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3PL Freight Brokerage: What it Actually Means

A 3PL provider is a company specializing in outsourced logistics

  • Written by Alex Dolce
  • Published on December 8, 2023
  • Time to read 9 minutes

Introduction

3PLs: They’re the bigger picture in a vastly complex shipping industry. They help with many shipping needs, like warehousing/storage, packing, and more. However, freight brokerage is something that not all 3PLs do, so people might get confused when the term “3PL Freight Brokerage” pops up. So today, we will be going over what “3PL Freight Brokerage” means, why it might be used, and how it works. Overall, we will help make sense of 3PLs vs. Freight Brokers. 

What is 3PL Freight Brokerage?

3PL Freight Brokerage, though not an actual term, combines two vital elements in logistics: “3PL” and “Freight Brokerage.” Let’s break down each component:

1. 3PL (Third-Party Logistics)

A 3PL provider specializes in outsourced logistics and supply chain management services. They serve as intermediaries between businesses that need to transport goods and the various elements of the supply chain, including transportation, warehousing, distribution, and more. 3PLs offer a holistic approach to managing logistics, enabling businesses to focus on their core operations while entrusting their supply chain complexities to experts.

2. Freight Brokerage

On the other hand, freight brokerage is a specific service within the logistics industry. These brokers act as intermediaries, connecting two crucial players in the logistics ecosystem. These players are shippers and carriers. 

In a sense, all freight brokers are technically 3PLs. However, 3PLs aren’t precisely “freight brokers”, since they don’t always provide that exact service that freight brokers do. 

So, how does the term “3PL Freight Brokerage” come into play? 

3PLs and Freight Brokerage: How it Works

A 3PL is like a puzzle, while freight brokerage is a piece within it. In essence, the term “3PL Freight Brokerage” likely refers to 3PL providers with the services of freight brokers, offering a seamless logistics solution. Here’s how it typically might work:

Matching Shippers and Carriers: The process begins with a shipper seeking transportation for their goods. At this point, the 3PL “freight broker” assesses the shipment’s specific requirements, such as cargo type, destination, and timing.

Negotiation and Rate Setting: The 3PL leverages its industry knowledge and negotiation skills in this stage. By doing this, it can secure the best possible rates and terms for both the shipper and the carrier. This ensures fair and mutually beneficial agreements.

Documentation and Compliance: Any required paperwork and documentation, including bills of lading, customs forms, and insurance requirements, are handled by the 3PL freight broker. This helps to ensure compliance with legal and regulatory standards.

Tracking and Visibility: The 3PL provides advanced tracking and monitoring services. Therefore, they allow real-time visibility into the shipment’s status and location throughout its journey.

Problem Resolution: If there are any issues like delays, damages, or route changes, the 3PL freight broker can help. They can step in to swiftly resolve problems, minimizing disruptions to the supply chain.

Significance of 3PL Freight Brokerage

The concept of freight brokerage offers several critical advantages for businesses:

  1. Cost Savings: The negotiation skills and industry expertise of 3PL brokers often lead to cost savings in transportation.
  2.  Time Efficiency: Outsourcing logistics to experts frees up time for businesses to focus on core operations.
  3. Scalability: 3PL services are highly scalable, adapting to the unique needs of businesses, whether they have occasional shipments or require continuous logistics support.
  4. Reduced Risk: By handling regulatory and compliance matters, 3PL brokers reduce the risk of costly errors in logistics operations.

Final Thoughts

In a world driven by global trade and rapid commerce, the term “3PL Freight Brokerage” likely pops up because both pieces are crucial in the supply chain. 3PLs and Freight Brokers alike have similar approaches to logistics management. However, 3PLs are more the big picture, while Freight brokers have a specific role.

But, by combining the capabilities of 3PL providers with the precision of freight brokers, businesses can streamline their supply chain overall. This includes reducing costs and achieving greater efficiency in the transportation of goods. You can confidently navigate the logistics landscape by understanding the nuances between 3PLs and Freight Brokerage and how to use both to your advantage in the shipping space.

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