Logistics is key in any business. You want to deliver your products as cheap and fast as possible. That’s where a third-party logistics (3PL) brokerage comes in.
3PL brokerages are a service that connects businesses with third-party logistics providers. Businesses are able to save time and money by using these services. Basically, a third-party logistics company helps businesses find the best supplier for their logistical needs.
What Is Third-Party Logistics (3PL)?
A third-party logistics company helps manage transportation services for its customers. Their work includes shipping and storing products correctly. Choosing to work with a 3PL will give you more time to focus on your business.
What Is a Third-Party Logistics (3PL) Brokerage?
A 3PL brokerage is a third-party logistics provider with an in-house team that only focuses on freight brokerage.
The Difference Between 3PLs and Freight Brokers
A freight broker helps connect shippers with carriers. They look for cheap transportation plans for their customers. Typically, they focus on long-distance shipments.
On the other hand, a 3PL invests in people and technology to help with deliveries. 3PLs also offers many unique services that freight brokers don’t.
Advantages of Using a 3PL
The main advantages of using a 3PL:
- Higher logistics optimization and efficiency
- Lower spending
- Access to transportation experts
Let’s go through each of these 3PL benefits in detail.
1. Higher Logistics Optimization and Efficiency
3PLs work hard to improve their customers’ supply chains. Indeed, they want to make sure everything runs smoothly. They look for ways to save money on inbound deliveries and they optimize processes by using awesome features in their last-mile delivery solutions.
2. Lower Spending
As we know, many companies outsource their logistics. 3PLs record all spending activities so companies are able to predict their future spending better.
3. Expertise and Knowledge in Transportation
You’re the pro in your business and industry. We’re the pros at taking care of transportation, including fleet management.
Our job is to always stay up-to-date with the latest logistics innovations and trends.
Disadvantages of Using a 3PL
The primary significant drawbacks to hiring a 3PL are:
- Lack of supply chain management skills in the industry
- Shippers become reliant on their 3PL
- Costs of implementation and transition
1. Lack of Supply Chain Management Skills in the Industry
3PLs manage every aspect of their customer’s supply chain. If a company doesn’t know how to do things on its own, it’ll be hard when they stop working with the 3PL.
2. Shippers Become Reliant on Their 3PL
After some time, many companies aren’t able to do things on their own without the help of their 3PL. For example, companies using 3PLs don’t know how to manage their carrier network. Some of them aren’t even familiar with scheduling trucks.
3. Costs of Implementation and Transitioning
At first, it’s expensive to hire a third-party logistics company. You need to give these companies the time and resources they need to get the job done right. But don’t worry, you’ll start seeing their benefits after some time.
Advantages of Using a Freight Brokerage
The most significant advantages of outsourcing with a freight brokerage:
- Lower spending
- Higher convenience
- Freight brokers offer more flexibility
1. Lower Spending
Freight brokers use a combination of truck market visibility, technology, and expertise to help their customers save money. It’s really important that you work with one that knows what they’re doing and gets the job done.
2. Higher Convenience
Sometimes, things go wrong in the trucking industry. For example, a load fails, or a truck breaks down. A freight broker is where you turn to. They will do their best to keep your supply chains running smoothly.
3. Freight Brokers Offer More Flexibility
There’s definitely more room for flexibility when working with a freight broker. Why? Because they have connections with many carriers. They help you move many types of freight, like reefer freight, truckload freight, and even heavy haul trucking.
Disadvantages of Using a Freight Brokerage
The two main disadvantages of using a freight brokerage are:
- Ability to “guarantee” an available truck
- Difficulty in selecting the right one for your business
1. Ability to “Guarantee” an Available Truck
It’s important to know that a freight brokerage is not a trucking company. They do not own any trucks or trailers, and they do not employ any drivers. Instead, they work with actual truckers to get the job done.
Brokers never have a truck ready to go and pick up a load for their customers. They cannot just shake hands with a truck driver and send them on their way.
If you are a shipper worried about a truck falling through because your provider can’t force-dispatch them, a brokerage with a small network won’t fit your needs.
2. Difficulty in Selecting the Right One for Your Business
Choosing the wrong freight brokerage will most definitely affect your supply chain in a bad way, so choose wisely!
How Your Business Can Benefit from Working with a Third-Party Logistics Brokerage Company
The two primary benefits of using a 3PL brokerage company:
- More access to expertise and knowledge
- Higher cost efficiency
1. Access to Expertise and Knowledge
Managing a company’s supply chain is a lot of work. From getting everything right to making sure the shipments go smoothly. Whatever problem comes up, 3PLs have the expertise and knowledge on how to handle it.
2. Higher Cost Efficiency
Customers save time and money by working with a 3PL. They don’t have to spend extra time working on freight shipping! And the super high-tech tools can help customers save money.
Overall, customers love working with a 3PL broker because it’s just easier. Everyone involved will save time and money by working with one. Plus, there’s less paperwork!
Interested in learning more about what 3PL brings to the table? Check out our blog on why 3PLs do last-mile delivery best.
How Dropoff Can Help Your Business
Finally, a 3PL brokerage is a great way for businesses to have someone else handle the shipments, while they focus more on their businesses. Talk with a Dropoff expert if you want to learn more about how this service could benefit your business.
FAQs on 3PL Brokerage
1. What is a 3PL brokerage?
A 3PL broker is a company that provides services, like freight brokerage, to other companies.
2. What does a 3PL do?
Simply put, 3PLs offer services to support shipping operations.
3. What is the difference between a 3PL and a freight broker?
Freight brokers arrange the deliveries for companies so they don’t have to. A 3PL invests in people and technology to help with the deliveries.