3PL software covers the business of running a logistics operation on somebody else's behalf: client contracts and what each pays for, activity captured as it is performed, client stock kept separate, billing assembled from that activity, and the reporting each client's contract requires. With Pentoggle, a third-party logistics provider can describe how its client arrangements actually work and generate the starting application around it.
This page is about the business, not the operation. Locations, putaway, picking and stock accuracy are covered by Warehouse Management Software, and order flow by Order Fulfilment Software. A 3PL runs both and additionally has to charge for them.
Many providers already run Tally for accounting and invoicing. That stays where it is. What is often still managed outside it is the link between work performed and money charged.
Key takeaways
- Activity that is not captured when it happens is difficult to bill for, and unlike an operational error, unbilled work leaves little trace.
- Client contracts differ in what they pay for and how, which means the billing logic is per client rather than per operation.
- Client stock is goods belonging to or otherwise held on behalf of a client, and keeping ownership or entitlement distinct in the record is both an operational and a contractual matter.
- Clients measure you on terms their contract defines, and reporting to their definition rather than yours is what makes a review straightforward.
- A useful number is the share of billable activity captured and billed, against activity actually performed.
The warehouse system is often not the problem
A provider running a competent warehouse operation with a working system is doing the hard part well. Goods arrive, are stored, are picked and go out.
The trouble sits in the layer above it, at identifiable points.
When activity is not captured as it happens
A pallet was moved at a client's request. A carton was relabelled. Stock was counted for a client's audit. All real work, potentially billable depending on the contract, and all invisible unless somebody recorded them at the time.
When each client's contract is different
One pays per pallet per week, another per unit handled, another a monthly fee with volume bands. Billing has to follow each contract, and doing that from a warehouse report is manual work every month.
When client stock is not separated in the record
Stock is stored efficiently, sometimes mixed. If the record does not keep client ownership distinct, questions about what belongs to whom become difficult, and they arrive at inconvenient moments.
When clients report their own numbers back at you
A client says accuracy was below the agreed level last month. Answering requires your figures on their definition, and if yours are computed differently the conversation is about methodology rather than performance.
What 3PL software holds
Client contracts
What each client pays for, on what basis, with rates, minimums, volume bands and the period they are billed for.
Client stock
Stock held by client, with ownership or entitlement distinct in the record regardless of how it is stored physically.
Activity capture
Receipts, putaway, picks, packs, dispatches, movements, counts, relabelling, returns handling and anything else the contract pays for, recorded as performed.
Ad hoc and additional work
Requests outside the standard scope, with who asked, what was done and whether it is billable.
Billing assembly
The invoice built from captured activity against that client's contract terms.
Client performance
The measures each contract defines, computed on the client's definitions.
Client reporting
What each client receives, in the form and on the cycle their contract specifies.
Capture coverage
Where activity was performed and not captured, so unbilled work becomes visible.
Unbilled work leaves no trace
This is the structural risk of the 3PL business and it deserves stating plainly.
In an operation running for yourself, work that goes unrecorded costs you the record. In an operation running for a client, work that goes unrecorded can cost you the revenue, and little in any system will tell you it happened.
An operational error tends to produce a symptom. A short shipment generates a complaint, a stock discrepancy shows up at a count, a late dispatch appears in a service report. Unbilled activity produces little or nothing. The work was done, the client received the benefit, and the invoice was smaller than it might have been.
The exposure concentrates in predictable places.
Ad hoc requests. A client calls and asks for something outside the routine. It gets done because the relationship matters, and it is frequently not recorded because it was a favour in the moment.
Handling that is not the main flow. Relabelling, repacking, kitting, quality checks, disposal, sample pulls. Real work, frequently billable, and outside whatever the main system counts.
Storage transitions. Stock moving between areas or between storage types may change what it costs to hold, and the change is only billable if the movement is recorded.
Returns processing. Handling goods coming back is work, and where the contract pays for it the volume needs capturing.
The remedy is the same principle that runs through this cluster: capture has to happen where the work happens, in seconds, by the person doing it. A person who has to walk to a terminal and complete a form will do the work and not the record, and they will be right to prioritise the work.
The measure worth reporting is capture coverage rather than revenue, because revenue looks fine while capture is failing.
Every client is a different billing system
A 3PL with eight clients has eight billing arrangements, and the differences are structural rather than cosmetic.
Charging bases in common use include storage per pallet, per square foot or per unit, over a day, week or month. Handling per receipt, per line, per unit, per order or per carton. Value-added work priced per activity or per hour. Fixed monthly fees with or without volume bands. Freight recovered at cost, at cost plus, or at an agreed rate. Minimum charges applying per period. And in many contracts a mixture of several of these.
Each of these needs the underlying activity captured at the granularity it is billed at, which is a point frequently missed. A contract billing per line requires line-level capture; per-order capture cannot produce it retrospectively.
Two consequences worth designing for.
Billing should be assembled from activity, not reconstructed monthly. Where captured activity is priced against the contract as it occurs, the monthly invoice is a selection. Where it is reconstructed from warehouse reports, it is several days of work and it is where errors and omissions enter.
Contract changes need effective dates. Rates change, volume bands are renegotiated, new activities are added. Historical invoices should be explicable against what applied at the time, which requires the terms to carry dates rather than being overwritten.
Freight recovered on a client's behalf is worth handling deliberately, since what you paid and what you recover may differ and the treatment depends on the arrangement. How such recoveries should be billed and treated is a matter for your contract and your CA. See Logistics Invoice and Billing Software.
Client stock and client reporting
Two things distinguish a 3PL record from an ordinary warehouse record, and both are about the goods not being yours.
Ownership stays distinct. Client stock is goods belonging to or otherwise held on behalf of a client, depending on the arrangement. Physically it may be stored wherever is efficient, including mixed with other clients' goods where your contract and applicable requirements permit that. In the record, keeping client ownership or entitlement distinct is important because questions about what belongs to whom can arise during audits, disputes, insurance claims and client exits, and none of those are good moments to be reconstructing it.
What your obligations are regarding client goods, including how they should be held, insured and accounted for, depends on your contracts and the applicable position, and those are matters for your own advice.
Reporting follows the client's definitions. Many 3PL contracts specify service measures, and the measures often sound standard while being defined differently by each client. Where the clock starts on an order. Whether an order dispatched short counts as fulfilled. Whether an error caught internally counts as an error. Whether cut-off failures on the client's side are excluded.
A provider computing these on its own definitions will produce figures that disagree with the client's, and the review becomes a discussion about methodology rather than about performance. Holding each client's definitions in the system and computing on theirs keeps the conversation on performance, and it also means you see the number they will see before they see it.
The related discipline is having your own figure ready before the review rather than responding to theirs. A provider that arrives with the numbers, computed on the client's terms, is in a different position from one reacting to a report it has not seen.
Where 3PL work looks different by business type
- Warehouse Management Software, which is the physical operation this business is built on.
- Order Fulfilment Software, where client orders move through allocation, picking and handover.
- E-commerce Logistics Software, where fulfilment is run for brands selling across channels.
- Cold Chain Logistics Software, where the condition record is a contractual deliverable to the client.
- Pharmaceutical Logistics Software, where batch-level records are held on a client's behalf.
- Freight Management Software, where transport is bought for clients and recovered from them.
Why providers choose Pentoggle for 3PL
Activity captured where it happens
Receipts, handling, movements, counts and ad hoc work recorded in seconds by the person doing it, because unrecorded work is difficult to bill for.
A billing arrangement per client
Storage, handling, value-added work, minimums and bands held per contract with effective dates, so billing is a selection rather than a monthly reconstruction.
Client stock distinct in the record
Ownership or entitlement separately identified regardless of how goods are physically stored.
Performance on the client's definitions
Each client's measures computed their way, so a review is about performance rather than methodology.
Sits around your accounting
Tally and comparable systems continue raising invoices, keeping the ledger and handling GST. Pentoggle captures the activity and assembles what should be billed.
A useful number for a 3PL
The share of billable activity captured and billed, against activity actually performed.
This is the figure that describes one of the business's main leaks, and it is frequently one a provider cannot produce, which is itself the finding.
Establishing it requires a comparison rather than a report. Take a period and a client, and check a sample of what physically happened against what was captured and billed. Ad hoc requests, non-standard handling and returns processing are where the gap usually sits.
Do this per client rather than overall. Coverage tends to be worse on clients with more ad hoc activity, which are frequently also the clients who feel most demanding, and the connection between those two facts is worth seeing.
Read revenue per client alongside it, and be careful about the interpretation. A client with growing volume and flat revenue is either on a band you have not moved through or is generating activity nobody is capturing, and those are different problems.
Ready to build 3PL software?
Your warehouse knows what it did for each client last month.
Whether all of it reached the invoice is a question the invoice cannot answer.
Describe your client contracts and how work gets recorded to Pentoggle in plain English and generate a working first version in hours, then refine it around your process.