A guide to common terms associated with Third-Party Logistics (3PL)


The following terms provide a glimpse into the multifaceted world of Third-Party Logistics, defining the various processes and functions involved in optimizing supply chain operations.

3PL (Third-Party Logistics)

The overarching term referring to outsourcing logistics and supply chain functions to an external provider. This provider, or 3PL, manages various aspects of transportation, warehousing, distribution, and logistics technology.


In the context of 3PL, a carrier is a company or individual responsible for transporting goods. Carriers can include trucking companies, shipping lines, air cargo carriers, and more.

Freight Forwarder

A third-party company that facilitates the transportation of goods from the manufacturer to the end-user. Freight forwarders coordinate the logistics involved in the movement of goods across various modes of transportation.

Supply Chain Management (SCM)

The management of the entire process of producing and delivering products, from raw materials to the end customer. 3PLs often play a crucial role in supply chain management, ensuring efficiency and coordination.

Warehouse Management System (WMS)

Software designed to help manage daily warehouse operations from the time an inbound shipment arrives until the moment it leaves the building.


A logistics strategy where goods are unloaded from an inbound carrier and immediately loaded onto an outbound carrier with little or no storage in between. This reduces handling and storage time, improving overall efficiency.

Inventory Management

The process of overseeing and controlling the levels of stocked goods within a warehouse. 3PLs use advanced inventory management systems to optimize stock levels, reducing holding costs while ensuring product availability.

Radio Frequency Identification (RFID)

Technology that uses radio waves to identify people or objects. RFID labels and readers are ideal for warehouse applications to accurately track quantity and location of inventory in real time.


The amount of time it takes to process an inbound delivery at a warehouse dock into live inventory available for sale.

Order Fulfillment

The complete process from the time an order is placed to the moment it’s delivered to the customer. Order fulfillment in 3PL involves picking, packing, and shipping products to meet customer expectations.

Pick and Pack

The process of selecting items from inventory (picking) and packaging them (packing) for shipment. This is a crucial aspect of order fulfillment managed by 3PLs to ensure accurate and efficient shipping.

Retail Compliance Guidelines

A set of specifications for shipping bulk orders into retail for replenishment. Non-compliant shipments can result in lofty charge-backs to the 3PL.

Less-than-Truckload (LTL)

A shipping service for smaller loads that do not fill an entire trailer. Typically, this applies when the freight weighs between 150 and 15,000 lbs.

Last Mile Delivery

The final leg of the delivery process, where goods are transported from a distribution center to the end-user’s location. Last mile delivery is often a significant focus for 3PLs seeking to enhance the customer experience.

Reverse Logistics

The process of handling returned goods, including product recalls and recycling. 3PLs manage reverse logistics to efficiently handle returned products and minimize associated costs.

Customs Brokerage

In international logistics, a customs broker is a professional who assists in the clearance of goods through customs. They ensure compliance with customs regulations and facilitate the smooth movement of goods across borders.

Lead Time

The time it takes for an order to be processed, fulfilled, and delivered. 3PLs work to minimize lead times, ensuring timely delivery of products to meet customer expectations.