3PLs vs. Brokers: Which Should You Choose?
There's a question shippers ask themselves: what kind of logistics partner do I need, a strategic 3PL or a transactional broker? Small companies faced with this choice are often confused about the fundamental differences between the two, in addition to the relative advantages. And for good reason! 3PL and broker are often used interchangeably, because some of their core functions overlap. Both 3PLs and brokers work between shippers and carriers.
However, there are fundamental differences every shipper should know. Just because some of their functions overlap does not mean they are the same - or that they'll both give you the kinds of services your company needs.
A broker focuses on individual shipments, and highly transactional costs for services. They consider each load without the context of the market or future needs of the business. They typically do not gather data on market trends. Instead, they focus on creating vast networks of carriers and leveraging them to get the lowest costs and best services. When it comes to shipper and load management, they are relatively hands-off.
A 3PL balances their focus between shipments, market research, and technology to crunch shipping data. Their approach to shipments is strategic, rather than taken on a case-by-case basis. This research is done to avoid overcharging shippers during spot-market load times. They are also able to let shippers know when their loads are better to be shipped intermodal or LTL. A 3PL will often have a high-quality carrier networks to filled with carriers that have been vetted and approved. 3PLs are very hands-on. They put resources into thoroughly understanding their shipper's needs. They go above and beyond to put their cutting edge technology and vast amounts of data to work prioritizing efficiency and long-term cost savings.
In the end, the differences boil down to how future-minded the shipper is. If your business has very sporadic shipping needs and doesn't mind a little extra work - a transactional broker might provide the cheapest costs in some cases and without the necessary customer service that goes along with it.
But, if you're reading this, your business probably needs to ship loads more regularly. A 3PL provides deeper, efficient, custom solutions for businesses of all sizes. If your business plans on making regular shipments (even small intermittent ones), a 3PL is the way to go. Over time, a 3PL will learn your needs, increase efficiency accordingly, handle shipping emergencies for you, and keep you focused on actually running your business. It's an investment that pays for itself a hundred times over in both cost savings and headaches avoided.
Redwood is a 3PL dedicated to working with shippers to craft the perfect logistics solution. We work with companies who only employ a few people to those who employ thousands. If you're just starting out, we highly suggest you read further about why a 3PL is the best solution for small business logistics needs.