In the logistics and transportation industry, many terms are confused, especially if you don’t have years of industry experience. One example of terms that might be confused is ‘3PL (third-party logistics provider)’ and ‘freight broker.’ Many shippers consider these the same things, however, there is a significant difference between a 3PL and a freight broker.
A freight broker is a middle man between the shippers (or the companies who need to ship freight) and transportation carriers or drivers. Both shippers and carriers have their own requirements and schedules, and a freight broker acts as a person who matches them together and arranges freight shipments.
Usually, freight brokers are non-asset based. This means they don’t own any physical equipment. This allows brokers have the flexibility to find whatever equipment you need to ship your freight with. They work with numerous freight carriers and partners so that you don’t have to search for reliable carriers on your own. Freight brokers handle most of the communication and paperwork for you.
What is a 3PL?
A 3PL, or third-party logistics provider, is a company that provides a wide range of outsourced logistics and transportation services to businesses. The extensive service coverage of a 3PL includes everything from shipment tracking and dispatch to long-term supply chain management. 3PL’s work with thousands of freight carriers, suppliers, vendors, brokers, companies, and partners, so they have the buying power and a large network of industry connections. This lets them perform complex operations and manage the entire logistics branch of huge companies.
Both a 3PL and a freight broker act as a connection between the shipper and the carrier. However, they have different roles. A 3PL provides a much more extensive variety of services that just managing a particular shipment. Third-party logistics providers focus on building trusted, long-term relationships rather than simply executing one or two operations. A 3PL can help manage any volume of freight shipments, your supply chain, and any other logistics function.
If you need to send a few shipments occasionally, a freight broker can be a cost-effective and helpful solution. For companies with complex supply chains, a 3PL will be a better fit in terms of partnership, equipment, freight rates, and services.