Moving products between locations, whether you’re changing warehouses or sending orders to the customer, is always a complicated endeavour. It only gets more confusing when you need support and realise that a wide range of companies with different names claim to be the service that you’re looking for right now.
Two of the most common types of companies that arrive to help you get your products to customers are freight forwarders and third-party logistics providers (3PLs). Each comes with different price considerations, capabilities, and places where they integrate with your supply chain.
Find the right help you need by learning the difference each has to offer.
What’s a Freight Forwarder?
Freight forwarding is, at its core, a service that gets your goods from point A to point B. So, freight forwarders are the service providers that accomplish this by arranging the entire process. Even if your products move across different modes, such as from ships to trucks or trains, the freight forwarder will manage this for you.
In some cases, a freight forwarder will provide limited storage or warehousing specific to the movement of the goods. This isn’t long-term storage, but any small stopover or prep work needed to move your goods.
Often a freight forwarder will serve as a broker and intermediary between you and the transportation service companies that are used. They’re the contact for anything that occurs along this journey. Your freight forwarder will typically have their own rates with carriers and shipping lines, helping you save. They may also consult with your business on various aspects of a shipment, such as insurance you may need or ways to improve safety.
Freight forwarders are leaders of the process when the goods are moving.
What Is a Third-Party Logistics Provider?
In contrast, 3PLs are companies that provide logistics outsourcing support. Typically, this covers warehouse activities such as storing goods, picking, packing, and fulfilling orders. They’re handling your products before anything is shipped, often preparing them to get to the correct customer at the right time.
Think of a 3PL as someone who handles the warehousing, fulfillment, and shipping support your business may need.
The 3PL company is typically integrated into more aspects of your business because they receive orders from all of your sales channels and then prepare goods to be shipped to your customers. Often, a 3PL will work directly with carriers to ship goods, relying on their high-volume warehouses to secure discounted rates.
Sometimes, when an order is complex, or they’re experiencing growth, a 3PL can use a freight forwarder to manage a shipment. However, the inverse is rarely true because freight forwarders tend not to need any of the package-related services that a 3PL provides.
It’s good to think of your 3PL partner as a jack-of-all-trades for logistics needs. They’re typically experts in applying logistics solutions to business problems and address a wide range of needs. You’ll find help with order and inventory management, controlling labor costs, and even business strategy support to reduce returned merchandise.
The Biggest Difference Is Service
When people ask the difference between a freight forwarder and a 3PL company, they’re typically looking to find who can fill their needs. A freight forwarder is a specialist focused on moving goods between two locations. A 3PL is a specialist in managing your logistics needs, which often includes moving the same products.
Third-party logistics providers typically offer many more services than a freight forwarder. The 3PL will safeguard and support products from storage and filling orders to being moved by carriers and finally to the end-consumer, potentially doing the same thing over again if the customer returns the product.
A 3PL is more intertwined with your business, playing a significant role in customer service and satisfaction. A good 3PL will help you prepare your warehouse and products before an order is placed, get you the best shipping rates and fill orders when someone buys from you, and ensure the package with the right order arrives at the right person.
Jake Rheude, Vice President of Marketing, Red Stag Fulfillment