3PL Pricing Guide: Cost Models, Fees & How to Budget

Fulfilling orders involves a number of complex moving parts. Ecommerce businesses trying to juggle it all often find themselves struggling to keep these parts running smoothly. The solution is to outsource some of these tasks to third party vendors. 

However, simply handing over critical operations is a cost center. Businesses must understand 3PL pricing structures - what factors influence the final price and how to reduce them - exactly what this article aims to break down. Additionally, leveraging the best 3PL software can significantly optimize your fulfillment operations.

Third party logistics, or 3PL, refers to the practice of outsourcing some elements of supply chain activities to an external vendor or specialized service provider. These services include, but are not limited to:

• Inventory management
• Returns management
• Order fulfilment
• Distribution management
• Warehousing
• Reverse logistics
• Packaging 
• Order tracking

Want to better understand if your business needs a 3PL or a 4PL provider? Explore the differences in our detailed guide on 3PL vs 4PL.

If you are planning to outsource your logistics operations, consider these factors to influence your 3PL pricing. 

Initial setup costs

These are one time expenses for each vendor. You bear this cost during the onboarding process for integrating the new systems. It generally covers the fee for setting up new storage facilities or management systems. Given that the complexity and nature of service differ for each business, the setup cost is critical to cater to your unique requirements and processes. 

Inbound shipping and receiving costs

Transporting goods to a given location has a number of elements like vehicle renting cost, driver salary, fuel price, and road taxes. Keep in mind that the total shipping cost varies on factors like carrier rates, delivery speed, distance to destination, and even package dimensions. While many 3PL partners offer bulk discounts for large volumes of orders, you have to bear this cost whether you are using third party services or not. 

Storage and warehousing costs

Your goods need safe storage facilities. These warehouses should be located strategically to minimize distance to high order locations and  distance to main carriers. Typically, the warehousing cost depends on  storage capacity, volume of products, type of products, and other inventory requirements. 

Handling costs

Also known as “pick and pack” fees, handling costs are essentially a processing fee charged for manually picking items off the shelf and packing them. In most cases, this fee is charged per item and may vary on factors like size of the item, special handling requirements for fragile items, hazardous items, and weight of the item. 

Value added service costs

Apart from standard warehousing services, 3PL services include:

• Kitting costs: Instead of picking items individually, shippers may bundle multiple items as part of a special offer. 
• Custom labeling: Some products may require labelling specific to the brand or type of item. It may also include instructions related to handling, compliance, or place of origin. 
• Quality checks: Involves inspecting items ready to be shipped or returned products for defects or damage. 

Order volume and frequency

Higher, consistent volumes often unlock lower per-order pick, pack, and shipping rates due to economies of scale. 3PLs may also prioritize clients with steady throughput by offering better terms or service levels. 

In contrast, low or inconsistent order frequency may trigger minimum monthly fees or underutilization charges, making your cost per order higher. Irregular volumes also complicate labor and resource planning for the 3PL, leading to inefficiencies that may be passed on to you.

Account management fees

Before onboarding a new client, you need to bear a one time setup fee to ensure seamless logistics management. This fee varies from one business to another based on the complexity, type of services, and the size. Generally it covers activities like maintaining documents, managing insurance, reporting inventories, and paying office staff. 

Aftercare costs

The lifecycle of some packages may not end after being handed to the customer. This is where aftercare costs come into the picture; when customers raise return requests, inventories need to be restocked, or packages need to be disposed of, that add up to the total expense. 

These are some of the most common 3PL pricing models: 

Fixed Monthly 3PL Fee (Flat Rate)

As the same suggests, clients pay a specific rate they agreed on in the fixed monthly rate model. To simplify this further, the fee remains same each month, irrespective of the volume of orders and inventory space used. 

The flat rate method has its pros as well as cons. On the positive side, you don't have to worry about working on a new bill every month. In addition, if the order volume exceeds the average on a given month, it does not impact the fee.

On the flipside, a non variable pricing module means that you are likely overpaying if your order volume is low for most months. Moreover, your 3PL service provider may include hidden charges into the agreement to increase their margin. 

Variable 3PL Pricing Model

Unlike the fixed model, the costs in a variable pricing structure is based on usage volume or activities. Instead of paying a flat fee per month, your expense varies on factors like storage area used, pick and pack numbers, shipping distance, number of returns processed, order complexity, and more. 

The variable pricing model aligns with order fluctuations, is more transparent, and helps to budget better based on order volumes. 

However, factors like sales spikes, returns, or storage requirements fluctuate every month. Such unpredictability can make budgeting more complex. 

Hybrid 3PL Pricing Model

The hybrid model combines features from the fixed and variable model. Here, you get a balanced cost structure that can be customized as per your business needs. It generally includes a fixed base fee for the core services and while the variable charges depend on usage based activities.  

This model is best for businesses that prioritize cost predictability without compromising on scalability. If you have steady logistics requirements but face seasonal spikes, the hybrid model is the right choice. 

If your 3PL costs are going above the planned budget, consider applying these strategic changes across packaging, routing, and carrier management. 

Pay attention to packaging

If your containers are eating up more space than needed, consider changing the dimensions to save more space without damaging the item. While over paying for dimensional weight is not uncommon, especially with carriers like FedEx and UPS, right sizing boxes can cut costs by 20%. 

Choose warehouse strategically

Distance and fuel are major contributors to your expenses. One way to optimize these costs is by choosing warehouses strategically. If the inventories are closer to geographies with higher order volume, you can significantly cut down last mile charges as well as total transit time. 

Consolidate multiple orders

If you ship multiple items to the same customer or retailer, configure your system to auto combine orders before shipping them. This way, you can minimize costs associated with duplicate packaging, label charges, and costs per item.

For high volume destinations like Amazon warehouses, discuss with your 3PL provider if zone skipping is possible. 

Optimize shipping service levels

Faster delivery requires complex logistics, expedites handling and transportation activities, and may need additional labour to ensure timely processing. 

While some SLAs require one or two day delivery, this likely does not apply across every case. If your SLA does not require a fast delivery, there is no need to default it. A three or four day delivery window reduces the cost almost by half. We recommend sorting shipments by the delivery time to optimize shipping service levels.

Monitor surcharges and audit invoices

Unexpected costs associated with delivery, address correction, changes in order, add to additional costs. Minimize these by setting up alerts or custom rules in your 3PL system to flag them earlier. 

Roughly three to five percent of carrier invoices include recoverable errors. Set up a shipping audit workflow to flag overcharges, duplicate shipments, or invalid surcharges. 

Reduce your logistics costs significantly with FarEye’s advanced route optimization. Request a Demo

FarEye reduces costs across your delivery lifecycle by:

• Integrating with multiple carriers and using smart algorithms to automatically select the most cost effective option based on factors like delivery speed, cost, and performance. 
• Combining line haul and last mile to rescue zonal charges and fuel expenses. 
• Using predictive analytics and behavioral data to ensure success on the first attempt
• Taking live traffic, vehicle load, and delivery windows into account to optimize fuel costs or route detours
• Providing real time visibility into shipments and delays or disruptions at an early stage to prevent costly last minute rerouting

Leveraging 3PL cloud software helps businesses enhance scalability, gain real-time visibility, and drive efficiency across the logistics lifecycle.

Reduce your logistics costs significantly with FarEye’s advanced route optimization. Request a Demo

Who needs 3PL services?

Businesses that want to outsource logistics operations or scale fulfillment efficiently need 3PL services. This includes:

• E-commerce brands looking to streamline order fulfillment, reduce delivery times, and scale across regions without building warehouses.
• Retailers needing inventory distribution across multiple stores or channels.
• Manufacturers and wholesalers requiring warehousing, B2B order handling, and transportation support.

What is 3PL brokerage?

3PL brokerage refers to a third-party logistics provider acting as a freight broker, connecting shippers. Instead of owning trucks or warehouses, a 3PL broker depends on a vast carrier network to arrange transportation, negotiate rates, and manage shipments on behalf of clients.

How much does 3PL pick and pack cost?

3PL pick and pack costs typically range from 1.50 to $5.00 per order, depending on order complexity, number of SKUs, and service level. Most providers charge a base fee per order plus a per-item fee.