When you are looking for a logistics partner to help your supply chain run efficiently, finding the right partner can be a tall order. There are many factors to consider, and common industry jargon often creates more confusion than clarity.
For instance, the terms “freight broker” and “third-party logistics” (or 3PL) are sometimes used interchangeably. However, there are a few key differences between these two services, and when you’re looking for a new logistics partner, it’s helpful to know what they each do.
3PL vs. Freight Broker: breaking it down
What is a freight broker?
A freight broker serves as an intermediary between a shipper and a carrier. Freight brokers are generally not asset-based, which means they do not have their own equipment to transport shipments. This may give them agility, since they’re not tied to physical equipment. Instead, they locate and deploy one of their trusted partners to meet individual shipping needs as they arise.
Working with a freight broker is usually best for shippers with unpredictable transportation needs, or when an unexpected shipment needs to be moved. Because their business is sourcing capacity, established freight brokers have a large network of trusted carriers that offer a variety of specialty services. This network helps them find a solution for their customers, especially when time is a constraining factor.
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Companies may find it useful to establish a good relationship with a handful of trusted freight brokers to work with over the long term. However, since the role of a freight broker is generally on an as-needed basis, they’re not involved in the planning and optimization of an overall supply chain strategy. This means that when you’re working with a freight broker, you’re susceptible to price fluctuations in the spot market.
What is a 3PL?
A 3PL plays a more strategic role in supply chain optimization than a freight broker. They generally establish a longer-term working relationship with supply chain managers, and are involved in the whole planning process, instead of only being responsible for moving individual shipments.
Unlike freight brokers, who are brought in on an as-needed basis, a 3PL works with shippers to create a unified logistics solution. This gives them visibility about what kinds of challenges may arise, and advance time to find the best carriers at the best price available. A third-party logistics company will occasionally deploy some of their own assets to bring costs down for their shippers. However, like a broker, they’ll also have an established network of trusted carriers who can fill in where additional capacity or special equipment is needed.
3PL vs. Freight Broker: what’s right for your business?
Having clarity about the different roles a freight broker and a 3PL fulfill will help you to find exactly the type and level of service you need. Both kinds of logistics providers have an important role to play, and there are advantages to working with each.
However, if you’re responsible for ensuring that your goods get where they need to go, it’s always wise to have a trusted 3PL in your corner. A strong working relationship with an experienced third-party logistics partner can help you anticipate and plan for challenges to create an efficient supply chain operation.