Read on to discover the key differences between freight brokers, freight agents, and digital freight brokers.
As a shipper, you might be wondering: What are third-party logistics (3PL) companies and why use them? Third-party logistics providers are responsible for supply chain management. They provide fulfillment services that lead to time and cost savings. They also oversee logistics operations and promote supply chain efficiency. How do they do this? We’ll get into the details below.
What are third-party logistics companies?
Third-party logistics companies — also called 3PLs or 3PL providers — streamline supply chain processes. Their duties range from running some to all logistics services. Some examples include: transportation, freight management, and warehousing.
Why do companies use 3PLs?
Companies work with 3PL providers for the sake of efficiency. Third-party logistics companies take control of supply chain processes to make sure that they run smoothly. For example, 3PLs are responsible for load procurements. They also negotiate shipping costs, helping shippers find a cost-effective option. 3PLs also enable shippers to keep track of their shipments in real time and reduce the likelihood of mishaps and delays. This is particularly important in the age of e-commerce fulfillment, when customer satisfaction relies heavily on receiving constant updates about the status of goods.
There are several types of 3PL companies, including:
- Freight agents
- Freight brokers
- Digital freight brokers
Though they all provide similar third-party logistics services, each type of broker has a unique role. Since it’s important for you to work with a company that best suits your individual needs, let’s discuss what each of these types of brokers do.
Freight brokers help shippers and carriers communicate. They help shippers by sourcing carriers who are available to move their loads and carriers by negotiating fair pricing.
Freight brokers make deals with shippers and then help them move their freight. Throughout the shipment process, they stay in contact with the carrier and keep the shipper up to date on the status of their shipment.
Freight brokers are important because they help shippers find the right carriers to haul their loads. Having a qualified carrier for the load is essential for preventing damage and delays. Freight brokers are also an asset to carriers. They inform carriers when loads are available. This helps carriers win as many loads as possible and maximize profits.
One way that brokers do this is with load boards. Load boards are online databases that have details about available loads. When freight brokers post a shipper’s load on a load board, carriers who are available to move the load see the posting and bid on it.
Oftentimes, load boards focus on one shipping mode, for example less-than truckload (LTL) or shared truckload (STL).
Some examples of freight brokers are:
- C.H. Robinson
- XPO Logistics
- Echo Global Logistics
- Coyote Logistics
Freight agents (sometimes called freight forwarders) own their own businesses. They work on commission, coordinating freight shipments under a freight broker.
Freight agents have three important roles; they manage sales, customer service, and logistics.
- Sales: Freight agents cold-call potential customers and negotiate freight rates. They also source carriers and manage negotiations between shippers and carriers.
- Customer experience: Freight agents oversee order fulfillment, ensuring that trucks pick up and deliver shipments on time. They also take care of customer concerns, including keeping them up to date on the status of the shipment.
- Logistics: Freight agents are responsible for dispatching trucks that transport the shipment. They also manage components of the shipment’s journey, such as procuring warehouse space and overseeing inventory management. Some 3PLs even have their own fulfillment centers to ensure that they always have space available for shipments.
Some commonly known freight agents are:
- DHL Supply Chain & Global Forwarding
- DB Schenker
- DSV Global Transport and Logistics
- Sinotrans Limited
Freight agent vs. freight broker: What’s the difference?
What is the difference between a freight agent and a freight broker? Why pick one over the other? The two service providers have a lot in common, but there are some key differences.
Freight brokers are:
- Licensed through the Federal Motor Carrier Safety Administration (FMCSA)
- Required to have a surety bond
- Responsible for risks including granting credit to customers
- Liable for the transportation of your load
Freight brokers ensure that your freight reaches the end customer without getting damaged at a stage in the supply chain, for example under warehouse management.
Freight agents are:
- Independent — they are not required to have a license or to secure a surety bond
- Not responsible for the risk of granting credit — they have little to no liability for the transportation of a load
Both freight brokers and freight agents are responsible for transportation management. They help facilitate communication with carriers and promote supply chain efficiency. It’s important to do research to find out which is better-suited to your specific shipping needs.
Digital freight brokers
Another term you may be familiar with is “digital freight broker.” Many well-known names, including Convoy and Uber Freight, identify as digital freight brokers.
Digital freight brokers have a similar role as freight brokers and freight agents. They are based online and often work with small businesses. For small-scale shippers who need reliable carriers quickly but aren’t big enough to form long-term relationships with specific carriers, digital freight brokers are an ideal solution.
Digital freight brokers have access to advanced management software. This allows them to optimize truckloads via more flexible shipping methods, such as shared truckload (which combines your freight with another shipper’s into one, multi-stop load).
Like freight brokers and freight agents, digital freight brokers make the shipment process more efficient. They also have unique benefits, including less paperwork and 24/7 customer service, since everything is taken care of digitally.
3PL services are essential to logistics management. They also help level the playing field in trucking by aiding supply chain processes for both big and small companies. It’s safe to say that working with the right 3PL can make or break your shipping experience.