In the field of logistics, it is possible to meet such terms as “brokerage”, “3PL”, and “non-asset-based provider”. It is important for anyone who is in a supply chain management position to comprehend these ideas. This is because the options that you are presented with can greatly influence your day to day business, including how you handle stock, shipping and packaging of products.

Most of the shippers today integrate different third-party providers into their supply chain management systems. A large number of shippers are of the view that the involvement of third parties can contribute to increased efficiency in some way and thus can lead to better shipping solutions, more capacity and lower rates. Understanding when and how to use these services can be a real advantage for your business.

Understanding Third-Party Logistics (3PL)

A third party logistics provider or commonly referred to as 3 PL is a company that will handle your company's supply chain. Some of the functions encompassed are handling, forwarding, warehousing, and packaging of the consignment as well as supply chain management and technology.

First of all, one needs to understand the fact that every 3PL is different in terms of its business model. There are those which may specialize in certain aspects of the supply chain management while there are those which offer a more general service. Most of the 3PLs are not asset-based to a large extent; they provide logistics solutions for shippers. On the other hand, some third party logistics providers have the assets, for instance, the warehouses that are suitable for e commerce fulfillment.

Many firms decide to engage 3PLs for some or all the supply chain activities. This decision is usually made in light of the possibilities for increasing efficiency, gaining access to the required skills and resources, and reducing costs associated with performing these operations in-house.

What is the Role of a Third-Party Logistics Provider?

A 3PL provides various supply chain services tailored to your business needs. While some 3PLs specialize in limited areas, others offer extensive service options.

Key services a 3PL may provide include:

• Truckload brokerage
• LTL brokerage
• Intermodal marketing
• Air and ocean freight forwarding
• Supply chain optimization
• Managed transportation
• RFP management
• Carrier scorecarding
• Warehousing
• Distribution and fulfillment

In North America, the term “3PL” often highlights domestic transportation management, particularly freight brokerage.

Asset-Based vs. Non-Asset-Based: What Do They Mean?

Asset-Based Carriers

Asset-based carriers are usually trucking companies that own their equipment which include the trucks and trailers and employ drivers. These carriers can vary greatly in size from the large corporations with large fleets and logistics depots to small business people with only one truck. They offer a variety of services including power-only transportation, dry van, refrigerated and open-deck, and they are involved in both the full truckload and less-than-truckload markets. In intermodal transport, they may own their own containers while employing the rail operations of other companies.

Non-Asset-Based Providers

The non-asset based providers offer services that are quite comparable to those of the asset-based providers but the former does not own any commercial vehicles or directly employ drivers. Instead, they build complex structures of carriers, and then find the most suitable ones for the shippers’ freight via innovative technologies. Through the procurement of carriers for truckload, LTL or intermodal shipping, businesses can get professional logistics services without having their own fleet of vehicles. Many of the 3PL providers come under this category.

Asset-Light Carriers

Asset light carriers are a sub sect in the transportation industry. They may own or lease certain key resources like terminals and trailers, but primarily act as brokers. This model enables them to offer certain asset-backed services while at the same time keeping open the flexibility of operations to meet market conditions.

Are 3PLs Asset or Non-Asset Providers?

3PLs can be categorised into two; those that are asset based and those that are not, depending with the services they offer. The majority of 3PLs either have no assets or are considered to have limited assets. For instance, a 3PL that is primarily engaged in e-commerce fulfillment may have a network of warehouses and a delivery fleet, which allows it to meet the needs of shippers that want to outsource their logistics concerns.

3PL vs. Freight Broker: Is There a Difference?

Shippers Prefer 3PLs for Freight Brokerage

It is important to understand that although all freight brokers are considered to be 3PLs, not all 3PLs are freight brokers. Most of the 3PLs provide other services besides freight brokerage, and these may include warehousing as well as logistics management.

Out of all the sectors, it has been established that the key area where shippers look for help from third-party providers is in freight brokerage. In reality, 82% of the companies outsource at least some of their freight needs to external suppliers; 38% of which rely on third-party logistics providers for the majority of their shipments.

This trend is an indication that 3PLs are useful in the integration of the supply chain.

Which Is Better, Asset-Based Carriers or Third-Party Logistics Providers?

Performance & Service

To assess the capabilities of the freight providers you will need to consider your specific requirements for equipment and number of services. Comparing an asset-based carrier to a 3PL provider is like comparing apples to oranges or choosing between a hammer and a screwdriver. A third party logistics provider may not be as proficient in the area of pricing and service for particular routes as an asset-based carrier; nevertheless, the latter may lack adequate equipment for other routes that the former can handle more proficiently.

Information received from shippers is useful and beneficial. About half of the shippers see no major difference between asset and non-asset based providers or prefer the latter. This indicates that the level of service received from 3PLs is relatively diverse between acceptable and excellent, which means that you do not necessarily have to sacrifice service quality by choosing a 3PL.

Pricing & Rates

Contrary to common belief, a 3PL does not automatically translate to higher costs. While it acts as an intermediary between you and the trucking company, it doesn’t mean you will pay more in every situation.

• Negotiation Power: 3PLs manage thousands of shipments daily, which can enhance their ability to negotiate competitive rates on your behalf based on their total freight volume. This is particularly advantageous for less-than-truckload (LTL) shipments.
• Carrier Network: With relationships extending across numerous carriers, 3PLs can quickly identify the most suitable carrier for your shipping needs, enhancing efficiency and effectiveness in the logistics process.
  

By weighing these factors—performance and pricing—you can make a more informed decision about whether to engage asset-based carriers or 3PLs for your logistics requirements.

What Are the Core Benefits of Collaborating with a 3PL?

Network Scale and Reach

Working with a 3PL helps you gain efficient entry into an extremely fragmented trucking market. You get a single point of contact that links you with many small and mid-sized carriers, thus breaking through the fragmented communication and coordination with the market that includes these companies as a major part of the LSPs.

Responsive Capacity

3PLs offer flexibility that the asset-based carriers cannot afford to offer. In situations where a carrier has a shortage of drivers or particular equipment a 3PL will find the required resources. This capability guarantees that the trucking solutions you require are always available to you even if there are no changes in the supply of equipment.

Flexibility

Outsourcing to third-party logistics companies simplifies the decision-making process between building and buying. This kind of cooperation enables you to control the level of your logistic service, which means you can easily increase or decrease it depending on your shipping needs at given moment. It offers you a convenient solution to your business needs without requiring you to make long term commitments.

Service Line Diversity

A number of 3PLs are capable of providing not only truckload brokerage services but also many other logistics services. Expanding the range of the offered services will help to make the procurement simpler. For instance, if you handle both the LTL and TL shipments, then the 3PL will be able to handle both categories effectively and hence increase efficiency.

Comprehensive Supply Chain Coverage

If you face difficulties in fulfilling some lanes through the asset carriers then 3PL can be the best solution. They are masters at closing holes within your supply chain and providing you with dependable solutions where conventional means are unavailable or inefficient, guaranteeing your freight needs.

Access to Technology

Many 3PLs have embraced advanced technologies in the provision of their services. They offer digital freight matching services and enable process optimization through APIs and EDI. Through the use of IT, they help you to improve the transparency of your logistics management.

Optimal Applications for 3PLs in Your Supply Chain

Third-Party Logistics (3PLs) can be used in different processes of your supply chain management. The studies reveal that there is no one best way of delivering all the services. For example, as few as 36% of shippers indicated they wanted full in-house management in any one category.

3PLs are particularly strong in procurement of carriers, and this is just one area where they offer value. Working with 3PL providers can improve your logistics plan and cut expenses across the board.

Who Should You Collaborate With?

Both asset based and non asset based logistics providers are critical in any supply chain. Combining the two options will increase your capability and services provided.

Consider these points when selecting carriers:

• Asset-based carriers typically shine in handling consistent, high-volume drop trailer shipments within their service regions.
• 3PLs are often more effective at managing spot freight and unique, live-load requirements.
  

However, it is crucial to understand that these generalizations may not hold true across all settings. For instance, there are some providers who will excel in handling both types of freight.

Pro Tip: Build long-lasting, mutually beneficial partnerships with a select group of providers from each category. This strategy allows you to leverage their specific strengths effectively throughout your supply chain.