Warehouse & logistics
Third-Party Logistics (3PL)
By the Supply Chain Manager team · Updated October 16, 2026
A third-party logistics provider (3PL) is an outside company that runs warehousing, fulfilment or transport for you, under contract.
Distributors use 3PLs to add a region without opening their own building, to handle seasonal peaks, or to outsource transport. You still own the stock and the planning; the 3PL handles the physical operation.
Contracts with 3PLs are typically priced per pallet stored, per order picked and per line or unit handled. Understanding which of those drives your bill helps decide which SKUs to hold there: slow, bulky items can cost more in storage than they earn.
3PL example
Illustrative: a distributor serves a new region from a 3PL warehouse holding its top 300 SKUs, replenished weekly from the main warehouse, before deciding whether demand justifies its own branch.
Why 3PL matters for distributors
A 3PL turns fixed warehouse costs into variable ones. The planning challenge is the same as any extra location: deciding which SKUs to hold there and in what quantity.
Common 3PL mistakes
- Not getting daily stock data from the 3PL, so planning runs on stale numbers.
- Holding the full range at a 3PL site when only fast movers sell there.
Examples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.