What is the difference between freight forwarding and 3PL?

Freight forwarders and 3PL service providers both play important roles in supply chain management, but they have significant differences in scope, services, customers, responsibilities, risks, and cost structures. Freight forwarders typically focus on the transportation and logistics procedures of goods, while 3PL provides a wider range of supply chain solutions, including warehousing, transportation, order processing, and supply chain management. The choice of service depends on the customer's needs and business model, as well as their expectations for supply chain management. Regardless of which service you choose, you need to carefully consider its advantages and limitations to ensure that you meet the needs of the enterprise and improve the efficiency of the supply chain.
1. Definition
Freight forwarder
A freight forwarder is an intermediary who typically represents the owner or shipper of the goods and the transportation provider of the goods (such as a freight company, airline, or freight shipping company) for communication and coordination. Freight forwarders are usually responsible for handling the logistics and transportation procedures of goods, including loading and unloading, transportation, insurance, and customs clearance. They usually charge in the form of commissions or service fees.
3PL
Third Party Logistics (3PL) service provider is a company that specializes in providing comprehensive logistics and supply chain solutions. They undertake multiple links in logistics management, including warehousing, transportation, distribution, order processing, inventory management, and supply chain optimization of goods. 3PL is usually a comprehensive logistics outsourcing model where customers outsource logistics and supply chain management functions to 3PL companies in order to focus on their core business.
2. Scope and Services
Freight forwarder
Freight forwarders usually focus on the transportation and logistics procedures of goods, and their services mainly include the following aspects:
Transportation arrangements: Freight forwarders are responsible for selecting suitable transportation providers and coordinating transportation arrangements, including shipping schedules, flights, and truck transportation.
Goods tracking: They track the transportation of goods to ensure timely delivery to their destination.
Customs declaration and clearance: Freight forwarders assist customers in handling customs declaration and clearance procedures to ensure that goods enter the destination country legally.
Insurance: They can assist customers in purchasing cargo transportation insurance to ensure the safety of the goods during transportation.
3PL
3PL service providers have a wider range of services, typically including the following:
Warehousing and distribution: They provide warehousing facilities, manage inventory, execute order processing and distribution functions.
Transportation management: They coordinate transportation throughout the entire supply chain, including the transportation, tracking, and optimization of goods.
Supply chain management: They improve efficiency and reduce costs by optimizing supply chain processes, including supply chain planning, inventory optimization, and demand management.
Technical support: They provide logistics management systems and technical tools for customers to track and manage supply chain activities in real-time.
3. Target customers
Freight forwarder
The main customers of freight forwarders are usually shippers or shippers, who need assistance in transporting goods from one location to another. Freight forwarders can represent various types of shippers, including manufacturers, wholesalers, and retailers.
3PL
3PL service providers have a wider range of customers who can provide services to various types of companies, including manufacturers, retailers, e-commerce companies, and other logistics service providers. They typically collaborate with customers who require comprehensive supply chain solutions to improve efficiency and reduce costs.
4. Responsibilities and Risks
Freight forwarder
Freight forwarders are usually responsible for handling the logistics procedures of goods, but their responsibilities are limited. They usually do not assume responsibility for the warehousing and inventory management of goods, nor are they responsible for the overall management of the supply chain. The risks of freight forwarding are mainly related to transportation issues, such as loss, damage, or delay of goods.
3PL
3PL service providers typically take on more responsibilities, including warehousing and inventory management, order processing, and supply chain optimization. They need to manage customer inventory, ensure timely order processing, and reduce risks at all stages of the supply chain. Therefore, they may need to bear more risks, including inventory losses and supply chain delays.
5. Cost Structure
Freight forwarder
Freight forwarders usually charge fees in the form of commissions or service fees, which are usually related to the quantity and value of goods transported. Their cost structure is relatively simple, usually based on the cost of each transportation transaction.
3PL
The cost structure of 3PL service providers is usually more complex as they provide a variety of services, including warehousing, transportation, order processing, and supply chain management. Their fees are usually determined based on the type, complexity, and scale of the service.