What exactly does a logistics company, and a brokerage firm do? Moreover, what advantages can you realize with combined brokerage and 3PL services?
Logistics and Brokerage in a Global Economy
To start with, logistics companies control the movement and storage of goods, services, or information within a supply chain. Their strengths lie in the planning and implementation of delivery between the points of origin and final destination.
Brokerage firms can play an essential part in extending the relationships needed to move products cost-effectively throughout the supply chain.
Depending on their specific expertise, logistics companies and their partners manage some or all of these supply chain functions, depending on a client’s logistical needs.
Logistics is a term with its roots embedded in the military. During wartime, supplying troops with related equipment and associated supplies in a timely fashion is a function of logistics. With the rise of consumerism in the 1950’s, logistics evolved to serve more complex supply chains growing nationally.
This process of coordinating the movement of supplies and materials has now become globalized. in today’s world of business, particularly in the movement of physical goods, the supply chain is a vital part day-to-day operations.
A comprehensive supply model may include:
- management of all or one of these functions
Additionally, logistics operations may also apply to:
- material handling
- and security needs
3PL vs Freight Broker Services
Defining the Difference Between a 3PL Company and a Brokerage Firm
The terms 3PL and freight broker often get used interchangeably. But this creates confusion which comes at the expense of how each service is actually defined.
Third Party Logistics companies and Freight Brokers are both intermediaries between the shipper and the carrier. And there is a difference.
A freight broker focuses primarily on meeting specific cost and service goals associated with a singular shipment.
A 3PL provider works more strategically in the context of a bigger picture. By planning earlier in the supply chain, they anticipate the needs of a client through every step of the supply chain process from pickup and transport through to delivery.
What is a Freight Broker
As mentioned previously, a freight broker will often focus on one single shipment. The broker will act as a non-asset bearing intermediary between a shipper who has products to transport, and a carrier who actually moves the freight.
Essentially, a Freight broker networks directly with owner-operators nationwide to coordinate the individual shipments. Currently, freight brokers handle a significant amount of motor carrier transport in North America.
In terms of operations, freight brokers provide a large network of shipment options by connecting with hundreds, or even thousands of small to medium-sized freight carriers.
This benefits shippers by affording alternatives to larger freight carrier and cargo providers. Smaller independent carrier operations tend to rely more on brokers for business compared to larger carrier providers who will often have long standing relationships with 3PL companies.
What is a Third Party Logistics Company
In a previous article, we defined the role of logistics in the supply chain, but in its broadest form, 3PL applies to any service contract that involves storage or shipping of a product.
A 3rd party logistics company may have the flexibility to only offer a single service, like transportation. Or they may have multiple warehouses in Austin Texas, or specialize in inventory management.
A comprehensive 3PL company may also offer a system-wide, front-to-back bundling of services and management of a client’s entire supply chain.
By integrating operations such as warehousing and transportation, many 3rd party logistics companies tailor services to match a client’s needs.
Finally, a typical third-party logistics company is an asset-bearing firm that establishes relationships with shippers on a broader scale. Compared to brokerage alone, a 3PL company makes an investment in physical and human capital, including brick-and-mortar locations and wheels on the ground.
Why Combining Brokerage and 3PL Services Makes Sense
Shippers looking for the benefits that come with a collaborative transportation network will find that a 3PL fits their needs. However, freight brokers can play an important role in relation to shippers with already established 3PL relationships.
For example, if a shipper needs greater flexibility in moving their products, they may contract with a brokerage firm to supplement their shipping needs. When capacity is tight, a brokerage firm that has a long-standing relationship with a 3PL provider can pose an advantage.
For your own company, it’s not about choosing between a 3PL or a freight broker. It’s about establishing relationships with both entities, 3PL companies and freight brokerages alike, in the interest of reducing overall shipping costs.
As a small business owner, you probably find you often have to handle some level of inventory management, distribution logistics, and warehousing yourself. You may already engage in most of these functions internally.
A a business grows and becomes more complex, third-party logistics providers are the frequent solution to more complicated procedures. For example, deciding to export your products may require you to hire a person or organization that helps with distribution logistics.
Let Brimich Logistics Give You the Advantage
The streamlining, consolidating, and outsourcing of your logistics processes can result in significant long-term financial savings, and better overall client service.
Connect with Brimich to learn more about what a logistics company is, and specifically does to provide value.
We’re here to help you with your overall shipping needs across North America and beyond. It’s our goal to provide you with the best possible customer service!