May 19, 2020

3PL vs. Freight Brokers

Steven Toews

You’ve got a lot of options when it comes to choosing how your products get from you to your customer. Carriers, freight brokers, 3PL, carrier pigeons. Etc. We at Fulfyld are a 3PL company, meaning we work in the area of third-party logistics. Basically, we’re an outsourced solution for all of your fulfillment and shipping requirements.

But, as we already mentioned, 3PL isn’t your only choice when it comes to shipping your products. You can choose to fulfill your own orders. You can contract directly with a carrier. Or you can even go with a freight broker. And while it’s outside the scope of this article to examine each and every fulfillment option available to you, we thought we’d compare and contrast an independent 3PL company (like ours) with freight brokers.

Continue reading below to learn about the upsides and downsides of both 3PL and freight brokers, as well as who we recommend for various sorts of businesses.

What is 3PL?

3PL, as discussed above, stands for third-party logistics. 3PL companies provide full-service warehousing, packaging, and shipping services for their clients. Basically, a good 3PL company eliminates the need to spend time and energy on getting your products from Point A to Point B.

Competent 3PL firms (like our own) provide custom and turnkey solutions for your logistics requirements. You worry about selling your product and the 3PL company worries about getting it to the customer.

What are Freight Brokers?

Freight brokers are intermediaries between shippers and freight carriers. In other words, they connect business owners with the companies that ship their products. They’re generally not “asset-based,” which means that freight brokers typically don’t have their own trucks and facilities. In fact, freight brokers generally don’t take possession of the products being shipped at any point.

A quick note is warranted here. Most freight brokers do not accept liability or responsibility for any part of your shipment that is lost or damaged in transit. The reason for this is simple. If they don’t actually touch or handle the product, why should they be liable?

Freight brokers are middlemen in every sense of the word. We don’t mean that derogatorily. We just mean to say that the way in which they add value is by acting as a knowledgeable go-between for shippers and freight carriers.

3PL v. Freight Brokers: Which Is Superior?

You may be seeking a straightforward answer to a straightforward question: Which is better? 3PL companies or freight brokers? Unfortunately, the answer depends on who you are and what your needs consist of.

To answer the question of whether 3PL companies are better than freight brokers (or vice versa), we’ll need to briefly examine the pros and cons of each form of logistics solution.

Benefits of 3PL

3PL represents a host of benefits to your e-commerce business and we’ll go over just a few of them here.

  • Long-term Relationship

Good 3PL partners are in business with you for the long haul. Because 3PL provides a holistic solution for logistics needs, they need to learn a lot about your business to help you succeed. They’ll get to know the trends associated with your product shipments, the volume you’re likely to see over time, and the locations where your customers tend to reside.

  • Expert at What They Do

Good 3PL providers live and die by their logistics and fulfillment knowledge and expertise. Their ability to manage and supervise the handling and flow of products through their warehouses to the carrier and, eventually, on to the final customer determines their ability to succeed in this highly competitive business.

Just like freight brokers, effective 3PL companies know the ins and outs of freight carriers very well. Unlike freight brokers, however, the long-term relationships that 3PL firms form with their clients ensure that they know your business just as well as they know fulfillment.

  • Storage and Warehousing Solutions

In addition to making sure that your products make it all the way to your customers, 3PL companies handle the storage and warehousing of your inventory as well. Thanks to economies of scale, they can usually get better rates on warehousing your products than you’d be able to on your own.

  • Full-Service Business Model

A logistics provider isn’t worth much if it only solves a quarter of your problems. That’s why good 3PL firms aim to be a full-service logistics solution. From warehousing to packaging and shipping, reputable 3PL firms aim to take fulfillment completely off your hands. That leaves your day free to grow your business.

Downsides of 3PL

With the upsides must always come the downsides. 3PL is no exception.

  • Setup Costs

There is always an initial outlay of time and money when setting up shop with a new 3PL company. You’ll need time to get to know one another and learn each other’s needs and business practices. You’ll also need to move your inventory to the 3PL company’s location and change some of your shipping behaviors. All of that costs money.

  • Risk Associated With Picking the Wrong 3PL

Picking an exceptional 3PL (like Fulfyld) can unlock the potential of your e-commerce business. However, picking a bad 3PL can be disastrous. Client relationships you’ve spent years carefully building can be endangered if an incompetent 3PL regularly mishandles your shipments.

While we like to think that, at Fulfyld, we’ve eliminated this risk, those companies who go with unknown and untested 3PL firms definitely take the chance that their provider won’t be up to snuff.

Benefits of Freight Brokers

Freight brokers come with their own upsides and downsides. First, we’ll talk about some of the benefits.

  • Inexpensive

For what they provide, freight brokers can be surprisingly inexpensive. They’ll navigate the complex world of freight carriage on your behalf and charge you a fraction of the amount you’d have spent if you’d tried unsuccessfully to do it yourself.

  • Knowledgeable at Choosing Carriers

Freight brokers effectively do only one thing, and many of them do that thing extremely well. They are experts at choosing and arranging the right carrier for shipments around the world. The good ones know their stuff and know it well.

Downsides of Freight Brokers

With the benefits of freight brokers come significant downsides. While they can be ideal for certain kinds of businesses in certain situations, one overriding concern animates the decision of most e-commerce companies to choose 3PL instead.

  • Inadequate Solution for Most E-Commerce Businesses

The major downside of freight brokers isn’t necessarily that they do their jobs badly or ineffectively. On the contrary, many reputable freight brokers are excellent at what they do. Instead, the problem is just that freight brokering, on its own, is generally an inadequate solution for most e-commerce companies.

While freight brokers are great for arranging some kinds of shipping, they simply lack the end-to-end solutions that 3PL provides.

The Verdict

The verdict is in. (If we had a gavel, this is where we’d bang on the table with it.) Both 3PL and freight brokers offer great service for businesses with specific needs. If you’re looking for someone to arrange for the delivery of a large order on an ad-hoc basis, a freight broker might be a good choice for you.

If, however, you’re a typical e-commerce company that regularly expects to fulfill large numbers of orders over an extended period of time, you should probably be in the market for a 3PL company.

We say that for a number of reasons. First, there’s simply no substitute for having all of your logistics and fulfillment needs met by a single company. When this happens, you get to focus on those other aspects of your business that demand your individual attention. You also ensure that all of your fulfillment operations are being handled holistically, rather than piecemeal, and are more likely to satisfy your customers.

Second, by dealing with a single company over the long-term, rather than on an ad-hoc basis, you give that company the opportunity to learn your habits, trends, and needs. Such a company is more likely to be able to quickly adapt to unexpected changes and optimize your fulfillment strategy.

Get Fulfyld

At Fulfyld, we know that we’re best-suited to be your e-commerce fulfillment solution. We work only with e-commerce companies and know your needs and requirements inside and out. We also know how important customer satisfaction is to your bottom-line, and we work every day to ensure that each and every one of your clients gets their product in pristine condition in as little time as humanly possible.

Contact us today to learn how we can help take your e-commerce company to the next level.

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