One of the most common calls we receive starts with a frustrated executive saying:
“My 3PL just sent me a 12% increase. Are they serious?”
The next question is usually even more direct:
“Are they trying to take advantage of us?”
It is a fair reaction. For many ecommerce, wholesale distribution, and omnichannel businesses, a double-digit 3PL price increase can represent hundreds of thousands of dollars in additional annual fulfillment costs.
But the percentage alone tells you very little.
A 12% increase may be justified in one operation and unreasonable in another. A 5% increase may deserve scrutiny if the contract, rate structure, service levels, or operating profile do not support it.
The real question is not simply:
“Is 12% too high?”
The better question is:
“Is this increase justified, what are my options, and what should I do next?”
The first reaction to a major renewal increase is often frustration. That is understandable.
However, the strongest decisions are rarely made from the first emotional response. Before accepting the increase, rejecting it, threatening to go do an RFP, or moving to another provider, you need to understand what is driving the increase.
In our experience, any increase that materially exceeds inflation deserves scrutiny. But the next step should be a structured review of the contract, pricing, volumes, complexity, service performance, and market alternatives.
Many executives assume the increase is simply tied to inflation.
Sometimes inflation is part of the answer. But it is rarely the entire answer.
A 3PL may be reacting to:
Many renewal discussions become difficult because the customer and the 3PL are looking at the same operation from very different perspectives.
The customer may see:
The 3PL may see:
Both sides may believe they are looking at the same business. In reality, the operation may have changed significantly since the original agreement was priced.
One of the biggest mistakes companies make is assuming their operation today is the same operation the 3PL originally priced.
That is often not true.
For example, a company may have started by shipping to four major retailers with relatively similar compliance requirements. Over time, that may become 12 retailers, each with different routing guides, labeling rules, packaging requirements, carton requirements, and chargeback risks.
The company may still think, “We have always shipped to retailers.”
The 3PL sees something different: more processes, more exceptions, more labor, and more risk.
That added complexity costs money. It is not performed for free, and it is typically priced with a markup so the 3PL can operate profitably.
One of the most overlooked drivers of renewal increases is slow-moving inventory.
Many companies believe they are paying a 3PL primarily to pick, pack, and ship orders. But when inventory turns slow down, the economics of the relationship change.
The 3PL increasingly becomes a warehouse rather than a distribution center.
Warehouse space is consumed, but fewer fulfillment transactions occur. That means the provider generates less revenue from picking, packing, and shipping while still carrying the cost of space, labor, systems, and management.
This is one reason companies with aging inventory, excessive SKU counts, or slow inventory rationalization often experience pricing pressure during renewals.
One of the most misunderstood parts of 3PL pricing is how transactional activity affects economics.
3PLs typically generate revenue from a mix of:
When inventory moves efficiently, transaction volume helps support profitability.
When inventory sits, the operation becomes more space-heavy and less transaction-heavy. That often leads to higher storage costs, more pick locations, and increased fees.
In practical terms, companies that keep too much obsolete or slow-moving inventory can gradually make their operation more expensive to support.
Is My 3PL Taking Advantage of Me?
Sometimes. But far less often than many executives initially assume.
There are situations where a 3PL underprices services to win business and later attempts to recover profitability during renewal. In some cases, that can feel punitive. It does happen, and it contributes to mistrust in the industry.
However, that is not the majority of situations.
More commonly, the pricing assumptions made during implementation no longer match the operational realities of the account.
For example:
The challenge is determining which situation applies.
How FCBCO Typically Evaluates A 3PL Price Increase
At F. Curtis Barry & Company, we rarely start by asking whether the proposed increase is reasonable.
We start by asking whether the operation being priced today is the same operation that was priced when the agreement was originally signed.
To answer that, we typically review:
Only after reviewing those factors can we determine whether the increase appears justified, whether the client has negotiation leverage, and whether alternatives should be considered.
More often than not, the renewal discussion is not really about inflation. It is about operational complexity that accumulated over time without either party fully revisiting the original pricing assumptions.
In many situations, the operation being priced today is materially different than the operation that was originally priced when the relationship began.
Can I Negotiate The Increase?
Often, yes.
But the strongest negotiation does not start with:
“Your increase is too high.”
It starts with:
“Show us what is driving the increase.”
From there, negotiation opportunities may exist around:
The goal is not simply lowering a percentage. The goal is improving the total economics of the relationship.
Executive Reality Check: Be Careful What You Reopen
Not all pricing categories carry the same strategic value.
For example, a client may be facing significant increases in labor and storage rates while also benefiting from very favorable small parcel freight rates negotiated years earlier.
If the client pushes too aggressively, the 3PL may respond by saying:
“Fine, but then we should revisit all rates, including freight.”
That can create an unintended consequence. The client may reduce warehouse rates but lose favorable freight pricing, resulting in higher total cost.
The objective is not winning a single pricing discussion.
The objective is improving the overall economics of the relationship.
Should I Issue An RFP?
A significant increase does not automatically mean you should go to market.
An RFP may make sense when:
But an RFP is not always the answer.
Changing 3PLs can create:
Sometimes an RFP confirms that your current 3PL is still the best option.
What Would Another 3PL Charge Me Today?
This is one of the most common executive questions after a renewal increase.
Unfortunately, there is no simple market rate for fulfillment.
Two companies with the same order volume may receive very different pricing because of:
Market pricing is not just about comparing rate cards. It requires understanding the operation behind the rates.
Why Benchmarking Is Difficult
Many executives assume benchmarking means comparing pick fees, storage rates, and receiving charges.
In reality, meaningful benchmarking requires understanding:
FCBCO Consultant Perspective
The most meaningful benchmark is rarely a rate card.
It is understanding the total cost to fulfill an order relative to the complexity required to support that order.
Two companies may process the same number of orders and have dramatically different fulfillment economics because the underlying operational complexity is completely different.
What Should I Ask My 3PL Before Responding?
Before accepting, rejecting, or negotiating the renewal, ask your 3PL:
The quality of the answers matters.
Strong providers usually come prepared with data, explanations, and possible solutions.
Weak providers often come with only a percentage.
The Question Most Executives Start With — And The Question They Eventually Need To Answer
When a company receives a significant renewal increase, the first question is usually:
“Is this price increase reasonable?”
That is the right place to start.
But as the evaluation progresses, additional questions often emerge:
The price increase may be the trigger. But the final decision often depends on pricing, service, complexity, risk, growth, and relationship quality.
When SLAs Do Not Tell The Whole Story
A provider may technically meet an SLA while still creating significant business disruption.
For example, an inventory accuracy SLA may be measured annually at 99.5%. But if hundreds of units are lost, adjusted out, and then found two months later, the annual SLA may still technically be met.
That does not mean the business impact was acceptable.
For a fashion apparel company, those units may be found after the selling season has passed. The inventory may need to be marked down, margin may be lost, and the customer may have missed revenue opportunities.
From a contractual perspective, the 3PL may have met the SLA.
From a business perspective, the damage has already occurred.
That is why renewal decisions should not evaluate pricing in isolation.
When Should You Bring In A 3PL Consultant?
You may not need outside help if:
Outside expertise may be valuable when:
A consultant should not automatically recommend staying or leaving.
The role of the consultant is to help determine what the facts support.
Final Consultant Perspective
A 12% price increase is not automatically unreasonable.
It is also not something executives should accept without review.
The percentage is the trigger. The real work is understanding what sits underneath it.
That includes:
Companies that focus only on the increase often miss the larger business decision.
The goal is not simply reducing cost.
A 12% increase is not the decision. It is the signal.
The real decision is whether your pricing, operations, service requirements, and future growth plans remain aligned with the business you are running today.
That is what determines whether the right next step is renewal, negotiation, benchmarking, an RFP, or a provider change.