3PL Fulfillment: Meaning, Benefits, Services & How 3PL Fulfillment Centers Work

The global 3PL fulfillment logistics market is experiencing rapid growth. It was valued at $1.2 trillion in 2024-25 and is about to reach $2.6 trillion by 2034.

3PL Fulfillment is a process of outsourcing the supply chain and logistics to a third-party provider. The 3PL provider manages storage, performs order picking and packaging, and handles reverse logistics. This not only reduces a business's operational costs but also enhances customer satisfaction.

What Is 3PL Fulfillment?

3PL Fulfillment means outsourcing storage, transportation, and shipping operations to a third-party logistics service provider.

A startup or SME can easily manage storage, transportation, and on-time delivery through a 3rd party fulfillment service. However, as order volume increases, it struggles to manage storage and deliver products to customers on time. Late delivery can have an adverse impact on brand reputation. So most businesses partner with a 3PL fulfillment center. It handles order picking, packaging, and product handover to the shipper. The shipper finally delivers the product to the customer. 

Here, the Fulfillment covers the entire process, from receiving an order on the website to delivery. 3PL fulfilment ensures that the right products reach the right customer at the right time.

Difference Between In-House Fulfillment And 3PL Fulfillment?

Aspect	Inhouse Fulfillment	3PL Fulfillment
Warehouse	Owned or rented by a business.	3PL fulfillment provides secure warehousing solutions.
Staff	A business needs to hire or manage its own staff members.	The 3PL provider has its own staff members, who are skilled and experienced.
Technology	A business needs to invest money in leveraging advanced technologies like WMS, AI, and robotics.	3rd party logistics fulfillment provider utilizes advanced technology to enhance order fulfillment operations. A business doesn't need to invest money in improving order fulfillment operations.
Scalability	Limited scalable. A business needs to invest more money to increase its scalability features.	A 3rd party fulfillment provider offers a scalability feature, i.e., it can accommodate more products during peak seasons or holidays.
Shipping	Limited partnership with shipping carriers.	A third party fulfillment provider has a partnership with numerous shipping carriers.

How 3PL Fulfillment Works -Process & Components

Here is a step-by-step guide to how a 3PL fulfillment service provider works.

1. Inbound

The manufacturer sends goods to the 3PL fulfillment center's warehouse. The staff at the 3PL service thoroughly inspects the goods to ensure they have arrived as specified and enters them into the WMS.

2. Inventory Storage & Management

The 3PL fulfillment center stores products on racks or in cabinets according to client and product storage requirements. Most 3rd party logistics fulfillment centers utilize technology such as WMS to track inventory in real-time.

3. Order Integration

Order integration is the process of connecting a business's sales platform to the 3PL's warehouse management system. Whenever a customer orders a product from the website, the order details are automatically synced to the 3PL fulfillment service provider.

4. Order Picking and Packaging

The staff at the 3PL fulfillment center pick up the ordered product from the shelf or rack using methods such as batch or zone picking. The staff bring the ordered product to the consolidated area and do a thorough packaging. The packaging ensures that the product will not get damaged during transit.

5. Shipping and Delivery

A 3PL fulfillment provider has a partnership with various logistics partners. The 3PL service provider hands the packaged product to the logistics carrier, which then delivers it to the customer.

6. Returns and Reverse Logistics

Sometimes the customer does not like the ordered product and places a return request. The 3PL fulfillment company picks up the product and brings it back to the 3PL warehouse. A team carefully inspects the returned product and decides whether to refurbish, recycle, or restock.

Benefits of Using a Third Party Fulfillment Service

Partnering with a third party logistics fulfillment provider has various benefits. They are in the list below.

1. Reduces Operational Cost

Building a warehouse requires a lot of money. Again, businesses need to manage their staff and purchase heavy equipment, such as forklifts, which can be quite challenging for a 3rd party logistics fulfillment center. A 3PL fulfillment provider offers secure warehouse storage facilities, along with material handling, packaging, and B2B transportation. So this reduces the business's operational costs.

2. Faster Delivery Times and Broader Shipping Reach

Today, most customers expect their ordered products to reach them as soon as possible. 3PL providers have warehouses in various regions of India. Hence, they can deliver products faster to targeted customers and enhance customer satisfaction for the business.

3. Scalability During Seasonal Peaks

A 3PL provider provides scalable warehouse solutions, i.e, it can accommodate more products during peak seasons or holidays. Most of the top 3PL providers use advanced warehouse management systems and EMS that can handle high order volumes smoothly.

4. Improves Customer Satisfaction

A top 3PL fulfilment provider offers faster order processing, smooth returns, and quick refunds. This improves the brand reputation and customer satisfaction of a business.

Key Components That Make A 3PL Fulfillment Center Valuable

The main purpose of a 3PL fulfillment center is to handle all supply chain and logistics operations smoothly, so businesses do not need to invest in infrastructure, technology, or manpower. There are a few components that make a fulfillment center valuable. They are in the list below.

• A third party fulfillment center should be located near major highways, ports, and rail lines to make the transportation of goods easier.
• A 3PL fulfillment center's warehouse should have fire safety systems and CCTV surveillance for almost 24 hours.
• The warehouse of the 3rd party logistics fulfillment center should leverage advanced technologies such as a warehouse management system, robotics, and AI to accelerate order fulfillment.
• There must be dedicated zones for picking and packaging ordered products in a third party logistics fulfillment service.
• There must be a specific area for return processing.
• The 3PL fulfilment provider should provide value-added services, such as customized packaging, labeling, kitting, and bundling.

Types Of 3PL Fulfillment Services

There are various types of 3PL fulfillment services.

1. Ecommerce Order Fulfillment: It is best for D2C brands and ecommerce online marketplaces.
2. B2B Fulfillment: This service is mainly for businesses that want to ship bulk orders to retailers and distributors.
3. Reverse Logistics Services: It handles the flow of goods from the customers to the warehouse.
4. Kitting and Assembly: It includes product bundling, kitting, labelling, and quality checking of the product.
5. Same-Day/Next-Day Deliveries: A 3PL fulfilment provider delivers the product to the customer same day or next day.

How To Choose The Right 3PL Fulfillment Partner?

There are various 3PL fulfillment companies in India. But all of them do not provide the same services. A business needs to consider a few factors while choosing the right 3rd party logistics fulfillment provider.

1. Service Coverage

A business should assess the services provided by the 3PL fulfillment provider, such as picking, packaging, value-added, and return management services.

2. Technology and Integration Capability

The 3PL provider a business chooses should have access to modern technologies, such as warehouse management systems, robotics, AI, and machine learning.

3. Strategic Warehouse Locations

The warehouse should be located close to highways and ports to have seamless product delivery.

4. Experience and Industry Expertise

The 3PL fulfilment provider should have years of experience and have positive reviews and testimonials. It should have expertise in the same industry as the business.

How Third Party Logistics Fulfillment Pricing Works?

1. Storage Fees

Third party logistics fulfillment provider charges warehouse storage costs for keeping inventory inside the warehouse. The price depends on warehouse location and space occupied on pallets and bins.

2. Picking And Packaging Fees

A 3rd party logistics fulfillment provider charges for the picking and packaging of each order.

3. Shipping And Transportation Rates

A third party logistics fulfillment provider charges for shipping and transportation. The pricing factors depend on delivery distance, volumetric weight, or delivery speed.

4. Inbound Handling & Receiving Charges

A 3rd party logistics fulfillment provider charges for unloading and receiving goods.

5. Returns and Reverse Logistics Costs

A 3PL fulfillment service charges for handling returned products. The charges depend upon the return pickup and restocking.

6. Value Added Services

The third party fulfillment service charges for value-added services like labelling, kitting, and bundling.

Common Challenges In 3rd Party Fulfillment And How To Mitigate Them

• Sometimes, there can be a mismatch between physical stock and system inventory, which can lead to stockouts or delayed orders. The 3rd party fulfillment provider can conduct regular cycle counts or use advanced WMS.
• If the 3PL fulfillment provider uses outdated technology, then it delays order processing. The 3PL provider should invest in API-enabled technology to expedite order fulfillment.

Final Words

Small and medium-sized enterprises can outsource their warehousing and returns processing to a 3PL fulfilment provider, freeing up time to focus on core activities such as product development and market expansion. A top 3PL fulfillment provider uses advanced technology and offers scalability features to a business. It enables a company to grow more rapidly in the market and improve customer satisfaction.