Third-party logistics (3PL)

What it means

Third-party logistics, or 3PL, means a company entrusts its warehousing and dispatch to an external partner. The partner receives goods from suppliers, stores them, picks and packs orders and hands them to carriers. It often also handles returns, labelling or customs formalities.

It is a form of outsourcing in which, instead of the fixed costs of its own warehouse, staff and equipment, the company pays variable fees by volume: per pallet or shelf location, per item picked, per package. In e-commerce the same service is often called fulfilment.

The 3PL provider runs its own warehouse management system, a WMS, that a smaller company would not buy for itself. The client usually gets access through a portal or an integration with its online store and sees stock and order status in real time.

How it works in practice

For the accounts, the key point is that goods in a 3PL warehouse remain the company’s property. They must be in its stock records and covered at stocktaking, so at 31 December we need a stock balance confirmed by the provider to compare with the records.

If the 3PL warehouse is in another EU country, moving your own goods there is a transfer of goods for VAT purposes, and the company generally has to register for VAT in that country. Regimes such as call-off stock are an exception, but their conditions are strict. We ask about this before the contract is signed.

We book the provider’s invoices as services, split into storage, handling and transport, so the logistics cost of a single order is visible. You can then use that figure in pricing and when comparing offers from other providers.

What to watch out for

The contract should contain an SLA: by when an order will be dispatched, what error rate the provider guarantees and what happens in an outage. Without it the company has nothing to back a claim when orders are delayed in the Christmas season and customers start withdrawing from their purchases.

Watch liability for damage and shortages too. Providers often cap it at a low amount per kilogram or item and pay almost nothing for the loss of expensive goods. Compare the contractual caps with the value of your stock and, if needed, negotiate a higher cap or take out your own insurance.