The Difference between a Freight Forwarder and a 3rd Party Logistics Provider (3PL)? | Whale Logistics Blog

The Difference between a Freight Forwarder and a 3rd Party Logistics Provider (3PL)? | Whale Logistics Blog

In this post part of the 'Basics to Freight Forwarding' series, we are uncovering the key differences between a freight forwarder and a 3rd Party Logistics Provider (3PL).

Freight forwarders and 3PL add crucial value to the modern supply chain - but did you know that these terms are used interchangeably, while these two services are different in nature? In this blog post, we uncover 3 aspects in which freight forwarders and 3PLs play different roles in supply chain management.

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Transportation

Both freight forwarders and 3PL have common knowledge of being able to arrange, retrieve, and deliver freight from A to B. Where these two differ is that forwarders specialise in this area, whereas a 3PL may include this as part of its full supply-chain solution package. If you think of a McDonald's store supply chain, the freight forwarders are the patties and buns while a 3PL may also include the lettuce, tomato and sauce. The difference is highly dependent on concentration of expertise, and whether it is depth or breadth of services you're looking for.

Costs

Where these two differ the most and where people get the most confused is whether a 3PL provides extra value from providing a full-benefit, whole supply chain solution. The answer may depend on your company; what you need, and what you're able to afford. To determine if they are getting real value, shippers should ask their 3PLs some hard and straight questions about the transportation part of their services. For instance:

  • Are your transportation charges less expensive than freight forwarders?
  • Will a shipment under your supervision arrive at its destination any faster than utilizing a freight forwarder?
  • Once a shipment arrives, will it clear Customs more quickly than using a freight forwarder?
  • Because you are non-asset-based and rely on air carriers and shipping lines to move your customers' freight, can you obtain lower rates and more reliable service than forwarders?

3pl vs freight forwarder what's the difference whale logistics blog

Administrative effort

So a 3PL sounds like it will take care of your business' supply chain from A to Z - does it mean that with freight forwarders, there is more administrative effort for your company?

The answer is Yes and No.

Yes, because often you will need to take ownership of certain parts of the supply chain. Where freight forwarders come in value is transporting your freight from A to B with the least cost and hassle to you - but beyond points A and B, you are responsible.

No, because often 3PLs will charge more for the full service package that they offer, like stockpiling, picking and pressing, and offering a distribution centre.

Summary

So in summary, forwarders are specialists that focus on the cost and logistics of transportation. Third-party logistics providers are usually generalists who expect to be compensated for providing a 'one-stop-shop' service. This compensation may or may not be cost-effective, and it is helpful to research all options suitable for your organisation before deciding to commit to a relationship with either one.

Traditional freight forwarders continue to play a dominant role in international trade, controlling 90 percent of all heavyweight international air shipments.

This percentage has remained remarkably constant during the past 30 years, despite all the technical and operational changes during that time. For ocean freight, traditional forwarders control 75 percent of less-than-containerload revenues.

Yes, there are differences between 3PLs and freight forwarders. Increasingly, however, these services are blending.

To remain successful in today's fiercely competitive logistics market, both freight forwarders and third-party logistics providers must never forget that despite all the technical advances and innovations, logistics remains a people business.

If you liked this post, check out more in the Freight Forwarding Basics series. Don't forget to check out our regular blog posts and subscribe for more to come!

 

Whale Logistics are Australia’s leading Freight Forwarder and Logistics company located in Sydney and Melbourne. We deliver digital services such as Australian customs parcel tracking, parcel delivery box, and comprehensive ocean, air and road freight solutions. For cost competitive and innovative ocean freight solutions, please click the link below to contact a Whale Logistics Ocean Freight Specialist today for a quote. 

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