3PL is short for third-party logistics, and it refers to a business that takes care of logistics for eCommerce companies. 3PLs generally handle inventory management, warehousing, and fulfillment but often offer complementary services, including reverse logistics (returns management). A 3PL’s service list might include (but would rarely be limited to):
- Inventory management
- Picking and packing
- Reverse logistics
Traditionally, the services offered by 3PLs would have been carried out in-house, but as eCommerce has matured, businesses have seized the opportunity to outsource resource-intensive functions. Without the burden of logistics and fulfillment to worry about, fledgling (and even enterprise) eCommerce retailers can channel resources to other key business areas such as marketing and customer service.
Other benefits of 3PLs can include:
- Storage that grows with your business - 3PL warehousing space can scale with requirements as demand grows and shrinks.
- Faster deliveries - 3PLs will often have warehouses dotted throughout regions to facilitate faster delivery.
3PL services are not to be confused with dropshipping. In both cases, fulfillment is handled by a third party, but for dropshippers, it tends to be the responsibility of the wholesaler or manufacturer.