What is the Difference Between 3pl and Freight Brokers?

In order to efficiently manage the supply chain surrounding your business, you need a transportation and logistics partner that provides the services you need. Unfortunately, it can be difficult to find the right logistics partner because the industry jargon can be confusing, especially when there are so many moving parts. For example, 3PL and freight brokers are often referred to as if they were the same thing, but they are not. 

While there are some similarities between 3PL and freight brokers, it is important to note that there are a few crucial differences. When you are looking for a logistics provider, the differences may be significant to your important business decision. 

Let’s define 3PL and freight broker, compare and contrast the two, and discuss what your business needs

What is a 3PL (Third-Party Logistics Provider)?

3PL stands for Third-Party Logistics Provider. A 3PL links a company’s manufacturing operations with their customers by selecting, packing, and shipping products. 3PL is often used interchangeably with fulfillment center or fulfillment warehouse because companies that provide 3PL services overlap with the offerings of order fulfillment companies. 3PL companies handle warehousing, inventory management, picking, packing, customization, kitting, shipping, receiving, FTL and LTL freight shipping, and reverse logistics. 

There are different types of 3PL companies that specialize in different types of fulfillment and warehousing for specific products, like refrigerated goods, hazardous materials, or high-value products.  Regardless of the scope or specialization, 3PL companies are an efficient and effective choice for businesses that are looking to outsource order fulfillment processes. 

What is a Freight Broker?

A freight broker is an individual or entity that arranges the transportation of goods using a network of carriers. Freight brokers do not transport the goods themselves, and freight brokers do not own the equipment that moves the freight. They work with a carefully curated network of carriers to book drivers and equipment to carry shippers’ loads. 

Freight brokers are logistics concierges who are experts in navigating the complexities of arranging the timely and cost-efficient transportation of shipments. Freight brokers find work for truck drivers and help shippers find the appropriate carriers at competitive prices. Using a freight broker to coordinate the shipment of goods allows shippers to save money and focus on what they do best. Freight brokers are licensed to perform the duties of the job, and they are responsible for the cargo. While freight brokers are not required by law to carry insurance, the best freight brokers do. If you choose to work with a freight broker, it is important that you partner with a freight broker that is fully insured. 

3PL vs. Freight Broker

The primary distinctions between a 3PL and a freight broker is the range of provided services and the type of primary insurance coverage they carry. Let’s take a closer look at the similarities and differences between the two. 

Range of Services

Both 3PL and freight brokers can arrange for goods to be shipped. Freight brokers never ship the goods themselves and they do not own equipment to ship goods. On the other side, some 3PL own their own shipping assets to ship goods using their drivers and equipment. 

Freight brokers only coordinate the shipment of goods, and they do not provide any other services. In addition to coordinating the shipment of goods, a 3PL can also handle a multitude of other services related to order fulfillment. 

Insurance Coverage

The difference in degree and type of coverage is due to the differences in contact with and responsibility for the cargo. Freight brokers do not need to carry the most comprehensive insurance coverage because they do not physically handle the cargo. Freight brokers are not mandated by law to carry insurance, but many freight brokers offer contingent coverage that takes effect if a motor carrier’s coverage is insufficient to cover the losses of lost, stolen, or damaged goods. In contrast, 3PL are fully insured, and extensive coverage is necessary because 3PL handles the cargo at many stages of the logistics processes. 

Does your business need a 3PL or freight broker?

A great 3PL or freight broker is an asset to any business. When you are choosing a logistics partner, it is important to evaluate your company’s needs. Do you need a provider to manage all aspects of your order fulfillment from warehousing, inventory management, packing, customization, shipping, receiving, returns, and more? Or do you need a provider who specializes exclusively in coordinating freight shipments? 
Whatever choice you make, First Star Logistics is here for you. First Star Logistics is a unique asset-based global logistics provider. With more than 60 years of experience, First Star is one of the fastest-growing companies in the industry. Clients benefit from a comprehensive North American network and global reach, along with time and money-saving technology that delivers. For all of your transportation and logistics needs, contact First Star today!