What Is a 3PL? Third-Party Logistics Explained

If you sell products, import goods or run an online store, sooner or later someone will suggest you hand your logistics to a 3PL. The term is used loosely, so here is what it actually means, what a third-party logistics provider does day to day, and what software it needs to run without chaos.

What is a 3PL?

A 3PL, short for third-party logistics provider, is a company that handles logistics work on behalf of other businesses. The first party is the seller of the goods, the second party is the buyer, and the third party is the specialist in the middle that stores, packs, moves or delivers the goods for the seller.

In practice, most 3PL businesses start from a warehouse. A seller sends goods to the 3PL warehouse, the 3PL stores them, and when orders come in the 3PL prepares and delivers them. The seller keeps ownership of the goods and focuses on selling.

What services does a 3PL provide?

Services differ between providers, but the common building blocks are:

• Receiving goods from suppliers, ports, agents or couriers and recording what arrived.
• Storage in racks, bins or floor areas, sometimes with separate zones for cold, bulky or high-value goods.
• Handling holds, for example goods that wait for documents, for a payment or for the owner's instruction.
• Order preparation, such as picking, packing and labelling.
• Local delivery to the final customer, with or without cash collection.
• Returns, where failed or refused deliveries come back and are inspected.

A single 3PL can offer all of these or just two of them. What defines it is that the goods belong to someone else and the provider is accountable for them while they are in its hands.

Why businesses use a 3PL

Running your own warehouse means space, staff, equipment and management attention. A 3PL lets a business grow its stock without building all of that itself, and lets it use warehouse space as an operating cost rather than a fixed one. It is also a way to reach customers faster when the 3PL is closer to them than your own premises. The trade-off is control: you rely on the provider's processes and records, so the quality of those records matters a great deal.

How are warehouse storage charges commonly calculated?

Storage is usually the first thing a 3PL charges for, and the way it is measured varies. In general terms, providers commonly choose from methods like these:

• Per pallet per day or per month, which suits goods stored on pallets.
• Per cubic metre (CBM), which suits mixed or irregular goods.
• Per package, bin or shelf, which suits small items.
• A minimum charge, so that a customer with a very small amount of stock still covers the cost of a rack position and the handling around it.

Handling charges, such as receiving or dispatch fees, are normally separate from storage. Whatever method is used, the fair way to charge is to agree it in writing in advance and to be able to show the customer the facts behind each figure: how many packages, how much volume and for how many days. We are deliberately not quoting rates here, because they depend on the city, the type of goods and the contract.

A word on what the software does. Tafsee Logistics does not calculate storage charges and does not produce invoices. What it does show is the age of goods in storage, in days, for each lot and for each customer. That gives you the factual basis for your own storage calculation, which you then bill through your accounting system.

What software does a 3PL need?

Third-party logistics software, sometimes called 3PL software or 3PL warehouse management software, has to solve a problem a single-owner warehouse does not have: many customers' goods under one roof, each needing to be kept apart in the records. A useful system gives you:

1. A clear owner on every lot. Every arrival is linked to the customer who owns the goods and the sender who delivered them.
2. One barcode per package, so scanning is the way to find, move and hand over goods.
3. Locations, so a lot is on a known rack and a stock count shows what is missing.
4. Holds and approvals, so goods waiting for documents or payment cannot leave by mistake.
5. Age in storage per lot and per customer, which you need whatever charging method you use.
6. Dispatch and delivery, with trips, drivers, proof of delivery and cash on delivery if you collect it.
7. A timeline that shows who did what and when, because customers will ask.
8. Arabic and English screens, because teams and customers in Saudi Arabia use both.

What to ask any 3PL software vendor

Ask how a customer's stock is separated in reports, how fast a team member can find a lot by scanning, whether you can limit what each role sees, and whether your customers can follow their goods without calling you. And ask what the software does not do. Honest vendors answer that question easily.

A short checklist for starting a 3PL warehouse

1. Define the services you will offer, and just as clearly the ones you will not.
2. Write a simple service agreement covering storage, handling, liability and how long goods can stay.
3. Set up warehouses, zones and racks with short codes.
4. Decide which arrivals need approval or an automatic hold before release.
5. Print labels with a barcode for every package from day one.
6. Count racks regularly and compare with the system.
7. Give each customer a way to see what they have in stock and where deliveries stand.

For a deeper look at how this works in our product, see the 3PL warehouses solution, the warehouse stock features and our guide to the warehouse receiving process.

Where Tafsee Logistics fits

Tafsee Logistics is warehouse-to-door software for Saudi businesses, including 3PL warehouses that receive goods for customers and deliver them locally. It records each arrival as a lot with one barcode per package, tracks racks and holds, and carries goods through delivery trips to proof of delivery. It works in Arabic and English, in a browser and on a phone, and is for Saudi Arabia only, with money in SAR. It does not issue invoices or calculate storage charges. You can start at the Tafsee Logistics page or check the plans and 14-day trial.

Warehouse storage charges: calculation basics

Most 3PL contracts charge storage per pallet or per cubic metre for each day or month, with handling charged per movement and a minimum per month. Whatever your model, the calculation needs one number you can trust: how long each customer's goods have been with you. Tafsee Logistics shows days in storage per lot and per customer; it does not calculate the charges or issue invoices.