What is 3PL (third-party logistics)?

In 3PL a company hands its storage, order fulfilment and often transport management to a specialist logistics provider under a contract. In regulated sectors such as pharmaceuticals the work is outsourced but responsibility for the product stays with its owner; the roles are set in a written contract.

3PL stands for third-party logistics. Instead of running its own warehouse, a company hands the storage of its products, the preparation of orders and often the management of transport to a firm that does this as its specialism. The logistics provider is the third party between the product owner and the owner’s customers.

1PL, 2PL, 3PL and 4PL

The classification is widely used in the industry, although definitions vary a little from source to source. Roughly:

Model	Who does the work	Typical example
1PL	The company itself	Distribution with its own warehouse, vehicles and staff
2PL	A provider of one asset or service	A carrier that only transports, a landlord that only rents space
3PL	A logistics provider offering connected services together	Storage, stock management, order fulfilment and reporting
4PL	A firm that manages the whole chain for the owner	Coordinating several 3PLs and carriers

Why companies work with a 3PL

Investment is the most common reason. A company that builds its own warehouse takes on the space, the racking, the handling equipment, the warehouse management system and the staff. If the goods need conditioned storage, temperature monitoring, mapping and calibration come on top. With a 3PL, that investment becomes a service fee.

Flexibility is the second reason. When volumes change with the season or with a product launch, a fixed warehouse is either half empty or too small. The third is expertise: for medicines, medical devices or food supplements, record-keeping and regulatory knowledge are part of a specialist warehouse’s daily work.

Outsourcing in pharma: who is responsible?

Good Distribution Practice (GDP) gives outsourcing its own chapter. Under chapter 7 of the EU GDP guidelines, the company that outsources the work (the contract giver) assesses whether the provider (the contract acceptor) is competent for it, and the responsibilities of both sides are set out in a written contract. The contract acceptor does not pass work entrusted to it to a third party without the contract giver’s prior evaluation and approval.

In practice this means the storage is outsourced but the responsibility for the product’s quality is not. How deviations are reported, who does what in a recall, audits and access to records should all be written into the contract. We explain the wider GDP framework in a separate article.

What to look for in the contract

The main headings are:

the scope of the service and the storage conditions it covers,
performance measures and how often they are reported,
ownership of the stock and of the records,
how stock count differences are handled,
insurance,
how stock and data are handed over when the contract ends.

How performance can be measured is covered in our article on warehouse KPIs, and the questions to ask a provider in our article on choosing a storage partner.