# Logistics providers, 3PLs and carriers

> How in-house logistics compares with 3PLs and 4PLs, what carriers, brokers and forwarders do, how 3PLs price and where integration and liability gaps sit.

Source: https://docs.lumina-erp.com/first-and-third-parties/logistics-providers-and-3pls/

**In short.** A third-party logistics provider (3PL) runs warehousing or transport for you, but the inventory, the customer promise and most of the risk stay yours. Before you sign, understand how the 3PL prices storage, handling and accessorials, agree measurable service levels, integrate orders and inventory through EDI or APIs, decide who owns inventory accuracy and read the liability limits, because carrier and warehouse liability is usually far below the value of your goods.

A third-party logistics provider (3PL) stores, handles or moves your goods under contract, and a carrier, broker, forwarder or customs broker each handles one piece of the movement. Outsourcing logistics can add capacity, locations and skills you do not have, but the inventory, the customer promise and most of the risk remain yours.

## The options at a glance

The table sets each type of provider against what it does and where a distributor typically uses it.

| Option | What they do | Owns or operates | Typical use for a distributor |
|---|---|---|---|
| In-house warehouse and fleet | Your people, buildings, trucks | You | Core branches, will-call, local delivery, where service is how you win |
| 3PL (third-party logistics) | Warehousing, fulfillment, sometimes transport, under contract | Their buildings, staff and systems, holding your inventory | A new region, overflow, e-commerce fulfillment, seasonal peaks |
| 4PL (fourth-party logistics) | Manages your logistics network and other providers on your behalf | Often no assets, managing 3PLs and carriers | Large or complex networks where coordination is the gap |
| Parcel carrier | Small packages on a network of hubs | Their network | Small orders, e-commerce, samples |
| LTL carrier (less than truckload) | Pallet shipments consolidated with other shippers through terminals | Their trucks and terminals | Most distributor freight between 150 and 10,000 lb or so |
| FTL carrier (full truckload) | A whole trailer for one shipper, point to point | Their trucks | Replenishment from suppliers, branch transfers |
| Freight broker | Arranges transport with carriers for you without hauling it | Neither goods nor trucks | Finding capacity, spot quotes, lanes you ship rarely |
| Freight forwarder | Arranges and consolidates shipments, often international, and may issue its own bill of lading | Sometimes containers or consolidation space | Imports and exports, ocean and air consolidation |
| Customs broker | Files entries with customs and handles duty payment for importers | No goods | Every commercial import into the U.S. that you do not clear yourself |

The weights in the LTL row are a rule of thumb. Carriers and brokers draw the lines differently.

## Choose in-house, 3PL or 4PL

Each question below leans the decision one way.

| Question | Leans in-house | Leans 3PL | Leans 4PL |
|---|---|---|---|
| Is logistics how you win customers (same-day, will-call, technical counter)? | Yes | | |
| Do you need a location in a region where you have little volume? | | Yes | |
| Are your volumes seasonal or unpredictable? | | Yes | |
| Do you run many providers and lack people to coordinate them? | | | Yes |
| Do you need value-added work (kitting, labeling, light assembly) at scale? | Either | Either | |
| Would losing control of the dock hurt customer service? | Yes | | |

Many distributors end up hybrid: branches in-house for local service, a 3PL for a distant region or e-commerce, brokers for overflow freight.

## How 3PLs price

3PL pricing has three layers: storage, handling and accessorials. Quotes that look cheap usually move cost into the third.

| Charge | How it is usually billed | What to check |
|---|---|---|
| Storage | Per bin or shelf, per pallet position or per cubic foot, per month | Whether a partly full pallet bills as full, and the day of the month inventory is measured |
| Receiving | Per pallet, per carton or per hour | Floor-loaded containers often cost much more than palletized |
| Put-away | Often included in receiving | Confirm |
| Pick and pack | Per order plus per line or per unit | How a multi-line order is priced, and any minimums |
| Shipping and outbound handling | Per order or per carton, with transport billed separately at a markup | The markup on carrier rates, and whose carrier accounts are used |
| Accessorials | Per event: labeling, kitting, rush orders, returns, cycle counts, special projects, account management, minimum monthly fee | The full rate sheet behind the headline rates |
| Minimums | A monthly minimum bill | What you pay in your slowest month |

With invented figures, one month of a 3PL bill for an industrial distributor looks like this:

| Line | Calculation | Amount |
|---|---|---|
| Storage | 800 pallets × $18 | $14,400 |
| Receiving | 300 pallets × $6 | $1,800 |
| Order picks | 4,000 orders × $3.50 | $14,000 |
| Unit picks | 10,000 units × $0.40 | $4,000 |
| Accessorials | Labeling, returns, a rush project | $1,200 |
| **Total** | | **$35,400** |

Storage here is about 41% of the bill. Slow-moving stock sitting at the 3PL costs rent every month, so an ABC review of what you send there often saves more than negotiating the pick rate. See [ABC analysis and cycle counting](/distribution/abc-analysis-and-cycle-counting/).

## KPIs and service levels

Agree the measures, the targets and what happens when a target is missed. Where you can, measure them from your own data as well as the 3PL report. The table gives common measures with invented example targets.

| KPI | What it measures | Example target (invented) |
|---|---|---|
| Dock to stock | Time from arrival to available to sell | Within 24 hours |
| Order cycle time | Order received to shipped | Same day for orders received before the cutoff |
| Order accuracy | Orders shipped with the right items and quantities | 99.5% or better |
| On-time ship | Orders shipped by the promised date | 98% or better |
| Inventory accuracy | Counted quantity matches system quantity, by location | 99% or better on cycle counts |
| Damage rate | Units damaged in the 3PL's care | Below an agreed share of units handled |
| Invoice accuracy | Bills that match the rate sheet | No billing errors after the first quarter |
| EDI and API timeliness | Shipment and receipt confirmations sent within the agreed time | Within one hour of the event |

For customer-facing measures, [fill rate and OTIF](/distribution/fill-rate-and-otif/) explains the definitions. The SLA should say what counts as a miss, how it is measured, the credit or remedy and the right to exit after repeated misses. The [contracts, SLAs and data rights](/first-and-third-parties/contracts-slas-and-data-rights/) page covers how to write those terms.

## Integrating a 3PL with your ERP

A 3PL warehouse is a location in your ERP whose transactions happen in someone else's system. The integration keeps the two in step.

### The standard EDI documents

X12 publishes warehouse transaction sets for this exchange (retrieved 2026-09-28):

| Document | Name | Direction | What it does |
|---|---|---|---|
| 940 | Warehouse Shipping Order | You to 3PL | Tells the warehouse to ship an order |
| 945 | Warehouse Shipping Advice | 3PL to you | Confirms what shipped, quantities, carrier and tracking |
| 943 | Warehouse Stock Transfer Shipment Advice | You to 3PL | Tells the warehouse that stock is on its way (a transfer or a supplier shipment) |
| 944 | Warehouse Stock Transfer Receipt Advice | 3PL to you | Confirms what was received, including shortages and damage |
| 846 | Inventory Inquiry/Advice | 3PL to you | Reports on-hand quantities, often daily, for reconciliation |

Many 3PLs also offer APIs, which are faster and easier to extend but less standard. Either way, the ERP side creates the shipping order when an order is released and posts the shipment and invoice from the 945. It also receives stock from the 944 and flags differences. [EDI for distributors](/distribution/edi-for-distributors/) covers EDI mechanics and partner testing.

### Inventory sync and who owns accuracy

The 3PL counts and moves your goods, but the inventory value is on your balance sheet. Decide in the contract:

- [ ] **Which system is the book of record.** Usually your ERP for value and availability, the 3PL system for location detail.
- [ ] **How often on-hand is reconciled.** A daily 846 or API snapshot compared with ERP on-hand, with differences investigated within a set time.
- [ ] **Who counts, how often and at whose cost.** Cycle counts by the 3PL, with your right to observe or audit.
- [ ] **Shrink allowance.** Whether the 3PL pays for unexplained loss beyond an agreed tolerance, and at what value.
- [ ] **Adjustments.** No inventory adjustment posts in your ERP without a reason code and your approval.

## Liability, claims and insurance

This is where outsourced logistics surprises people. Default liability for carriers and warehouses is often a small fraction of the value of your goods.

### Carriers

For interstate motor carriage in the U.S., the Carmack Amendment (49 U.S.C. 14706) makes the carrier liable for actual loss or injury to property it carries. It also allows carriers to limit that liability to a value declared by the shipper or agreed in writing, often called released value.

The statute sets minimums too. A carrier may not give you less than 9 months to file a claim or less than 2 years to sue after a claim is denied (Cornell LII, retrieved 2026-09-28). LTL tariffs commonly cap liability per pound, so a light, valuable shipment may recover a fraction of its value. Parcel carriers have their own declared-value rules.

### Warehouses

Under the Uniform Commercial Code as adopted by most states (UCC 7-204), a warehouse must take the care a reasonably careful person would take. It may limit its liability per item or per unit of weight in the warehouse receipt or storage agreement (Cornell LII, retrieved 2026-09-28), and 3PL contracts usually do exactly that.

With invented numbers, suppose a storage agreement limits liability to $0.50 per pound. A 1,000 lb pallet of controls worth $12,000 is destroyed in the 3PL's care. The 3PL owes $500 if its limit holds. The other $11,500 is yours, unless your own insurance covers it.

### Brokers, forwarders and customs brokers

A freight broker does not carry goods and is not a carrier. FMCSA requires property brokers to hold a $75,000 surety bond or trust fund (49 CFR 387.307, retrieved 2026-09-28). That protects carriers and shippers against unpaid obligations, not the value of your freight. Check each broker's operating authority and the carrier's insurance on the load.

Customs brokers must be licensed by U.S. Customs and Border Protection under 19 CFR Part 111. CBP states that the importer of record stays ultimately responsible for the correctness of the entry and for duties, taxes and fees. That holds even when a broker files the entry (CBP, Tips for New Importers and Exporters, retrieved 2026-09-28). The broker's work is still yours to check.

### Insurance

Several policies can cover the gap between those limits and the value of your goods.

| Cover | What it protects |
|---|---|
| Your property or inventory insurance | Your goods in third-party warehouses, if the policy extends to off-site locations |
| Cargo insurance (shipper's interest) | Goods in transit, above the carrier's limited liability |
| 3PL's warehouse legal liability | The 3PL's liability to you, up to its contract limits |
| Carrier's cargo liability insurance | The carrier's liability, up to its limits |

:::caution[Not legal advice]
Liability limits, bills of lading, warehouse receipts, customs obligations and insurance terms vary by contract, mode and state. Have counsel and your insurance broker review 3PL, carrier and broker agreements before you sign.
:::

## Onboarding a 3PL

1. Define the scope and data: items, units of measure, dimensions and weights, lot or serial rules, labeling and packaging requirements, carrier accounts. Missing dimensions are the most common cause of storage and freight billing disputes.

2. Build and test the integration. Run test 940, 945, 943 and 944 documents (or API calls) with real orders, including partial shipments, backorders, cancellations and returns.

3. Set up the location in your ERP as a warehouse or branch with its own costing, replenishment rules and order routing.

4. Plan the inventory move. Count before it leaves, count on arrival and reconcile every difference before you start shipping from the new location.

5. Run a pilot. Start with a subset of items or customers for a few weeks, and check every KPI daily.

6. Go live and hold weekly reviews. Review KPIs, invoices against the rate sheet and open issues every week for the first three months, then monthly.

7. Plan the exit now. The contract should say how you get your inventory and data back, in what time and at what cost, if either side ends it. See [leaving a vendor](/first-and-third-parties/leaving-a-vendor/).

## Questions to ask a 3PL

1. Can we see the full rate sheet, including every accessorial and the monthly minimum?
2. How is storage measured, and on which day?
3. Which EDI documents or APIs do you support today with other clients on our ERP?
4. How often do you cycle count, and can we audit?
5. What is your liability limit per pound or per item, and what warehouse legal liability insurance do you carry?
6. Who are your carriers and subcontractors, and do you mark up freight?
7. How do you report KPIs, and can we measure them from our own data?
8. What does exit look like: notice period, fees and the time to release our goods?

## Red flags

Any of these in a proposal or contract needs an answer before you sign.

- Headline rates with no written accessorial schedule.
- Liability limited to a per-pound figure with no mention of insurance.
- No experience integrating with your ERP or your EDI provider.
- A 3PL that will not share its inventory data daily.
- Inventory adjustments made without your approval.
- A contract that lets the 3PL hold your goods (a warehouse lien) over disputed invoices without a dispute process.

## Gather your own volumes first

Before you ask for 3PL quotes, pull a year of your own data: pallets on hand by month, receipts, orders, lines and units shipped, returns and the weights and dimensions of your top items. With that, you can price every proposal against the same volumes and see which 3PL is actually cheaper for your mix.

## Sources

- [49 U.S.C. 14706, Liability of carriers under receipts and bills of lading (Cornell LII)](https://www.law.cornell.edu/uscode/text/49/14706)
- [UCC 7-204, Duty of care; contractual limitation of warehouse's liability (Cornell LII)](https://www.law.cornell.edu/ucc/7/7-204)
- [49 CFR 387.307, Property broker surety bond or trust fund (eCFR)](https://www.ecfr.gov/current/title-49/subtitle-B/chapter-III/subchapter-B/part-387/subpart-C/section-387.307)
- [19 CFR Part 111, Customs Brokers (eCFR)](https://www.ecfr.gov/current/title-19/chapter-I/part-111)
- [Customs Brokers (U.S. Customs and Border Protection)](https://www.cbp.gov/trade/programs-administration/customs-brokers)
- [Tips for New Importers and Exporters (U.S. Customs and Border Protection)](https://www.cbp.gov/trade/basic-import-export/importer-exporter-tips)
- [X12 Transaction Sets (X12)](https://x12.org/products/transaction-sets)

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