What is contract logistics and how does it differ from 3PL?

Contract logistics is one such type of outsourcing. To understand which partner company is right for your business, you need to understand what contract logistics is and how it differs from 3PL.

What is contract logistics?

Contract logistics companies can be various firms: from those that provide consulting services to providers of freight forwarding services. These companies specialize in different parts of the supply chain — from the production line to delivery management.

Contract logistics does not usually include shipping, inventory management, and order fulfillment, but it helps coordinate domestic and international transportation. For example, such an operator can ensure the delivery of e-commerce goods throughout the entire supply chain.

Contract logistics operators are active in the e-commerce market, planning, arranging, and organizing transport flows. They collaborate with large transport companies and can negotiate favorable rates, acting as intermediaries between carriers and online stores. This often results in significant cost savings.

In addition, such operators optimize routes, which allows for faster and cheaper delivery.

Contract logistics vs. 3PL: key differences

Although these terms are often used interchangeably, contract logistics and 3PL operators offer different services.

While contract logistics companies typically help organize transportation and routes, a 3PL company does more than just transportation. 3PLs provide a full range of logistics services, from warehousing and order fulfillment to inventory management and automated delivery.

Many 3PL operators have multiple distribution centers, allowing sellers to:

• distribute goods between centers;

• distribute inventory according to demand;

• view available inventory in real time.

3PL is the ideal logistics partner because these companies provide flexibility and visibility in the e-commerce supply chain. They offer technological integration tailored to the needs of e-commerce businesses (from inventory planning to freight delivery) and provide end-to-end solutions.

At the same time, contract logistics is useful for managing large-volume shipments from the manufacturer to 3PL centers, while 3PL operators typically handle delivery directly to the end buyer.

Let's dive deeper into the differences.

1. Inventory management

3PL operators offer software solutions for real-time inventory control, which allows you to track inventory, group products, and analyze demand.

This ensures sufficient inventory, allows you to forecast demand based on historical data, and optimize inventory, which helps avoid overpayments.

2. Delivery management

Contract logistics is responsible for coordinating delivery processes, but thanks to their network of warehouses, 3PL operators can distribute goods according to demand.

They work with numerous carriers, which often leads to lower delivery costs.

3. Warehouse management

3PLs use WMS platforms to fully automate the warehouse — receiving, storage, packaging, picking, shipping, and replenishment.

Unlike contract logistics, 3PLs use WMS not only to optimize and improve their own operations, but also to provide sellers with control over all processes. This way, sellers know which goods are in transit, what is in stock, and which orders are being processed.

4. Flexibility in order fulfillment

3PL provides multi-channel order fulfillment: fulfillment, delivery to physical locations, processing orders from websites, social networks, or marketplaces — all without customer intervention.

5. Real-time shipment tracking

Nowadays, buyers want to keep track of everything that happens with their order: when it was processed, how quickly it was completed and shipped, and when it will be delivered. Modern 3PL systems allow you to automatically inform buyers about the status of order processing and delivery — from the moment of completion to the last mile. This increases customer satisfaction.

6. Availability of technical integration

3PL platforms are easily integrated with e-commerce sites and CRM/ERP platforms. This allows you to create multi-channel logistics, efficiently process orders, organize returns, and scale your business.

How to choose the right logistics option for your business

Even with complete information, it is very difficult to make the right choice. Therefore, we have prepared a list of cases for which one or another outsourcing model is suitable.

Where is contract logistics used?

This model is beneficial for one-time delivery of goods or as an additional function in the overall supply chain.

• If you perform all other stages yourself, such as warehousing, picking, packing, inventory and stock control, etc., it is worth contacting a contract logistics company.

• If you have time to deal with order fulfillment logistics and develop other parts of your business at the same time, then a contract logistics company is a good way to reduce the cost of order delivery.

Contract logistics is suitable when:

• One-time delivery or logistics support is required as part of large chains.

• You perform most warehouse operations yourself (packaging, accounting, inventory control).

Where is 3PL used?

If you feel that most of your time is spent on running your business and marketing, and you don't have enough resources for logistics, the best solution for you is to work with a 3PL company.

• 3PL companies offer a wide range of solutions to support supply chain efficiency, so you can worry less about logistics operations and the quality of their execution.

• 3PLs also provide the necessary infrastructure, technology, expertise, and support you need to remain competitive and meet customer expectations for fast and affordable delivery — all of which supports your reputation and increases profits.

3PL is suitable when:

• Your budget or resources do not allow you to fully control logistics internally.

• A complete logistics solution is required: with infrastructure, technology, automation, and support.

• Speed, flexibility, transparency, and customer satisfaction are important.

Thus, the choice between contract logistics and 3PL depends on your business needs: if you need a simple delivery service, the contract model is suitable. If you need a comprehensive, scalable solution, it makes sense to choose a 3PL operator.