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Freight Forwarder vs 3PL: Which is Right for Your Business?

Warehouse Services

Written by Bella Dryden

3PL Operations

May 20, 2024

Contents:

 

When it comes to managing your supply chain and logistics, understanding the roles and benefits of 3PL (Third-Party Logistics) providers and freight forwarders is essential. Both offer valuable services but cater to different needs. In this blog, we’ll delve into the key aspects of freight forwarding and 3PL services, their differences, and how to decide which is best for your business.

What is Freight Forwarding?

Freight forwarding involves coordinating and shipping goods from one place to another. Freight forwarders act as a middleman between shippers and transportation services, ensuring that goods are transported efficiently and cost-effectively. They handle a range of logistics tasks, including:

  • Booking cargo space on carriers such as ships, airplanes, trucks, and
  • Negotiating freight charges to get the best rates.
  • Handling documentation such as bills, customs paperwork, and insurance.
  • Tracking shipments and managing logistics to ensure timely delivery.
  • Providing warehousing services if needed.

Freight forwarders are particularly valuable for international shipping, where navigating complex customs regulations and coordinating multiple modes of transport are crucial.

What Does 3PL Mean?

3PL, or Third-Party Logistics, refers to outsourcing logistics operations to a third-party service provider. These providers offer a comprehensive suite of services that can include:

 

3PL providers integrate these services to offer end-to-end supply chain management, allowing businesses to focus on their core operations while leaving logistics to the experts.

What are the Main Differences Between 3PL and a Freight Forwarder?

While both 3PL providers and freight forwarders play crucial roles in logistics, they serve different purposes and offer distinct services. Understanding these differences can help businesses choose the right partner to optimise their supply chain:

 

1. Scope of Services:

Freight Forwarder:

  • Primary Focus: Freight forwarders primarily focus on transportation and the logistics to moving goods. Their core functions include arranging shipments, negotiating freight charges, and managing customs processes.
  • Specialised services: Freight forwarders specialise in handling international shipping, this includes ensuring goods move correctly and smoothly across borders. For example, they need to deal with documentation, customs clearance, and the compliance with international trade regulations.
  • Limited to transport: their services are often limited to ensuring that cargo reaches its destination efficiently and cost-effectively. They do not typically manage warehousing, inventory, or order fulfilment.

 

3PL Providers:

 

2. Integration:

Freight Forwarder:

  • Segmented services: Freight forwarders typically handle specific sections of the supply chain. They are experts in transportation logistics, but do not usually integrate with other parts of the supply chain such as warehousing or order fulfilment.
  • Coordination Role: In addition to this, they also act as coordinators who arrange and oversee the transportation of goods, ensuring that they move from point A to point B smoothly. During this point, freight forwarders will often communicate between multiple carriers and customs authorities to make sure everything is in order.

 

3PL providers:

  • Integrated solutions: 3PL providers offer solutions that cover multiple aspects of the supply chain. This integration provides an efficient and smooth experience for all businesses, as all logistics functions are under one roof.
  • Holistic Approach: Not only this but their services are interconnected, meaning their systems are all coordinated to optimise efficiency and reduce overall costs. This holistic approach helps make their operations smoother and improve the overall supply chain performance.

 

3. Client Interaction:

Freight forwarder:

  • Intermediary Role: Freight forwarders act as the middleman between shippers (businesses needing to transport goods) and carriers (companies that transport goods). They communicate and coordinate between parties to ensure that shipments are handled properly.
  • Transactional Relationship: Additionally, the relationship between a business and a freight forwarder is often transactional, focusing on individual shipment and specific transportation needs.

 

3PL providers:

  • Direct management: 3PL providers work directly with businesses to manage their entire logistics operations. They often form long-term partnerships with their clients, becoming an integral part of their supply chain strategy.
  • Strategic Partner: 3PLs are viewed as strategic partners that contribute to the overall efficiency and success of a business’s supply chain. This often provides insights and enhances performance.

When to Choose a 3PL Provider:

Choosing a 3PL provider can completely change the game in your business operations, especially when your logistics needs extend beyond basic transportation. Here are key scenarios in which opting for a 3PL provider would benefit your business:

 

If Your Business Needs Comprehensive Logistics Solutions, Such as:

  • Warehousing: 3PL providers offer storage solutions to accommodate various inventory sizes, ensuring secure and efficient storage and retrieval.
  • Inventory Management: They use advanced systems such as a WMS to track stock levels in real time. This overall reduces holding costs and prevents stockouts or overstock situations.
  • Order Fulfilment: 3PLs handle picking, packing and shipping, ensuring accurate and timely order processing for higher customer satisfaction.
  • Transportation: They manage carrier selection, route optimisation, and freight forwarding, ensuring efficient and cost-effective delivery.

You Want to Scale up Your Business:

  • Rapid Growth: As your business expands, 3PL providers can scale services to match increased logistics demands, including adding additional warehouse space.
  • Seasonal Peaks: 3PL providers can ramp up operations during peak times and scale down during odd peak periods. This provides flexibility without long-term co
  • Geographic expansion: 3PLs can quickly establish logistics networks in new regions, providing local warehousing and distribution capabilities.

You Want to Focus on Core Business Activities:

  • Product development: By outsourcing logistics, you can focus on more resources for product development.
  • Marketing and Sales: with logistics managed by a 3PL, your team can concentrate on driving sales and marketing strategies.

When to Choose a Freight Forwarder:

Opting for a freight forwarder can be highly beneficial in certain situations such as:

 

If Your Business has Specialised Transportation Needs:

  • International shipping: If your business involves international trade, a freight forwarder can navigate the complexities of global shipping. This includes customs regulations, import/export documentation, and compliance with international trade laws.
  • Multiple carriers: Freight forwarders coordinate with various carriers (air, sea, land) to ensure that your goods are transported efficiently.

 

When you Want Cost Efficient Prices:

  • Negotiated Shipping rates: freight forwarders often have established relationships with carriers and can secure better shipping rates due to the high volume of shipments they manage. This can result in a lot of cost savings for your business.

 

You Want to Focus on Transportation and Have Limited Logistics Needs:

  • Self-managed warehouse and inventory: If your business already has a warehouse and an order fulfilment system, a freight forwarder is an ideal choice. This is because they offer specialised transportation services without requiring you to overhaul your existing logistics setup.

Cost Comparison Between 3PL Providers and Freight Forwarders:

Freight Forwarder:

Freight forwarders typically charge based on the size, weight, and destination of shipments. Additional fees may include customs clearance, insurance, and handling charges.

 

3PL Providers:

3PL providers offer bundles services, so pricing can include warehousing, inventory management, order fulfilment and transportation. Costs are often based on Service Level Agreements (SLAs) and may include setup fees, storage fees and pre-order fulfilment charges.

How do you Decide What is Best for Your Business? Freight Forwarder vs 3PL

Every business is unique, so you need to make sure to look at your own business plan to decide what provider is best for your business. Some things to consider include:

  1. Your logistics needs: Assess the scope of your supply chain requirements. Consider things like do you need logistics management or specialised transportation services?
  2. Budget: Compare the costs of each provider and consider what one aligns with your business budget the most.
  3. Growth plans: Choose a solution that can grow with your business and adapt to seasonal changes and demands.
  4. Expertise: Evaluate the expertise and reliability of potential providers. Look into many different options so you choose the provider that will benefit your business the most.

Looking for a 3PL Provider That Also Provides Freight Forwarding Services? PackPro are Here as Your Trusted Partner.

 

At PackPro, we pride ourselves on being your trusted 3PL partner, expertly managing all your logistical needs so you can focus on growing your business. Our comprehensive services include real-time inventory management with accurate forecasting, ensuring optimal stock levels. Our efficient pick and pack services guarantee precise and speedy order fulfilment, customisable packaging solutions, and scalable operations to meet any demand. We provide end-to-end shipping management, from selecting the best carriers and optimising routes to offering real-time tracking and detailed shipping reports. Additionally, our hassle-free returns management ensures quick processing and restocking of returned items, supported by excellent customer service to make the reverse logistics process smooth and efficient. Trust PackPro with your supply chain with reliability and expertise.

 

In addition to our 3PL offerings, PackPro also provides expert freight forwarding services to ensure your goods are transported efficiently and cost-effectively. Our rail freight services offer reliable and economical options for large volumes over long distances, complete with route planning, documentation, and customs clearance. For urgent and high-value shipments, our air freight services provide speed and flexibility, partnering with major airlines for swift, secure delivery. Our sea freight services offer cost-effective international shipping with Full Container Load (FCL) and Less than Container Load (LCL) options, managing everything from carrier selection to delivery. By integrating these freight forwarding services with our 3PL capabilities, PackPro delivers an efficient logistics experience, ensuring your supply chain operates smoothly.

Conclusion:

 Choosing between a 3PL provider and a freight forwarder depends on your business’ specific logistics needs and growth plans. Understanding the distinct roles and services each offers can help to make an informed decision. Whether you need the comprehensive solutions of a 3PL provider or the expertise of a freight forwarder, selecting the right partner can streamline your supply chain, reduce costs, and enhance efficiency.

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