Difference Between a 3PL and Freight Forwarding

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March 20, 2018

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There are many terms in logistics that can be easily confused if you’re new to the industry. Third-party logistics 3PL companies and freight forwarding services are two terms that may seem to be interchangeable but are completely different in the world of logistics.

It is not uncommon for freight forwarding and 3PL services to exist under the roof of one provider. Nor it is uncommon for them to offered by separate providers.

Difference Between a 3PL and Freight Forwarding

What is Freight Forwarding?

Freight forwarders specialize in the moving of freight. They are experts in this part of the overall supply chain. Freight forwarders are not always the transportation companies themselves (although they can be), but more often than not contract with various carriers to ensure maximum options for their clients.

Freight forwarders may choose to work both domestically and globally, therefore working with all modes of transport. Or they may choose to specialize even further and only work within the domestic space or international space. Each comes with its own unique challenges, but in the end there are similarities in regard to load requirements, waybill processing, duties, requirements for perishable goods and of course fulfilling client expectations.

Why do people choose to use freight forwarders when they could just make arrangements for shipping their products themselves? The truth is that freight forwarders offer rates that companies may not be able to get on their own. Their established relationships with carriers allow them exclusive prices, from which their customers can benefit. In addition, their extensive knowledge of documentation requirements, regulations, transportation costs, and banking practices can make the export process a lot easier for companies. Regardless of your freight size, freight forwarders can handle all export responsibilities and take the burden off your company.

What is 3PL Services?

3PL, otherwise known as third-party logistics, is the outsourcing of some or all of your supply chain and logistics operations. This means that a third-party company will take care of your entire supply chain and logistics operations, leaving you free to focus on your business development, sales, and marketing. The need for 3PL providers continues to grow as the logistics industry becomes more and more complex. It had become difficult for small- and even medium-sized companies to keep up with all of the advancements, and often, it no longer makes sense for them to try and keep up. 3PL providers not only free up valuable business time, but they can offer great transportation costs as well.

The main tasks that third-party logistics services include are: cross docking,retail scan packaging, inventory management, order management and processing, reporting, as well as freight and distribution. When businesses hire 3PL providers to take care of their entire supply chain, there’s nothing additional they’ll have to worry about when it comes to logistics. However, while 3PL providers can be full-service, companies also have the option to take advantage of some of their services and exclude others. The most common tasks that companies outsource to 3PL providers include: domestic transport, international transport, warehousing, customer brokerage, and freight forwarding.

More than half of all shippers outsource some or all of their logistics services. Why? Because it makes good business sense. Unless you have the in-house resources to manage all the services we’ve listed above, chances are that your company can greatly benefit from hiring a 3PL provider. When you hire a company to handle all of your supply chain needs, there are a ton of benefits that come along with it. You’ll notice increased order-fill accuracy, and you’ll have more time to focus on growing other parts of your business. In addition, you’ll have the advantage of a low capital commitment, and the flexibility to scale back when you need to.

Difference Between a 3PL and Freight Forwarding

Freight forwarding offers a broker-type service. This allows companies to get the best rates and combination of carriers figured out on their behalf. They act as a middle man and coordinate pretty much everything from booking cargo space to filing insurance claims. However, freight forwarders do nothing beyond this—their services end at organizing how your products will get from point A to point B. This means that you’ll have to organize warehouse storage, picking and packing, and other tasks.

3PL providers are different in the sense that they can be full-service. Meaning that they’re able to take care of your entire supply chain. This includes warehouse storage, picking and packing, as well as shipping. Companies can reap many of the same benefits from 3PL providers as from freight forwarding. Third-party logistics services offer some flexibility as well since companies can pick and choose which services they’d like.

When deciding between the two, the most important thing to do is evaluate the needs of your business. Figuring out which service would be the most cost-efficient will help you make an informed decision.

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