What is the difference between 3PL and Freight Broker and which one to choose?
There are many terms in the logistics industry that seems to be confusing. There are a few of them which are used interchangeably according to the situation. This might be quite a task for any newbie in the field of logistics in particular when you are engaged in the operational execution of planning transportation.
One such jargon or term that invariably are used interchangeably is 3PL Services and Freight Broker. But one must understand that there are a few key aspects in both that make it into two different services. Though many shippers consider both to be the same we will elaborate on the significant differences between 3PL and Broker and when they are used in different logistic operations.
First of all let us break down these two terms to better understand what these services are.
Who is a Freight Broker and what do they do?
Operationally a freight broker is an intermediary or a middle man who connects the shippers and the transportations carriers. This technically means that freight brokers do not have any assets of their own which are necessary to transport the shipment. In this case both the shipper and the carriers will be having their requirements and schedules which is carried out via this middlemen called the ‘Freight Broker’. Hence he becomes a matchmaker for both these entities and ultimately arranges the freight shipment activities forward.
Freight brokers will be having many individual providers with them that they may contract to carry out specific shipping needs as and when they arise. This non-asset nature of a freight broker gives them the flexibility to find whatever equipment needed to ship the freight via their reliable partners and most of the communication as well as paperwork is handled by the freight broker.
The very nature of a freight broker is to source out resources and solutions from a large network of trusted carriers and hence this capacity makes it the best for shippers who might have unpredictable and unexpected shipping and transportation requirements. The vast network makes it easier to make arrangements especially when time acts as a big constraint.
What is 3PL and its strategic role?
Though many times the term 3PL and Freight broker are used in the same context it is worthwhile to understand that a 3PL is more of a third-party logistics provider company that provides a wide range of logistics and transportation services. Hence 3PL is more like a strategic partner and plays an integral role in the supply chain optimization that that of a freight broker.
3PL establishes a strong and long term partnership with supply chain managers and hence provides extensive service coverage. The services involve everything from shipment tracking, dispatching to the entire supply chain management. Hence unlike that of a freight broker who is responsible for just moving the shipments a 3PL is more like a consolidated service package.
3PL works with many freight carriers, vendors, brokers, and suppliers that gives them the capacity to engage resources from a larger network of industry connections. This empowers a 3PL company with the power to perform many complex operations and also the ability to manage the entire logistics division of businesses. Also many 3PL have their own assets and resources that they may employ to carry out the shipping and supply chain activities to bring down the costs.
Key Difference between a Freight Broker and 3PL Services:
When one tries to dive into the activities of both these entities or rather services it is quite certain to conclude that both provide the same kind of services. But there are very core areas of difference as well. Though both act as a connection between the shipper and the carrier they certainly do have different roles.
A third-party logistics (3PL) works more like an extension of the logistics company that will have the capacity of providing a galore of services that a freight broker won’t be able to provide as he is more of a non-asset services provider. To elaborate on this point many 3PL providers are likely to own a warehousing facility and will have their own vehicles for transportations unlike freight brokers who contract these services as and when required.
3PL service providers will try to invest in developing their own resources, staff, and technology in order to provide the best of services whereas a Freight Broker won’t be in the capacity to do that.
That’s not all, a 3PL services provider will be able to manage a huge volume of shipments and also can handle any other logistics or supply chain functions as and when required.
Choose the right one for your business:
It is always necessary to have clarity about your business requirements and that will help you in choosing between a freight broker and a 3PL. One has to evaluate the levels of service requirements and the type of services as both of these logistics providers have a very integral role to play in transporting your shipment.
One of the main factors in making a choice is to access the frequency of your shipments. If you just need to occasionally send a few shipments then the most cost-effective will be to contract a freight broker as he can source out the required services as and when your shipment is ready.
But if you have regular shipments and if it’s your responsibility to ensure that the shipments reach on time and intact then the best will be to partner with a trusted 3PL services provider. It is always better to establish a very strong working relationship with a 3PL as they will be better equipped to access, anticipate, and plan for any challenges thereby ensuring a very smooth supply chain operations.
To wrap up it is the responsibility for any logistics company to see to it that the shipment reaches the destination on time with no damages. You as a business won’t be able to concentrate on the nitty-gritty of the logistics operations and hence it would be best to contact a trusted 3PL provider to handle your supply chain activities. What’s most important is to evaluate the third-party logistics provider by accessing their capabilities and their partnerships before employing their services.