do the maths on your true in-house cost first.
FAQ
How many orders do I need before using a 3PL? There is no universal threshold. Many small businesses start exploring 3PLs once packing consumes significant weekly hours or stock outgrows their space. Compare quotes against your own cost per order.
Is a 3PL the same as dropshipping? No. With a 3PL you own the inventory and send it to their warehouse. With dropshipping the supplier holds and ships the stock.
Can a 3PL ship internationally? Many can, but capabilities vary. Ask about customs paperwork, carriers, and duty handling.
Do I keep control of my inventory? Yes. You own the stock, and most 3PLs provide live inventory reports through a portal or integration.
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