In facilitating efficient management of your supply chain, choosing a transportation and logistics partner with right combination of services that fit your company needs is essential. Unfortunately, industry jargon breeds confusion. For example, 3PL (third-party logistics) and freight brokering are often spoken of as if interchangeable. They aren’t.
As our Cleveland 3PL experts can explain, there are some similarities, but also a few key differences. When you’re in the market for a logistics partner, those differences matter.
At On Time Delivery & Warehouse, we want clients to have the information and tools necessary to determine the best solutions for their operations.
What primarily sets 3PL services and freight brokers apart (as well as freight forwarders and motor carriers) is the range of services they provide (including whether they are asset or non-asset services) and the type of primary insurance coverage they carry. Much of this is spelled out by the Federal Motor Carrier Safety Administration (FMCSA), the regulator responsible for ensuring safety and legal compliance of over the road transportation.
What is a Freight Broker?
Freight brokers are individuals or entities that arrange for motor carrier transport of goods or property for a fee. The broker isn’t the one who actually transports the goods. They aren’t responsible for the property, nor do they own the equipment necessary to move it.
Being that freight brokers don’t own the assets themselves, their profit is gleaned from being a transactional agent. Through their connections, they buy and facilitate transport from mode-specific carriers, including truckload or less-than-truckload service providers, on behalf of their clients.
Another key point about freight brokers is the insurance coverage they offer in transport. Unlike motor carriers (those who own the trucks), brokers don’t provide cargo liability coverage. They may offer contingent coverage, but that will only kick in if the motor carrier’s coverage isn’t adequate to cover the losses. Wise freight brokers carry some form of insurance, but it’s not mandated by law so not all do. They can in some cases (depending on your contract) be held liable if a shipment is lost, stolen or damaged, but the contract could require the manufacturer or shipper to carry cargo insurance. These are points you’ll want clarified if you’re thinking of partnering with a freight broker.
By contrast, motor carriers own the assets required to move the goods, as well as carry the liability insurance coverage mandated by law.
If a freight broker fails to pay a carrier for a shipment moved on behalf of your business, your company may be stuck holding the bill. That’s why it’s important if you are contracting with a freight broker to work with one that has a solid reputation.
What is a 3PL (Third-Party Logistics Provider)?
A 3PL has the same operating authority of a freight broker under FMCSA terms. However, they do move freight for companies.
The primary difference is that a Cleveland 3PL like ours utilizes a much broader range of tools, services and technology compared to a freight broker. They can be asset services (like ours, as we own our own truck fleet) or non-asset providers, but instead of just moving materials, they also provide logistics services – for freight, warehousing or both.
Logistics providers also tend to have the most up-to-date track-and-trace technology necessary for supply chain transparency.
On Time Delivery and Warehouse offers these services, plus the value of a Container Freight Station and Customs exam site for consolidation and de-consolidation of both import and export freight.
What is a Freight Forwarder?
A freight forwarder is an individual or entity that offers transportation of goods for a fee, and also assembles and consolidates distribution operations of shipments.
A freight forwarder is responsible to transport products from the place it is received to the point of destination and can utilize transportation of rail, motor carriers and water carriers overseen by either the FMCSA or the Surface Transportation Board.
They may be responsible for holding the primary liability insurance coverage to move your goods if they are moving international freight in-house.
The Value of 3PL and Freight Broker Services
So why would anyone need to contract with a freight broker or logistics provider? Why not just go direct to the motor carrier?
The answer comes down to service and capacity. Most businesses don’t have relationships with hundreds of motor carriers necessary to ensure their supply chain is cost-effective and streamlined.
Having a trusted Cleveland 3PL, freight broker or freight forwarder available to help you navigate can be invaluable.
What are the definitions of motor carrier, broker and freight forwarder authorities? Nov. 11, 2017, FMCSA
More Blog Entries:
Cleveland 3PL Can Lower Client Liability Risk, July 30, 2019, Cleveland 3PL Provider Blog
Whether on a highway, an ocean freight or a customer’s doorstep, one key advantage of working with a Cleveland 3PL (third-party logistics company) is reducing the risk of liability – on several fronts.
How? A dependable Cleveland 3PL streamlines supply chains by reducing bottlenecks, constantly updating intermodal deliveries and preparing for exigencies with solid contingency plans. In taking on these responsibilities, our insurance assumes coverage for some of the risks our clients would otherwise have to burden alone.
That said, shippers/manufacturers are urged to carefully review their own liability insurance plans with a qualified agent to ensure their coverage is sufficient, but not excessive. Cargo insurance (land, marine, general) is not required of shippers, but it’s something for which many opt.
Although we can’t advise you on insurance, here’s what we can say:
At On Time Delivery and Warehouse, our committed Cleveland 3PL team strives daily to always provide the very best logistics services to our clients while also keeping our rates AND terms-of-service, fair, unambiguous and transparent.
A recent analysis by commercial real estate and investment firm CBRE Group, Inc. revealed retail-to-warehouse conversions are soaring, in large part due to the way people shop. Big box stores are becoming less lucrative while e-commerce is booming. As this trend continues, Cleveland 3PL service providers at On Time Delivery & Warehouse urge companies to recognize there is a big difference between companies that solely provide public warehouse space and the extensive services you get with a third-party logistics firm.
The retail-to-warehouse place-trading involves a broad range of projects, including demolition of old malls and remodeling warehouse retail stores into distribution centers. CBRE also found that while demand for warehouse space overshot supply last year by nearly 30 million square feet. Industrial real estate availability fell to its lowest level since 2000, with only 7 percent up for grabs. Retail space, on the other hand, is much more prevalent. However, just because the space is there doesn’t mean it’s primed and move-in ready. Issues have included trouble with rezoning (which requires local government buy-in) and difficulty convincing other stakeholders like co-tenants to go along.
Companies in Cleveland looking to expand or outsource some of their warehousing services must understand that while public warehouse space-only services do offer some benefits, they’re far less than what you get teaming with Cleveland 3PL service providers.
As long-time Cleveland 3PL providers, the On Time Delivery & Warehouse team is trained to quickly spot any hint of a supply chain weakness so we can either address it fast or – better yet – avoid it altogether. That keeps our partners from losing profits, customers and investor faith.
A single supply chain weakness has the potential to stymie productivity, spike company costs and hamper a business’s ability to deliver quality.
In recent years, there have been numerous instances wherein a supply chain weakness forced a business to close its doors – temporarily or permanently – or curtailed its ability to offer key products. Worse, those failures made big headlines.
Sustainability has become a hot topic in Northeast Ohio supply chain management circles, especially as scientific projections on impacts of climate change become increasingly urgent. As long-time Cleveland 3PL providers integral to Midwest supply chains, On Time Delivery & Warehouse managers know there is much evidence to support the assertion that companies committed to greener, more sustainable supply chains help guard against numerous financial, reputational and legal supply chain risks.
A recent HSBC Navigator survey found that of 8,500 business leaders in 34 markets globally, one-third are making sustainability-related changes to their chain of supply in the next three years – specifically prioritizing more environmentally-friendly practices. This is better for the planet obviously, but that’s not the only reason. Our Cleveland 3PL supply chain experts have long known these benefits go both ways. Economic drivers for greener supply chains, according to the HSBC survey, include:
- Greater cost efficiency
- Improved revenues
- Better overall financial performance
Cleveland 3PL supply chain management teams recognize the additional cost for many businesses amid the U.S.-China trade war is potentially crippling, involving $250 billion in Chinese export tariffs and $110 billion on U.S. goods. The Section 301 remedy tariffs have been unrolled in phases this year, and more are scheduled for next year. The Section 232 tariffs on aluminum and steel have also hurt bottom lines globally.
Hopes are high an accord will soon be reached, but in the meantime, firms and industries reliant on Chinese manufacturing and parts (and there are many) should be mapping their game plans if they haven’t already. The aide of an experienced 3PL supply chain management company can help businesses navigate these challenges and curtail impact.
Whether the tariffs will have the desired economic policy impact remains to be seen, but it’s not impossible that even if this one ends, a new one won’t suddenly crop up. Tariffs are one of those adverse market forces outside our control for which companies need to prepare because of the dizzying blow to American manufacturers and shippers, jobs and consumer prices. As a long-time Cleveland 3PL supply chain management partner, On Time Delivery & Warehouse works to formulate strategic supply chain approaches – tailored to each client – to help minimize distribution and financial woes.
Warehousing bottlenecks are a source of time-consuming and costly delays that ultimately chip away at customer confidence. A once-in-a-while warehouse bottleneck might be manageable, but even an occasional bottleneck can signal larger, non-obvious systemic issues that are hurting your bottom line. If this or constant in-house warehousing bottleneck headaches sound familiar, it’s time to discuss these concerns with an knowledgeable Cleveland 3PL provider.
Outsourcing warehousing services to a third-party logistics firm is sometimes the smartest way to manage complex and/ or fluctuating operations long-term – and avoid warehousing bottlenecks.
No matter what size your business, reducing unnecessary supply chain costs can result in a significant savings – assuming you can accurately identify and efficiently address the weak links.
Anyone who works in Cleveland supply chain management service knows that all for-profit companies are going to incur a “cost to serve.” But is your company’s “cost to serve” reasonable? Can you lower it without risking a major blow to quality or customer satisfaction?
Supply Chain Loopholes Vary by Industry, Service, Location
The answer will depend a lot on the type of product or service you provide. For example, let’s say your Cleveland supply chain involves the packaging and delivery of building products to construction sites. Not only are you managing a complex schedule thanks to the heavy equipment and various contractors involved – your deliveries MUST be precise and on time. Certain materials like mixed cement can be totally wasted if there aren’t workers on site. If elements like weather are consistently a problem in one region, you may need to consider whether you can re-route around that area altogether. If you are in the grocery or restaurant industry, it will be critical that your deliverables be properly packaged, sometimes limited to one product-per-pallet and that delivery dates and times are accurate to the minute – otherwise the shipment could be unusable.
Understanding not just your industry but also your customer base is priority No. 1. You need to be able to serve their needs, but also make sure the cost of doing so is still sensible. One analysis in the International Journal of Production Economics found in supply chain cost reviews by 30 companies in 10 different industries, most were falling short when it came to the estimated standard supply chain cost compared to actual cost.
One of the best ways to cut your Cleveland supply chain costs is to work with a dedicated third-party logistics partner. On Time Delivery & Warehouse 3PL providers can help you better pinpoint what exactly in your chain of supply is causing you the biggest headaches and cost bleed-out. Despite wide variances between industries and companies, there are a few supply chain our third-party logistics professionals have seen consistently cause problems. If any of these issues sound familiar (or you’re having trouble identifying exactly which supply chain loophole is costing you most or what to do about it), a third-party supply chain management team can be an invaluable resource.
Some think of logistics and supply chain management as simply moving goods from one place to the next. In reality, it’s a complex and dynamic trillion-dollar industry, with outsourcing proven to be mission-critical for companies edging out competition.
Reliable supply chain management partners know it’s always been a challenging field, though it’s true lately many of us are facing down some tough realities. Those include higher rates, capacity shortages and now a pending trade war and import/ export uncertainties. This tightening of the market (especially in ground transportation) means those of us on the front lines need to be innovative now more than ever – while also holding true to the best practices and relationships that allowed us to ride out past tumult.
If you depend on Cleveland supply chain management, you may be interested in these surprising statistics offering insight into the industry – and where it’s headed.
Third-party logistics is more than just a contract. It’s a relationship. On Time Delivery & Warehouse 3PL partners trust us to perform materials management and product distribution functions, but for us, it goes beyond that. We represent an extension of our client to their clients. Many shippers need customized offerings with a broad range of capabilities – encompassing freight shipping, trucking, warehousing and distribution. We deliver that. Ultimately, though, it’s about forging a long-term, mutually-beneficial accord.
Finding the Best Cleveland 3PL Partner
Market research released by IBISWorld last month revealed there are nearly 19,000 third-party logistics providers in the U.S. – a figure expected to grow the next five years, given the uptick in consumer spending, industrial production and trade. Northeast Ohio and other areas around the Great Lakes are concentrated in 3PL providers because of the high volume of manufacturing, trade and other commercial activities.
That means shippers have an array of choices in third-party logistics options. Choosing the best for your needs means weighing a host of factors (i.e., expanse of valuable carrier networks, service areas, supply chain and freight costs, freight accounting, performance auditing, punctuality, scalability, financial strength, responsiveness, technological tools/ data-sharing, excellent industry references, corporate culture, etc.). However, evaluation of the third-party logistics relationship shouldn’t stop once you’ve signed a contract.