In the world of logistics, terms like “brokerage,” “3PL,” and “non-asset-based provider” frequently appear. Understanding these concepts is essential for anyone involved in supply chain management. Your ability to navigate these options can significantly impact your operations, from managing inventory to shipping products.

Many shippers today utilize a combination of third-party providers to optimize their supply chains. Research indicates that a substantial majority of shippers believe some level of third-party support enhances efficiency, offering opportunities for improved shipping processes, increased capacity, and more competitive rates. Knowing when and how to leverage these services can be a game changer for your business.

Understanding Third-Party Logistics (3PL)

A third-party logistics provider, commonly referred to as a 3PL, is an entity that manages various aspects of the supply chain for your business. This includes tasks such as brokering, shipping, storing, and packing freight, along with offering strategic supply chain solutions and technological support.

It's important to recognize that 3PLs vary in their business models. Some may focus on specific sectors of supply chain operations while others cover a broader range of services. The majority of 3PLs do not own physical assets; they orchestrate logistics services for shippers. Conversely, certain 3PLs possess assets like warehouses that facilitate e-commerce fulfillment.

Businesses often choose to partially or entirely outsource supply chain functions to 3PLs. This decision typically stems from the potential for enhanced efficiency, access to specialized expertise, and the opportunity for cost savings when compared to managing these operations internally.

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 typically trucking companies that own their equipment, which includes trucks and trailers, and hire their drivers. These carriers can range widely in size, from large firms with extensive fleets and logistics facilities to individual owner-operators with a single truck. They provide various services such as power-only transport, dry van, refrigerated, and open-deck options, and operate in both full truckload and less-than-truckload sectors. In intermodal transport, they may own their containers while utilizing rail services operated by other companies.

Non-Asset-Based Providers

Non-asset-based providers deliver services similar to their asset-based counterparts but do not possess any physical vehicles or hire drivers directly. Instead, they create comprehensive networks of carriers, matching them with shippers' freight needs through advanced digital solutions. By outsourcing the procurement of carriers for truckload, LTL, or intermodal shipping, businesses can rely on these providers to handle logistics without needing their own fleet. Most third-party logistics (3PL) providers fall under this category.

Asset-Light Carriers

Asset-light carriers represent a niche in the transportation industry. They typically own or lease select strategic assets, such as terminals and trailers, but predominantly operate as brokers. This model allows them to maintain operational flexibility and adapt to market demands while still providing certain asset-backed services.

Are 3PLs Asset or Non-Asset Providers?

The classification of 3PLs as asset or non-asset providers depends on their range of services. Most 3PLs either operate without owning assets or fall into the asset-light category. For example, a 3PL focusing on e-commerce fulfillment may own warehouses and operate a fleet for last-mile delivery, effectively serving shippers who prefer outsourcing their logistics needs.

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

Shippers Prefer 3PLs for Freight Brokerage

You should note that while all freight brokers fall under the category of 3PLs, the reverse is not true. Many 3PLs offer a variety of services apart from freight brokerage, which can include warehousing and logistics management.

Research indicates that freight brokerage is the primary area where shippers tend to seek third-party assistance. In fact, 82% of shippers utilize external providers for some portion of their freight capacity needs, with 38% depending on 3PLs for the majority of their shipments.

This trend underscores the importance of 3PLs in streamlining supply chain operations.

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

Performance & Service

Evaluating freight providers requires an understanding of your specific needs, such as equipment types and service variety. Choosing between an asset-based carrier and a third-party logistics (3PL) provider is similar to selecting the right tool for a job. An asset-based carrier may excel in pricing and service for certain routes, yet they might not have the necessary equipment capacity for others, where a 3PL could be the more reliable option.

Feedback from shippers reveals valuable insights. Approximately 51% of shippers perceive no significant distinction between asset and non-asset providers or actually favor non-asset options. This suggests that the service levels experienced with 3PLs range broadly from acceptable to exceptional, indicating that you might not be compromising on service quality by opting for 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

Partnering with a 3PL allows you to streamline access to a highly fragmented trucking industry. You gain a single point of contact that connects you with numerous small and mid-sized carriers, simplifying communication and coordination in a market where these companies represent a significant portion of logistics service providers.

Responsive Capacity

3PLs provide flexibility that asset-based carriers often lack. When a carrier faces shortages of drivers or specific equipment, a 3PL steps in to source the necessary resources. This capability ensures that you have continuous access to trucking solutions tailored to your needs, regardless of equipment availability.

Flexibility

Utilizing third-party logistics providers alleviates the complexities of the build vs. buy challenge. This collaboration allows you to quickly adjust your logistics capabilities, scaling operations up or down as your shipping demands fluctuate. It provides a responsive approach to meeting your logistical requirements without permanent commitments.

Service Line Diversity

Many 3PLs possess a wide range of logistics offerings beyond just truckload brokerage. By diversifying your service options, you can simplify procurement processes. For example, if you manage both less-than-truckload (LTL) and truckload shipments, a 3PL can seamlessly handle both categories, enhancing efficiency.

Comprehensive Supply Chain Coverage

Should you encounter challenges in covering specific lanes through asset carriers, a 3PL can provide effective solutions. They excel at bridging gaps within your supply chain, offering reliable options where traditional methods may fall short, ensuring all your freight needs are met.

Access to Technology

A substantial number of 3PLs leverage advanced technology to optimize their service offerings. They provide digital freight matching tools and facilitate process improvements through API and EDI integrations. By integrating technology into their operations, they enhance efficiency and transparency in your logistics processes.

Optimal Applications for 3PLs in Your Supply Chain

You can incorporate Third-Party Logistics (3PLs) in various aspects of your supply chain operations. Research indicates that no single area is best managed entirely in-house. For instance, only 36% of shippers favored full in-house management in any one category.

3PLs particularly excel in areas like carrier procurement, yet their benefits extend across all functions. Utilizing 3PLs can enhance efficiency and reduce costs throughout your logistics strategy.

Who Should You Collaborate With?

In any supply chain, both asset-based and non-asset-based logistics providers play essential roles. Utilizing a mix of both options enhances your capacity and service variety.

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.

It's important to note that these generalizations may not apply universally. For example, some providers may adeptly manage 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.

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