3 Key Differences Between Freight Forwarding and 3PL (3rd party logistics)

What are the differences between freight forwarding and 3rd party logistics?

1. Level of Service
2. Flexibility
3. Cost-effectiveness

In the logistics industry, there are many services available given the needs of your supply chain. From your local courier service to your freight forwarders, there is no shortage of interesting options that can get your raw materials, products, and other goods from one place to the next.

However, there is a relatively lesser-used service that is finally becoming more popular thanks to the development of the digital age — e-commerce specifically. These are the 3PLs or 3rd party logistics companies.

It can be easy to assume that this is just the same as freight forwarding due to the nature of logistics management, but are they really the same? In order to figure that out, and to help you know which kind of logistics service is potentially appropriate for you and your business, here are the key differences between freight forwarding and 3rd party logistics (3PL).

What are Freight Forwarders?

Before going into specific differences, it is best to qualify what a given thing is before qualifying what it is not. It makes differentiating one thing from another easier.

That being said, freight forwarding is all about getting something from point A to point B. Freight forwarders are the agents of this service and do so by arranging the whole shipping process from storage to actual shipping of the merchandise.

Think of them as ‘shipping brokers.’ They act as the intermediary between the shipper and the actual transportation service like the shipping lines and oversee the whole process until your merchandise has been successfully transported. Freight forwarders can and will negotiate prices with carriers and shipping lines, and make the best decision for you based on safety, affordability, and time sensitivity.

This is not to say that freight forwarders cannot be the carriers of the goods themselves as forwarders also have their own shipping line if they’re a relatively big company.

What are 3rd Party Logistics?

Meanwhile, 3PLs or 3rd party logistics providers are individuals or companies who offer outsourced logistics services whether it is packing, shipping, or storage. Not only do these companies make sure that your merchandise or goods go from point A to point B, but they can also manage your goods for you before and after they are shipped.

If freight forwarders are the brokers for shipping, then consider 3rd party logistics the ‘fixers’ of logistics. When it comes to your supply chain management issues, 3PLs can probably handle it through their different connections and contacts in the industry.

To be sure, 3PLs can employ the use of freight forwarders in order to handle the shipping and transportation side of logistics, but freight forwarders will rarely contact a 3rd party logistics provider for their own needs.

Now that you know what these services are, and what they are not, their differences can be finally articulated.

Level of Service

The biggest difference between a freight forwarder and a 3rd party logistics provider is their level of service. In the most general sense, a 3PL will offer additional services that a freight forwarder does not.

This all boils down to the scope of the service’s specialty. Freight forwarders are specialists at getting your products and merchandise from one place to another, but any other logistics management issue that comes prior to and after shipping is none of their concern anymore. 3PLs will not only be concerned about your carrier, but they will also be involved in storage (selecting a good warehouse for your goods before and after shipping), packing (making sure your products are prepared efficiently before shipping), and distribution.

Flexibility

Although this might be one of the most glaring differences, there is a big difference in flexibility when it comes to freight forwarders and 3PLs. The former is straightforward, maybe too straightforward because you somehow know what you are always going to get given that you employ the same freight forwarders. This makes it a good option for consistency and reliability.

Third-party logistics services offer more flexibility at the expense of consistency mainly because they handle so many different aspects of logistics management at the same time. Sure, you can pick and choose the specific services you would like to employ for your business, but you can never guarantee that you are getting the best bang for your buck.

Cost-effectiveness

Stemming from the previous points, an important question arises from the overlap between the two’s services. Are you getting genuine value in terms of the transportation/ shipping part of logistics management if you use 3PLs? The answer is often not that clear.

If it cannot be stated enough, forwarders are experts when it comes to the costs of transportation. They know the cheapest, fastest, and most cost-effective options for your shipping needs. The more generalist third-party logistics providers are one-stop shops that expect to be compensated for providing a holistic service.

In terms of the cost-effectiveness of 3PLs, you have to know how much you are saving in terms of resources when using them. Consider their negotiating skills and connections when compared to forwarders before passing judgment. It really all depends.

Key Takeaway

When deciding which is better between freight forwarding and 3PL services, one thing you should always do is evaluate the needs of your business. There’s no need to worry about third-party logistics if your enterprise only needs a local courier service or freight forwarder. Now that you know their differences, figuring out which service would be the best for you is easier.