Short answer
A 3PL, or third-party logistics provider, is a company a shipper hires to run part of its logistics, such as freight brokerage, warehousing, fulfillment, or managed transportation. Some 3PLs own trucks and buildings, and others arrange service through carriers. A 3PL that arranges interstate truck transportation for pay is acting as a broker and needs FMCSA authority.
1PL, 2PL, 3PL, and 4PL
| Model | Who does the work | Example |
|---|---|---|
| 1PL | The shipper moves its own freight | A manufacturer with a private fleet |
| 2PL | An asset carrier hired for the move | A trucking company or railroad |
| 3PL | An outside provider running logistics services | A broker that also runs warehouses |
| 4PL | A provider managing the whole supply chain, including other 3PLs | A lead logistics provider overseeing several carriers and warehouses |
Industry shorthand. These labels aren’t defined in federal regulations.
What 3PLs do
- Freight brokerage. Finding and booking carriers for truckload, LTL, and specialized freight.
- Managed transportation. Running a shipper’s routing, carrier selection, tendering, and freight bill audit.
- Warehousing and fulfillment. Storing inventory, picking orders, and shipping to stores or consumers.
- Cross-docking and consolidation. Combining or splitting shipments at a dock. See cross-docking.
- International. Freight forwarding and coordinating the domestic legs of import and export moves.
Asset-based 3PLs own some trucks, trailers, or warehouses. Non-asset 3PLs own little equipment and depend on carrier and warehouse partners. Many do a mix.
3PL vs freight broker
Every freight broker is a kind of 3PL, but plenty of 3PLs never broker a truck. The label doesn’t matter to regulators. What the company does matters.
Federal law defines a broker as a person, other than a motor carrier, that sells, negotiates for, or arranges transportation by motor carrier for compensation. FMCSA says companies arranging transport of federally regulated commodities need an MC number in addition to a USDOT number. Brokers also need a $75,000 BMC-84 bond or BMC-85 trust fund and a BOC-3 on file.
A 3PL that consolidates shipments and takes responsibility for the whole move may fit the separate federal definition of a freight forwarder, which has its own registration.
Example: how a 3PL earns on one account
Example, with illustrative numbers. A 3PL stores a manufacturer’s goods and handles its outbound truckloads.
- Storage: 800 pallets at $12 per pallet per month = $9,600
- Handling: 1,000 pallets in and out at $6 each = $6,000
- Freight: 40 truckloads billed at $1,900 and covered at $1,650, for $10,000 of gross margin
That’s $25,600 a month from one customer across three service lines. It’s also three sets of billing rules and three places to lose margin if they’re tracked in separate spreadsheets.
Common mistakes
- Arranging interstate truck freight for pay without broker authority because the company calls itself a 3PL.
- Contracts that don’t say who’s liable for cargo loss during storage vs transit.
- Shippers not knowing which carrier actually moved their load.
- Blending warehouse and freight revenue so no one can see which service line makes money.
How FreightVero handles it
The FreightVero broker TMS runs the brokerage side of a 3PL, and it’s live: loads, carriers, versioned rate cons, database-enforced checkpoints, tracking, and a billing queue with customer billing rules. It isn’t a warehouse management system. For 3PLs with workflows a standard TMS doesn’t fit, custom TMS development is a live service. See FreightVero for 3PLs.