Logistics Blog Post
July 15, 2015
What is a freight broker?
3PL is an acronym for Third Party Logistics. It is also commonly known as freight broker or transportation broker. A 3PL is a person or company that arranges the shipment of cargo between the owner of the cargo and the transportation company who will be handling the cargo. In other words, freight brokers are the middle man.
Why work with a freight broker?
Some believe that using a freight broker is cost effective. Since most freight brokers work with a wide range of vendors, they are able to compare prices, giving them the average going rate for a lane and also giving them bigger discounts due to volume. However, as a middle man, freight brokers must include a profit margin on their rates, in most cases it is actually cheaper to deal with the transportation company directly. This is why a growing trend with brokers is to step outside of brokerage and enter the world of having a fleet of their own. However, such a step is usually only initiated when the brokerage is doing well enough to handle its own shipments at a bigger profit. Since in most cases a shipper saves money on their freight costs by dealing directly with transportation companies, why is it that some companies prefer brokers?
Convenience and Expertise. Instead of calling 30 different transportation companies then receiving and comparing 30 different rates, a shipper would only need to contact their freight broker, allowing the shipper to focus on more important details. Also, it can be a hassle dealing with transportation companies as not all of them are of quality. Some have a high risk rate due to frequent truck breakdowns, late deliveries, and poor drivers. Some freight brokers have access to databases that allow them to see a companies rating just as shippers can purchase databases that allow them to see a freight brokers rating. Comparing freight costs is very time consuming and requires a certain level of skill as well. Good freight brokers are usually very good at negotiating. Since they work with various freight companies and they are familiar with how much certain lanes should cost, they use this knowledge to their advantage making sure they receive the best price on lanes.
Should I work with a freight broker or go directly to the transportation company?
Weigh the options of whether to work with a freight broker or a transportation company remembering that each has its pros and cons. Another option is to simply work with a freight broker that owns its own equipment. Vann International is proud to introduce our transportation division that offers in house trucks for full truckloads on the east coast. This allows us to offer the best of both worlds, cheap rates with the expertise and knowledge of the average rates for lanes in the U.S. Simply contact us for freight quotes and we will be more than happy to assist you in your freight needs