What is 3PL? A guide to third-party logistics

3PL stands for third-party logistics: which means outsourcing some or all of your storage, stock management and delivery over to a company that does it for a living, instead of running it yourself. 

According to IBISWorld, the UK's third-party logistics industry is now worth around £22.2 billion, which gives some idea of how many businesses have already made that decision.

If you'd rather talk it through than read on, get in touch with the SFI team and tell us what problem you're trying to solve. We can help with everything, from storage to inventory management and pick and pack.

What does 3PL mean?

 

3PL means outsourcing the parts of your business that get products from storage to your customer, rather than keeping that in-house.

That can mean one thing, like warehousing, or it can mean the whole chain: goods-in, storage, stock management, order preparation and delivery, all handled by the same company.

It's a step further than just booking a courier. A courier moves a parcel from one address to another, and that's usually where their responsibility ends.

A 3PL company takes on the stock itself, often for weeks or months at a time, and is responsible for knowing where it is, what condition it's in, and getting it to the right place when you need it to move.

If you want a fuller picture of that role, we've written about what a logistics partner actually does in more detail.

 

What does a 3PL provider do?

 

A 3PL service normally covers:

• Receiving stock and checking it in (goods-in)
• Storing it securely and keeping an accurate record of what's held
• Picking and packing orders as they come in
• Arranging distribution and delivery to the customer
• Managing returns when something comes back

At SFI, that means warehousing and storage for the stock itself, pick and pack for order preparation, last-mile delivery to get orders to their destination, and reverse logistics to handle anything that comes back.

Some 3PL companies stop there. Others also offer things like kitting, relabelling, or specialist handling for products that don't fit neatly into a standard parcel, so it's worth checking exactly what's included rather than assuming every 3PL provider covers the same ground.

 

What's the difference between a 3PL and a freight forwarder?

 

A freight forwarder gets goods from one point to another, often across borders, and deals with the paperwork, customs and carriers involved in that journey. Once the goods arrive, their job is usually done.

A 3PL provider does more than move goods. It stores them, manages the stock while it's with them, prepares orders and arranges transport at the end of that process too.

If your problem is getting a container from a port to a warehouse, you probably need a freight forwarder.

If your problem is what happens to that stock once it arrives, and how it gets out to customers afterwards, that's a 3PL. The two often work alongside each other on the same supply chain rather than replacing one another.

 

What's the difference between 3PL and 4PL?

 

A 3PL runs the physical side of logistics: the warehouse, the stock, the deliveries. A 4PL sits a level above that, coordinating multiple 3PLs or managing a business's entire supply chain strategy, usually without holding any stock itself.

Most businesses looking at outsourcing for the first time need a 3PL rather than a 4PL. 4PL tends to come into play for bigger companies juggling multiple logistics providers across different regions or product lines, where somebody needs to sit above all of them and manage the strategy rather than the day-to-day handling.

 

Is 3PL only for ecommerce businesses?

 

No, ecommerce is a big part of the 3PL market, but manufacturers, retailers, hospitality businesses and fit-out projects use it just as much, often for goods that are heavier and more awkward than a parcel courier is set up to handle.

In fact, we regularly see companies whose finished products are ready weeks before a customer's site is ready to receive them. Rather than that stock sitting in a corner of the production floor, it can be moved into storage and released when the site is ready.

Hotels, restaurants and offices going through a fit-out have a similar problem in reverse: furniture arrives from several different suppliers at different times, and sending everything straight to an unfinished site just creates a different kind of mess.

This is where a lot of generic 3PL guides fall short, because they assume every customer is selling parcels online. For products that need heavier or more specialist handling, or that need to be delivered and installed on site rather than left at the door, the service looks quite different from standard ecommerce fulfilment.

Fit-out and refurbishment projects in particular often rely on FF&E logistics to bring furniture, fixtures and equipment together before installation.

If your business fits that second group, speak to the SFI team about how storage, specialist handling and installation could work together for your project.

 

When should a business start using a 3PL?

 

There's no single trigger point, but a few signs tend to come up again and again:

• Stock is taking up space that your own site needs for something else
• Orders or production are increasing faster than your storage can keep up
• Deliveries are becoming more complicated than a standard courier can manage
• Your team is spending more time managing logistics than running the rest of the business

If the first one sounds familiar, overflow warehouse storage can be a smaller step than moving your whole operation to a 3PL, giving you extra space for a few weeks or months without committing to anything permanent.

If any of these sound familiar, talk to us about what's driving it, whether that's a temporary peak or a longer-term shift, and we'll help you work out what kind of support actually makes sense.

 

What should you look for in a 3PL company?

 

Price matters, but it shouldn't be the only thing you compare. Before choosing a company, it's worth asking:

• Have they handled products like yours before?
• How will you know what's in stock, what's been dispatched and what's on its way back, without having to call and ask?
• Can they scale up or down if your volumes change, rather than being set up for one fixed level of activity?
• What happens if something goes wrong with a delivery or a stock discrepancy, and who do you actually speak to about it?

We've written in more detail about the main risks of outsourcing logistics and how to choose the right logistics partner, both of which go through this in more depth.

 

SFI as a 3PL partner for UK businesses

 

At SFI, we work as a commercial logistics partner for businesses across the UK, bringing warehousing, distribution, delivery and installation together as one service rather than several separate suppliers.

That's useful whether you're an ecommerce business needing pick and pack and delivery, or a manufacturer or fit-out project needing storage, specialist handling and installation at the other end.

If you're trying to work out whether 3PL is the right move for your business, tell us what you store, move or deliver and we'll talk you through where it could help. Get in touch with the SFI team.