What term describes outsourcing logistics functions to a third-party company?

Outsourcing logistics functions to a third-party company is called third-party logistics, commonly abbreviated 3PL.

A 3PL provider performs logistics activities for another business instead of the business handling every operation internally. Services may include transportation, warehousing, inventory management, order fulfillment, freight brokerage, packaging, and returns processing. The exact combination depends on the customer’s supply-chain needs.

The term is broader than freight forwarding. A freight forwarder typically arranges transportation and shipping documentation, while a 3PL may operate warehouses, manage fulfillment systems, coordinate carriers, and integrate several logistics functions. “Contract logistics” is also related, but it usually emphasizes an ongoing, contract-based operational arrangement rather than the broader category name.

A fourth-party logistics provider, or 4PL, generally coordinates and manages multiple logistics providers across a supply chain. In practice, the boundaries between 3PL and 4PL can overlap, but 3PL remains the standard answer when a company outsources logistics execution to an external provider.