One major challenge many businesses face as they grow is logistics, particularly warehousing and distribution. From finding suitable warehouse space to hiring the right workers and managing distribution on top of marketing, sales, etc., handling logistics internally can put a management team over the top.
This is why many businesses use 3PL (third-party logistics) for warehousing and distribution. This can be the best way to improve supply chain operations and help businesses scale.
But what is 3PL warehousing and distribution? Let’s find out in this post.
What is 3PL Warehousing and Distribution?
3PL warehousing and distribution is the outsourcing of logistics, storage, and supply chain management to a third-party logistics (3PL) provider. These 3PL providers handle storage, handling, and distribution through advanced technology systems, allowing businesses to focus on their core strengths: production, sales, and marketing.
3PLs use technology to deliver real-time visibility into operations, from product tracking to predictive analytics, helping businesses make data-driven decisions..
Role of 3PL in Warehousing and Distribution
Third-party logistics warehousing and distribution revolve around storing and moving goods.
The main roles 3PLs play in warehousing include:
Storage
Providing secure spaces such as shelves, racks, or bulk storage areas tailored to the type of product (e.g., temperature-controlled storage for perishables).
Order fulfillment
This includes picking, packing, and preparing goods for shipment to customers or retailers.
Inventory management
3PLs monitor the number of goods that come in and go out and make accurate projections for future inventory needs. These providers use advanced systems to track stock levels, inbound and outbound goods, and inventory rotation.
For distribution, 3PLs are most useful in the following ways:
Carrier selection
This involves finding the most efficient and reputable providers at the best prices to complete the order.
Route optimization
They plan the best routes to save time and money on transportation, which reduces the risk of spoilage during delivery trips.
Transportation management
3PLs organize the movement of goods from the warehouse to their final destination. They oversee the intricate details of transportation, such as the kind of transportation method needed. They also handle reverse logistics, such as processing returns, exchanges, or repairs.
Tracking and reporting
3PL providers employ the best technology to track packages while studying patterns to develop better strategies for the future.
Types of 3PL Warehouses
Public warehouses
These warehouses are owned by the public and run by 3PL logistics providers. They provide warehousing services to various customers and usually offer basic services like storage, handling, and distribution. They are for flexible, short-term, or long-term contracts, often cost-effective for smaller companies or those with fluctuating storage needs.
Contract warehouses
Contract warehouses are more private and dedicated to specific clients. They are customized to meet each client’s needs and offer extra services like packaging, labeling, and quality control.
Distribution centres
These are specialized warehouses that can handle a large volume of goods and can provide fast delivery to retailers and customers. They are designed for rapid movement of goods rather than long-term storage and are equipped with the latest technology. This type of 3PL warehouse is optimized to improve and speed up the distribution process.
Cold storage warehouses
As the name implies, these 3PL warehouses are designed to store perishable goods like medical supplies, food, and pharmaceutical products. They have temperature-controlled rooms with advanced monitoring systems to ensure that the goods are delivered in the optimum state. Businesses in the food and beverage, healthcare, or biotech industries use this type of 3PL warehouse.
Fulfillment centres
This type of 3PL warehouse handles e-commerce orders and offers a range of services like picking, packaging, processing, and shipping. It is equipped with advanced inventory management systems, handles small parcel shipments, and integrates with online platforms.
Bonded warehouses
The government authorizes these facilities to store imported goods that customs have not yet cleared. They provide security and can repackage or label the goods while held there, thereby allowing businesses to store goods until they are ready for distribution or export.
Hazmat warehouses
These warehouses store dangerous materials like chemicals and explosives. They have special safety features like fire suppression systems and emergency response equipment, just in case. They are compliant with strict safety regulations and equipped with fire suppression systems, ventilation, and spill containment.
Benefits of Using a 3PL Warehouse
Juggling your corporate business needs and logistics can be exhausting. Here are some of the benefits of 3PL warehousing can have on your business:
Saves costs
3PL distribution solutions remove the need to invest in warehouse space and get the most advanced technology along with it. A 3PL warehouse will cover storage and distribution problems while eliminating the need to hire logistics staff, letting you focus on other important aspects of your business. However, the total cost savings from 3PL distribution will vary depending on factors such as storage fees per pallet, handling fees per order, and any additional charges, especially for specialized services like temperature-controlled storage or express shipping. Choosing a 3PL provider that aligns with your exact needs will help optimize your logistics expenses better.
Expertise
3PL warehousing provides the best logistics professionals to handle your goods. There is no need to invest in training staff when you can outsource these services to experts at a fixed amount.
Efficient operations
3PL warehousing will optimize your day-to-day operations using advanced technology. Warehouse management software like Da Vinci Unified provides access to important data to help you make more informed decisions and plan for the future.
Better customer services
A reliable 3PL warehouse improves your customer’s satisfaction by choosing the best routes and tracking and reporting on each delivery. Your customers are happier when they receive their packages on time and in good condition.
Scalability
With a 3PL warehouse, you can focus on other efforts that will push your business to the next level. Outsourcing storage and distribution to a 3PL provider makes it easier to scale your business faster.
Core Services Offered by 3PL Providers
Order fulfillment
3PL providers ensure that orders are received on time, processed correctly, and shipped out as quickly as they come in. This requires systematic coordination with suppliers, customers, sales reps, and everyone in between.
Storage
Warehousing involves storing goods in a warehouse until they are ready to be shipped out. Warehousing companies also transport goods from the supplier to the final destination.
Transport management
3PL providers coordinate transportation between ports and warehouses, track goods moving from different locations, and can outsource this service if your business cannot handle it. Depending on the nature of the order, they work with carriers and freight forwarders.
Quality control
Third-party logistics providers must ensure that all products for shipment meet the set standards and specifications. This process involves testing samples and checking finished goods for defects before sending them out.
How to Choose a 3PL Provider
Choosing the right 3PL provider will significantly impact how efficient your supply chain is and how much you save.
When assessing 3PL providers, focus on the following factors:
- Location: Ensure the provider’s warehouses are strategically located to serve your target markets efficiently and help reduce shipping time and costs.
- Technology: Check that their technology stack, including inventory management systems, warehouse management software, and real-time tracking capabilities are compatible with your existing systems for smooth integration.
- Scalability: Choose a provider that can grow with your business. They should offer scalable services to handle demand fluctuations.
- Industry Experience: Look for a 3PL provider with experience in your industry. A 3PL provider that is familiar with your product and market requirements will offer more tailored solutions with minimal errors.
- Customer Support: Choose a 3PL provider with a dedicated account manager or a responsive customer support team so you can resolve issues quickly and maintain transparency.
Questions to Ask a Potential 3PL Provider
- What is your pricing structure? Can you provide a detailed breakdown of storage, handling, and other service fees?
- How do you ensure order accuracy and timeliness?
- What technology systems do you use, and are they compatible with ours?
- Can you provide references from similar clients or industries?
- How do you handle peak seasons or sudden increases in demand?
- What is your process for handling returns and reverse logistics?
Red Flags to Watch For
- Vague Pricing Structures: If a provider cannot provide clear and detailed pricing, it may indicate hidden costs or unreliable billing practices.
- Outdated Technology: 3PL providers without modern systems like real-time tracking or automated inventory updates may struggle to keep up with your business’s needs.
- Poor Communication: Slow response times, vague answers, or unresponsive customer support can cause bigger issues.
- Negative Reviews: A history of dissatisfied clients or inconsistent feedback from references is a strong red flag
- Limited Scalability: Providers who cannot demonstrate their ability to handle growth or seasonal spikes may hinder your business’s long-term plans.
Top Trends and Innovations in 3PL Warehousing and Distribution for 2025
Technological advancements are an important aspect of 3PL services for storage and distribution. These inventions improve the 3PL operations and are set to further increase productivity in 2025:
Automation and Robotics
Automation and robotics in warehousing increase efficiency while reducing human error. Though automation requires significant upfront investment, it delivers long-term ROI through increased accuracy and higher operational capacity.Often the tools can handle menial tasks while increasing productivity.
Real-time tracking
With warehouse management software like Da Vinci, 3PL providers can easily provide real-time statistics and analytics for warehouse operations. Business owners want to know where their products are and when their customers will receive them. This software can provide a base for accurate predictions of future operations.
Omnichannel distribution strategies
This trend provides customers with more integrated channels to buy and receive products. With Omnichannel distribution, customers can buy a product online or return it to the same supplier, even if it came from a different manufacturer. If done right, this can improve sales and customer satisfaction.
3PL Warehousing and Distribution FAQs
What is the difference between a warehouse and a 3PL?
A warehouse provides storage, while 3PLs provide other services that benefit the supply chain, like order fulfillment and shipment.
What is the difference between 3PL and 4PL warehouses?
3PL warehouses handle order fulfillment and everything related to it. 4PL warehouses manage the supply chain and provide 3PL services with technology, transportation, and more. They offer more comprehensive solutions to improve the supply chain.
What is the difference between a warehouse and a distribution center?
A warehouse’s major focus is on storage, while a distribution center focuses on order fulfillment processes like picking and packaging while employing the latest technology.
How much do 3PL warehouse services cost?
3PL warehouse service costs depend on factors such as order type, location, and size. Some warehouses have fixed rates, and others have variable rates.
Streamline Your Supply Chain with 3PL Solutions.
Partnering with a 3PL provider can boost customer satisfaction through faster delivery times and more accurate order fulfillment, leading to increased sales and customer loyalty.. With the rise of e-commerce, the right 3PL is especially key to companies trying to scale their e-com operations faster.
A good 3PL provider needs software like Da Vinci to give its clients clear oversight of its operations. Such technology improves efficiency and productivity. To explore more services from Da Vinci, request a demo today to get started.