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Decision Engine

Do You Need a 3PL or Keep Logistics In-House?

Armstrong and Associates 3PL Market Research and Council of Supply Chain Management Professionals data consistently show that 3PL adoption concentrates among shippers with multi-region or international distribution, complex value-added service needs, aggressive growth plans, or limited in-house logistics capability. Weigh order volume, geographic reach, warehousing needs, growth plans, in-house capability, cost comparison, and service complexity to lean toward outsourcing to a 3PL or keeping logistics in-house.

Last updated: May 2026

A third-party logistics (3PL) outsourcing decision weighs whether to keep logistics operations in-house, adopt a hybrid model (in-house critical operations plus 3PL for overflow or specialty needs), or fully outsource to a 3PL provider. Typical 3PL adoption thresholds (Armstrong and Associates) typically target Multi-region, growth-mode, limited in-house capability.

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What is Third-Party Logistics (3PL) Outsourcing Decision?

A third-party logistics (3PL) outsourcing decision weighs whether to keep logistics operations in-house, adopt a hybrid model (in-house critical operations plus 3PL for overflow or specialty needs), or fully outsource to a 3PL provider. The framework considers order volume, geographic reach, warehousing needs, growth plans, in-house capability, 3PL versus in-house cost comparison, and fulfillment service complexity. The decision is structural and shapes logistics economics for years.

The Formula

Best Path = (Order Volume) + (Geographic Reach) + (Warehousing Needs) + (Growth Plans) + (In-House Capability) + (Cost Comparison) + (Service Complexity)

Worked Example

A consumer brand ships 12,000 orders monthly with national coverage, needs multi-location warehousing, has aggressive growth plans doubling volume, limited in-house logistics capability, 3PL pricing is modestly cheaper than in-house, simple pick-and-pack service.

Order Volume: 12,000 monthly (lean toward 3PL)
Geographic Reach: national (lean toward 3PL)
Warehousing Needs: multi-location (lean toward 3PL)
Growth Plans: doubling volume (lean toward 3PL)
In-House Capability: limited (lean toward 3PL)
Cost Comparison: 3PL modestly cheaper (lean toward 3PL)
Service Complexity: simple pick-and-pack (workable in-house or 3PL)

📌 Strong signal toward outsourcing to a 3PL with national fulfillment network. The combination of substantial volume, national reach, multi-location warehousing, aggressive growth, and limited in-house capability points clearly to 3PL outsourcing. Next step is evaluating 3 national 3PL providers with reference checks from similar-volume e-commerce or consumer-brand shippers.

Why This Matters

3PL economics depend on volume and geographic reach

Armstrong and Associates 3PL Market Research consistently shows that 3PL adoption pencils best for shippers with substantial volume (typically 1,000+ orders monthly), multi-region or national geographic reach, and limited in-house logistics capability. Single-region operations with strong in-house capability often retain in-house operations with better unit economics.

Growth scaling is hard with in-house logistics expansion

Aggressive volume growth is difficult to support with in-house logistics expansion at the same pace because of warehouse buildout time, hiring lead time, and software implementation timeline. 3PL networks scale capacity faster than in-house warehouse-building can, making 3PL adoption particularly valuable for shippers in growth mode.

Common Mistakes

❌ Comparing 3PL per-order pricing to in-house base labor cost only

In-house logistics loaded cost includes warehouse rent plus labor plus benefits plus software plus equipment plus shrinkage plus management time. Comparing 3PL per-order pricing to in-house base labor cost alone consistently understates in-house cost and biases the decision incorrectly. The right comparison includes loaded cost on both sides.

❌ Choosing the cheapest 3PL without evaluating service levels

3PL pricing varies meaningfully with service levels (on-time shipping rate, error rate, returns handling, customer service responsiveness, integration quality). Lowest-cost 3PLs commonly compromise on service levels in ways that surface as customer experience issues after the contract is signed. Reference verification with comparable-volume shippers is the operational baseline.

Industry Benchmarks

Category	Good	Average	Poor
Typical 3PL adoption thresholds (Armstrong and Associates)	Multi-region, growth-mode, limited in-house capability	Mixed factors with workable in-house capability	Single-region small volume with strong in-house operations
Typical 3PL per-order cost (e-commerce fulfillment)	$3-8 per order at moderate volume	$5-15 per order all-in	Under $2 (likely unsustainable service) or over $20 (likely complex service)
3PL contract length	Multi-year with volume commitments	1-3 year contracts	Month-to-month (limited investment from 3PL)

Source: Armstrong and Associates 3PL Market Research, Council of Supply Chain Management Professionals State of Logistics Report, and 3PL Industry Survey data

Benchmark data sourced from Armstrong and Associates 3PL Market Research, Council of Supply Chain Management Professionals State of Logistics Report, and 3PL Industry Survey data.

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One of the most common mistakes we see when working with clients: comparing 3pl per-order pricing to in-house base labor cost only. In-house logistics loaded cost includes warehouse rent plus labor plus benefits plus software plus equipment plus shrinkage plus management time. Comparing 3PL per-order pricing to in-house base labor cost alone consistently understates in-house cost and biases the decision incorrectly. The right comparison includes loaded cost on both sides.

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Frequently Asked Questions

What is a 3PL?

A third-party logistics provider (3PL) is a company that provides outsourced logistics services covering warehousing, fulfillment, distribution, and often value-added services (kitting, labeling, returns handling). 3PLs commonly serve multiple customers from shared warehouses, achieving scale economics individual shippers cannot match independently. The 3PL industry includes large national networks (XPO, GXO, ShipBob, Ryder, DHL), regional providers, and specialty operators (cold storage, hazmat, e-commerce fulfillment).

When does a business benefit from using a 3PL?

Armstrong and Associates 3PL Market Research consistently identifies five 3PL adoption signals: multi-region or international distribution that requires geographic infrastructure, aggressive volume growth that exceeds in-house scaling pace, complex value-added service needs (kitting, customization, returns), limited or no in-house logistics capability, or favorable 3PL economics at the shipper volume. Single-region operations with strong in-house capability often retain in-house operations with better unit economics.

How much does a 3PL typically cost?

3PL pricing varies substantially by service mix and volume. Typical pricing includes per-order pick-and-pack fees ($1-5 per order), per-pallet or per-square-foot storage fees, inbound receiving fees, returns processing fees, and value-added service fees per activity. For e-commerce fulfillment at moderate volume, all-in 3PL cost commonly runs $5-15 per order. Comparing 3PL economics against in-house cost per order requires including the loaded in-house cost (warehouse rent, labor, software, equipment, shrinkage).

Can I use a 3PL for international fulfillment?

Yes, many 3PLs operate international networks covering customs brokerage, international freight, duty management, and local-country fulfillment. International 3PL services are particularly valuable for e-commerce brands expanding internationally without committing to international entity setup, or for manufacturers serving international customers without building international logistics capability. The right 3PL for international depends on the target markets and the service complexity.

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