Contract Logistics Vs 3PL: 6 Key Differences and How to Choose The Right Outsourcing Option for Your Online Business in 2022

Due to the expansion of on-demand logistics, contract logistics have quickly developed. However, they are frequently mistaken for 3PLs, which provide a different range of services that focus on multiple aspects of eCommerce. Despite the fact that some people use these words interchangeably, they mean very distinct things in practice. A contract logistics firm could be an excellent option for your eCommerce store if you’re seeking someone to manage a certain area of your supply chain while you handle the rest.

On the other hand, you should take another alternative i.e., 3PLs into consideration, if you want to outsource a significantly larger portion of your shipping and fulfillment operations. In this blog, we will look at the differences between contract logistics vs 3PL and what suits your business the best.

What is Contract Logistics?

Contract logistics firms, also referred to as consultants or freight forwarding companies, have areas of expertise ranging from the manufacturing line to delivery management. The term “contract logistics company” is typically used to refer to a freight forwarder. They are just experts in transporting cargo. They will be in charge of things like shipping, finishing up the necessary paperwork and customs clearance.

contract logistics vs 3pl_process
Contract Logistics Process

Contract logistics often assist with the administration of domestic and international transportation rather than shipping, inventory management, or fulfillment. For instance, they serve as a middleman between shipping firms and online retailers and guarantee that products are delivered to the appropriate locations across the supply chain.

WareIQ – Amazon-prime Like Logistics for Modern Brands in India

WareIQ, an eCommerce fulfillment company, empowers online brands with a superior-tech platform to compete with Amazon like service levels by bringing their average delivery timelines from 5-10 days to 1-2 days.

"With WareIQ’s full stack digital enabled fulfillment solution, we got access to the pan India network of fulfillment centers & cold storage facilities enabling same/next day delivery, without any upfront investment in supply chain infrastructure from our end. During the IPL campaign in April 2022, WareIQ efficiently handled unpredictable 200x surges in daily order volumes of ~20k/day with a 99% fulfillment rate. With WareIQ as our preferred fulfillment partner, we witnessed 172% growth in online order volume in just 4 months, with a significant improvement in the overall customer experience in fulfillment."
- Damanbir Singh, Product & Operations Head, Lil’Goodness

Contract Logistics in Today’s eCommerce Market

Contract logistics is mainly used by big market players who already have a vast supply chain network serving hundreds of people in the eCommerce ecosystem. They use it mainly for bulk product transportation from one warehouse to another.

In today’s eCommerce environment, contract logistics companies operate by organizing, managing and planning transportation requirements. Since they maintain tight relationships with significant freight carriers, they are able to bargain for lower transportation costs which benefits merchants. Additionally, they assist in route planning that is optimized for better shipping speed at a lower cost.

According to Verified Market Research, the Contract Logistics Market was valued at USD 203.40 billion in 2018 and is anticipated to increase at a CAGR of 4.80 percent from 2019 to 2026 to reach USD 296.52 billion.

6 Key Differences Between Contract Logistics vs 3PL

A 3PL company handles much more than just transportation; 3PLs offer a full range of ecommerce logistics services from warehousing and order fulfillment to inventory management and automated shipping. While contract logistics companies typically help arrange transportation and routes, a 3PL company handles much more than just transportation management. Since many 3PLs run numerous distribution centers, sellers can:

  • View current inventory levels in real-time
  • Distribute inventory among distribution facilities
  • Distribute stock in accordance with demand

In order to enable an end-to-end eCommerce solution, 3PLs offer flexibility, visibility into the eCommerce supply chain and technology connections with eCommerce solutions from inventory planning to freight delivery. While a 3PL normally provides transportation for orders after they are fulfilled through the carriers directly, a contract logistics business may help manage the transportation to get bulk inventory to a 3PL from a manufacturer. The comparison between contract logistics vs 3PL is shown in the table below:

ParticularsContract Logistics3PL
Delivery ManagementDelivery management processes are best handled by contract logistics vs 3PL. However, 3PLs with numerous fulfillment centers can assist brands in allocating products according to where there is more demand.To negotiate shipping rates and pass the savings down to you and your clients, 3PLs also work with regional and national carriers. In some cases, they even cooperate with global carriers.
Inventory ManagementContract logistics companies focus and specialize in delivery and transportation.With built-in inventory management provided by 3PL's software, it is simple to manage SKUs, track inventory in real-time and track its performance over time.
Order Fulfillment FlexibilityThe process is quite rigid due to the usage of a single shipping process.Unlike contract logistics, 3PLs have the systems and procedures to give the retail fulfillment process more flexibility.
Real-Time Shipment TrackingContract logistics acts as a middleman between the shipping companies and online retailers so there is no shipment tracking.Customers now anticipate receiving real-time shipment notifications for every online order. They want to be aware of the precise processing, preparation, shipping and delivery dates for their orders and these facilities are provided by 3PLs.
AutomationContract logistics only involves the transportation of goods to their relevant locations so the only portions that can be optimized providing correct information, assigning delivery partners and more.By partnering with a 3PL, retailers can optimize much of their inventory management and labour-intensive processes.
Warehouse ManagementContract logistics also uses software for making transportation easy and accurate but it is not as good as the WMS of 3PL companies. To guarantee that inventory is received, stored, picked, packaged, transported and refilled in the most effective manner possible, 3PLs utilize warehouse management systems (WMS). In contrast to contract logistics, 3PLs employ a WMS to optimize internal operations in a fulfillment center which offers visibility into the fulfillment process.

Contract Logistics vs 3PL: How to Choose the Right Outsourcing Option for Your Business in 2022?

Contract Logistics

A contract logistics agreement may be utilized for one-off services or for the precise step of the supply chain you need assistance with, depending on the specific services required, the size of your organization and your budget. If you are willing to handle everything else yourself, including picking and packaging orders, tracking them, keeping track of your own inventory and managing warehouse procedures, it can be beneficial to work with a contract logistics firm. A contract logistics company is the best option for you if you have the time to market your company and manage other processes involved with order fulfillment.

3PL

You should use a 3PL company’s order fulfillment services if you discover that managing your business and marketing takes up the majority of your time and you are not able to handle everything together. You don’t have to worry as much about logistics operations which enables you to save time while growing your supply chain because 3PLs provide a wide range of solutions to help with supply chain efficiency. Additionally, 3PLs offer the infrastructure, technology, experience and support you need to maintain your position in the market and satisfy customer demand for quick and low-cost delivery, all of which contribute to your bottom line.

Conclusion: Why Should You Choose WareIQ as Your 3PL Partner?

Your capacity to handle logistics and provide excellent customer service varies depending on the choice of contract logistics vs 3PL. Giving someone access to critical data like sales, inventory and other statistics carries a big risk. Startups in the fields of on-demand and cloud-based warehousing are becoming more and more well-known as eCommerce takes off. Instead of signing long-term leases for a set location, businesses can use the storage space according to seasonal demand. For retailers that require more assistance in other parts of their eCommerce operations, they are better suited in partnering with a 3PL company like WareIQ. 

contract logistics vs 3pl_WareIQ

WareIQ gives you many more facilities than contract logistics companies including order fulfillment, last-mile delivery, a custom WMS to manage orders and integrate with multiple eCommerce platforms, a nationwide network of fulfillment centers, choice of multiple shipping partners, ultra-fast delivery and much more.

Online firms have a lot of space to expand with WareIQ since they get access to a strong fulfillment infrastructure, a team of logistics professionals and a dedicated customer support team. We also make it simple for you to get onboarded. Once you make use of our services, online orders are automatically dispatched to the closest fulfillment center to be picked up, packed and shipped as soon as they are placed which saves you time, resources and extra delivery changes.

Contract Logistics vs 3PL: FAQs