Brick-and-mortar stores may be opening up again, but e-commerce sales continue to post steady year-over-year growth. Online sales were up 37 percent over 2019 for the third quarter, while online sellers expect to garner a much higher percentage of holiday peak sales in Q4 this year. This growth has largely been driven by COVID-19, but experts believe much of the market share gained by e-commerce will remain once the pandemic subsides.
For many e-commerce sellers, this rapid growth has been both a boon and a challenge. While increased sales have been a benefit for many e-commerce businesses, fulfilling higher volumes of consumer orders has strained the distribution capabilities of even the largest e-commerce sellers. Many e-commerce businesses have turned to logistics service providers for help managing higher order volumes.
For startups, online grocery sellers, and other businesses making their initial foray into logistics partnerships, determining the right type of logistics partner may be overwhelming. There are two primary types of service providers that arrange the movement of ground cargo: freight brokers and third-party logistics (3PL) providers.
What is a Freight Broker?
A freight broker handles the responsibility of booking trucking and parcel carriers to move freight. As an intermediary between shippers and carriers, the freight broker ensures that both parties live up to their end of the contracted agreement. For example, freight brokers will ensure that carriers have appropriate insurance and adhere to Federal Motor Carrier Safety Administration (FMCSA) safety guidelines, and also makes sure the carrier gets paid on time. The freight broker handles all interactions between parties, including billing and payment, creating and handling documentation, and mediating disputes.
Most freight brokers are non-asset based, relying instead on their network of carrier partners to move shipments for their customers. While the non-asset model requires sacrificing direct control over cargo movement, it does significantly reduce overhead costs. Brokers can then pass these savings on to shippers.
For businesses seeking to streamline shipping costs or expand transportation capacity, a freight broker may be the right choice. If your current shipping setup works pretty well but is experiencing strain, it’s likely a freight broker can help to relieve that pressure and keep your goods moving without making too many drastic changes to your operation.
What is a 3PL?
Some people in the industry will use the terms “freight broker” and “3PL” interchangeably, but that isn’t accurate. A freight broker is very focused on managing the shipment of goods and various ancillary tasks for those shipments. While most 3PLs offer freight brokerage as a service, not all freight brokers are 3PLs. A 3PL tends to offer a much broader service portfolio, often specializing in specific industries or areas.
The 3PL brings more value to the table by offering a slew of value-added services that form a well-rounded total logistics solution for the customer. Many growing businesses choose to outsource their entire logistics operation to a 3PL rather than making large investments in new real estate, technologies, and fulfillment capabilities. Beyond simple freight brokerage, a 3PL gains a broader view of the organization’s total supply chain. The 3PL typically oversees numerous aspects of the shipper’s supply chain, such as warehousing, multimodal transport, logistics technology, and much more. 3PL services can often be used piecemeal and scaled up later, which is ideal for accommodating growing businesses.
Finding a 3PL partner is most likely the optimal choice for booming e-commerce businesses who have recently discovered the limitations of their current operation. Leaving distribution and fulfillment in the hands of a logistics provider ultimately allows e-commerce businesses to focus on their own revenue-generating core competencies, such as sales, marketing, and customer retention.
About Phoenix Logistics
Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s need.