When it Makes Sense to Work With a 3PL / Freight Broker Versus an Asset-Based Carrier
When researching various transportation partners, you’ve likely come across the terms “3PL,” “freight broker” and “asset-based carriers.” The simple truth about transportation partners is that there isn’t necessarily a need for different types of shipping partners. They are really just different models for running a transportation business, each with its own benefits and a different level of value that they bring to a company that ships freight.
But how do you know which makes sense for your business? Is one better than the other?
What is a 3PL?
A third-party logistics company (most often referred to as “3PL,” a “non-asset based provider” or a freight broker) is a company’s use of third-party businesses to outsource parts of your distribution and fulfillment services.
In most cases, a 3PL does not have its own trucks (hence the term “non-asset based provider”). That means a 3PL /freight broker typically doesn’t have a significant amount of money tied up in purchasing and maintaining equipment. There are; however, a number of brokers who do have their own pools of trailers they own, although this is typically less common.
The biggest differentiator of a 3PL.
Since 3PLs/freight brokers don’t have the same capital tied up in owning and maintaining trucks and trailers, they can invest and build efficiencies in their businesses. This allows them to provide value to their clients (and improve the customer experience) in a range of ways.
One area where 3PLs typically make investments and can deliver superior experiences is through technology. Transportation technology is advancing rapidly, and can simplify a number of tasks for shippers, saving a significant amount of time and cost.
Also, 3PLs have access to a variety of different modes of transportation, which could save a customer time and money. Perhaps a customer has always shipped something by truck that could instead be moved by rail, saving the client a great deal of money.
Specialization can give you extra peace of mind.
Many 3PLs or freight brokers are starting to specialize in a variety of niches. By focusing their efforts and energies into knowing the ins and outs of one or two key areas/industries/specialties, these brokers are true experts in their fields and can provide a high level of service to their customers.
Potential niches are very numerous and can include hundreds of different specialties, including:
- Freight bill auditing
- Reverse logistics (the return of goods)
- Final mile delivery (which requires specialized moving company-style services such as inside delivery)
- Heavy haul
- LTL pallet shipping or driveaway service
- Power-only services
- Expedited services
- And much, much more
Depending on your specific needs, seeking a 3PL/freight broker who specializes in your niche can help you gain the extra level of trust and service desired.
Partnering with a 3PL brings with it some cost benefits.
Shippers traditionally most typically approach 3PLs/freight brokers to gain access to a much larger pool of available trucks, or to get rates that they can use as leverage with their current transportation providers.
The cost to hire and retain an entire logistics department can be cost prohibitive for many businesses. When you work with a 3PL or freight broker, your transportation provider can act as your shipping and logistics departments, saving considerable time and cost. Plus, the flexibility and scalability of a 3PL versus a team of permanent hires protects your transportation investment in the short AND long run with the seasonality of your business.
Caveat emptor!
As technology improvements impact the transportation industry and SaaS or cloud-based services make our lives easier in any number of ways, it can be tempting to use a cloud-based provider for your freight shipment. The advent of web-based freight marketplaces has permeated the market in recent years.
There is a fine line between convenience of online services and the headaches that can arise. When you work with a 3PL, you get the same “hands off” benefits that are perceived from a cloud-based solution. But instead of an algorithm working for you (and potentially missing core questions or details, or unable to pick up the phone and go the extra mile to get you a price or date you need), your 3PL/freight broker is an actual person — a transportation partner — working for you and striving to ensure your satisfaction. That is something that cannot yet be replicated by a programmer.
Asset-Based Carriers
Asset-based shipping companies own their own equipment like trucks, warehouses and tools.
Often times, working with asset-based carriers offers a high level of trust — the company you’re dealing with is the company that’s shipping your freight. But, along with that trust typically comes a higher cost, since 3PLs tend to have a higher pool of trucks available to haul your freight.
The Best of Both Worlds
While there are many advantages to working with a 3PL / freight broker and partnering with an asset-based carrier has its advantages, there is a third option that could be called “the best of both worlds.”
Here at Loadstar, we have the power of Landstar (and its 10,000 trucks) at our backs to help us provide precisely the equipment and solution that a shipper could need. Since we are also a 3PL, we offer the flexibility and much of the cost savings of a 3PL and the expertise to go with it, backed by years in the business.
Whatever mode of transport, Loadstar can often provide it. Direct communication, high-touch service, long-term relationships (a vast majority of our clients are repeat clients we’ve worked with for years — a fact that makes us very proud!). Transportation consultants like Loadstar are often truly viewed as the best of both worlds. Contact us today to learn more about how we can help simplify shipping for your business.
