As businesses grow, they’ll face increasing challenges with transporting raw materials, manufactured goods, and packaged products through the various stages of the supply chain. With competing priorities between marketing, customer service, manufacturing, and logistics, it’s nice to know that there are experts who can help with managing the supply chain.
But when it comes to a freight broker vs. a 3PL company, what’s the difference and how can you use these assets to their full advantage? We’ve put together everything you need to know about the similarities and differences between these two supply chain assets.
What Is a Freight Broker?
A freight broker is an intermediary between shippers and carriers. The shipping industry has many moving parts, requiring timely communication and negotiation. And for many shippers, that is too time-consuming or they lack the expertise internally.
That’s where a freight broker comes in. Whether you need air, ocean, or land transportation, a freight broker has the contacts and relationships to get shipments where they need to go.
Freight brokers aid in communicating with shippers and carriers and negotiating fair, agreeable contracts that please both parties. But they do far more than just connect shippers and carriers.
They also help shippers save money by knowing the going rates for various types of transportation. When your business experiences a sudden surge, they have the capacity to aid in finding spot carriers to deal with those sudden surges. And for carriers, a freight broker helps ensure trucks are full and staying active to avoid downtime, which can be costly.
What Is 3PL?
3PL stands for third-party logistics. These companies aid in managing inventory and handling shipping. They basically serve as the backend support for businesses to free up time and attention for the company to focus on other aspects of the business.
A 3PL can provide the following services:
- Inventory management
- Pick and pack
- Shipping
- Warehousing
- Distributed inventory to better serve a geographically diverse customer base
- Fulfillment
- Return management
- Data Analytics
- Customization, such as notes for gifts, wrapping, etc.
Working with a 3PL can help you save money while providing you access to experts who know the industry unlike anyone else. And if you want to begin an international business, a 3PL can help you manage fulfillment in other countries. 3PLs can take some burden off business owners to focus on other things.
Comparing Freight Broker & 3PL
Working with a transportation broker or a 3PL logistics company will each have its advantages and disadvantages. As you evaluate which is best for your business, review these key comparison points and which service is better based on that aspect.
Moving Goods
Freight brokers are often ideal for moving large goods that you transport via less-than-truckload (LTL) or full truckload services. That’s because they manage carrier relationships. They also have relationships with carriers who can move goods via rail, air, and ocean to provide a holistic solution for getting goods from one place to another.
Freight brokers are outstanding for moving large goods that you can’t transport via traditional carriers, such as USPS, UPS, or FedEx. This often helps get goods to a warehouse to await a customer’s order.
When you have long-term planning to do, a freight broker is ideal because they can help you sign a strong long-term contract with a carrier.
In contrast, 3PLs tend to be experts in shipping goods via USPS, UPS or FedEx to a customer’s doorstep, though 3PLs also have contacts with trucking carriers. Many 3PL companies manage relationships with all expedited shipping companies to ensure your customers can get their orders in the timeframe they want.
Winner: For this, it really depends on what you’re moving, the timeline for it, and how frequently you’ll make that same delivery. For fulfillment delivery to the end customer, 3PL is the winner. Frequent transport to and from the same location that requires a carrier relationship is best served with a freight broker.
Management Services
Management services between freight brokers and 3PL providers vary. Freight brokers will manage carrier relationships. That means ensuring goods are picked up and delivered in the time frame promised. And when a carrier doesn’t meet contract requirements, the freight broker ensures the carrier makes it right.
Freight brokers can schedule spot deliveries and oversee the process. This can be a huge asset to the business when unexpected situations arise.
3PL companies aid in managing an aspect of shipping services as well, but it is often more focused on delivery to the end customer. You can also contract for other management services, such as managing returns and refunds as well as inventory, pick and pack, and warehousing.
Winner: 3PL due to handling more aspects of the supply chain
Infrequent Assistance vs Regular Assistance
Companies requiring infrequent assistance find that a freight broker is the best option. That’s because the goal of working with a freight broker is to build a relationship with a carrier who you can enter into a contract with for a specific service.
In contrast, businesses that require regular assistance find that a 3PL is the best option. 3PLs are day-to-day partners who help with services related to operations and customer service. These companies can simplify the complicated supply chain for businesses that sell their products online and need fulfillment assistance.
Shipping Intermediary
Freight brokers are shipping intermediaries. That is, they help connect shippers and carriers to build lasting relationships and negotiate fair contracts. So if you’re looking for an intermediary, a freight broker is the solution that’s right for you.
3PL companies provide all-in-one services for warehousing, inventory, pick and pack, shipping, returns, and some aspects of customer service.
Transporting To and From Multiple Locations
Freight brokers help you coordinate one-off shipments. Generally, this is picking up goods at a dock or warehouse to deliver to another location. This might be once or on a regular schedule.
3PL services often mean delivering goods to multiple locations, generally the doorstep for your customer. Some 3PL companies have multiple warehouse locations to help get your goods closer to your customers to speed up delivery services and make this process faster and simpler.
Finding the Best Transportation Partners
Ultimately, freight brokers and 3PL companies provide different services that can fulfill various needs for a business. Freight brokers help shippers build valuable relationships with carriers, while 3PL companies aid in managing fulfillment services to help products reach end users. Some companies rely on both entities to manage the complicated requirements of the supply chain while others can complete their needs with one or the other.
FAQ
A freight broker helps a company complete a shipment based on a budget and timelines. 3PL companies offer the human resources and technology to facilitate inventory management, warehousing, and fulfillment.
3PL companies offer all the services a freight forwarder does. However, a 3PL offers additional services that freight forwarders do not.
A logistics service provider has a wider set of tools and services available compared to a freight broker. A logistics partner can also be called a third-party logistics (3PL) company.
