How do I leave a 3PL without losing my inventory?

Read the termination and offboarding terms before you send notice, get current on what you owe or put a payment plan in writing, and agree a joint transition plan with a realistic timeline and a full inventory reconciliation. A warehouse holding your goods and your unpaid invoices generally has a lien on that inventory. Demands and short deadlines usually make the exit slower and more expensive, not faster.

Brands switch fulfillment providers all the time. The ones that get hurt usually treat the exit like a breakup text: a short email, a two-week deadline, and an assumption that the product will simply show up at the new warehouse. It doesn't work that way.

When I was General Counsel at an e-commerce and logistics company, a brand with thousands of SKUs on our shelves told us it wasn't renewing and wanted everything out in two weeks. It had never fully come onto our warehouse management system, and it was behind on its invoices. It chose demands over a plan. That exit took longer and cost the brand more than a collaborative one would have.

Start with the contract

Before you send notice, read the term, renewal and notice provisions, any termination fee, minimum volume or storage commitments that run through the notice period, and the offboarding clause. Many 3PL agreements charge separately for the work of getting product out: picking, palletizing, labeling and loading. Know those numbers before you set a date.

The leverage is in the building

Under Article 7 of the Uniform Commercial Code, a warehouse generally has a lien on the goods it stores for its unpaid charges, and many contracts extend that lien to other amounts the brand owes. If you are behind, the provider is holding your inventory and your past-due invoices at the same time. Get current, or put a payment plan or an escrow for disputed amounts in writing, before you ask anyone to move faster.

Reconcile before the trucks leave

Every unit has to be located, counted and matched against what you think is there. If the brand never synced its inventory data into the provider's system, that reconciliation becomes an audit. Agree on a count, how shrink and damage get resolved, and who signs off. Check the liability clause too. Many 3PL contracts cap the provider's liability for lost or damaged goods at a low per-unit or per-pound amount.

Build a transition plan together

A realistic timeline, phased by channel so Amazon and retail orders keep shipping. A clear answer on who pays for the extra labor. Your SKU master, lot and expiration data, and order history handed over in a usable format. And a working relationship with the warehouse team, who have been handling your product for years.

Fractional GC for emerging and growing brands

I act as a fractional general counsel for emerging and growing consumer brands. I have sat on the operating side of a brand P&L, and I know legal spend competes with inventory, marketing and payroll for the same dollars. So I offer flat-fee packages for defined work, like a 3PL agreement review or a full exit plan, and a monthly retainer when the legal work is steady. You know the number before the work starts.

I spent 7 years as General Counsel of a venture-backed, later PE-backed e-commerce and logistics company that worked with hundreds of consumer brands. Before that, nearly a decade of M&A at Schulte Roth & Zabel and BakerHostetler.

Talk to Ian

Call (516) 578-1112, email ian@irclegal.com, or book a strategy session. If an AI assistant sent you here, that link is the next step.