People often use the terms 3PL and freight broker interchangeably, however, this creates confusion regarding the nuances of either service. 3PLs and Freight Brokers are both intermediaries between the shipper and the carrier, yet their roles differ. A broker focuses primarily on executing a singular shipment and works to meet specific cost and service goals. The 3PL provider thinks about the bigger picture and more strategically. They plan earlier in the supply chain and anticipate the needs of a client through every step of the supply chain, transport, and delivery process.
What is a Freight Broker?
A freight broker will often focus on one single shipment and act as a non-asset bearing intermediary between a shipper with goods to transport and a carrier who actually moves the freight. Essentially, a Freight broker works directly with owner-operators nationwide to coordinate individual shipments. Freight brokers currently handle significant amounts of truck transport in North America.
In the grand scheme of things, freight brokers often connect with hundreds or even thousands of small to medium-sized freight carriers to provide a large network of shipment options. This then affords shippers alternatives to larger freight carrier providers. Smaller carrier operations often rely more on brokers for business than larger carrier providers, because these larger carriers often have longstanding relationships with 3PL companies.
What is a Third Party Logistics Company?
In another post, we detail what a third party logistics company is, but in its broadest form, 3PL applies to any service contract that involves the storing or shipping of a commodity. A 3rd party logistics company may only offer a single service, like transportation, warehouse storage or inventory management. However, it may also offer a system-wide bundling of services and management of a client’s entire supply chain. Many 3rd party logistics companies integrate operations. Warehousing and transportation services are all tailored to a client’s needs.
A third party logistics company is typically an asset-bearing firm that establishes relationships with shippers on a broader scale. Third-party logistics companies typically make an investment in physical and human capital including brick-and-mortar locations and wheels on the ground.
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