What is 3PL? – The Complete Guide to Third Party Logistics
Acronyms make the world go round. From LMAO to SOS, it seems like we’re constantly inundated by letters taking the place of words. The trucking industry is no different. We’ve learned about FTL and LTL in previous blog posts. Today, we’re going to tie a bow on our introductory trucking acronyms by teaching you all about 3PLs.
In this guide, you will discover:
- What Is a 3PL?
- Why Would You Use a 3PL?
- What Else Should You Know About 3PLS?
- The Main Takeaway (TLDR)?
What Is a 3PL?
3PL stands for third party logistics company. They’re businesses that help coordinate shipments with shippers and transportation companies. Imagine you’re a carpet company sending a bunch of rolls of carpet from Dalton, GA to Augusta, ME. A 3PL could help you find the best form of transportation for your load, and they’d help you set it up.
3PLs are also called freight brokers, because that’s basically what they do. They find trucks for shippers that need them, pay the trucking companies, and take a little markup for their troubles. Everyone wins.
Why Would You Use a 3PL?
- You don’t ship often.
- You don’t have a large fleet of trucks at your disposal.
- You need help moving more freight than normal.
These are the 3 main reasons 3PLs are really helpful. They have contacts with thousands of trucking companies nationwide. They have access to load boards that regular companies usually don’t. They typically offer other services aside from full truckload too – things like LTL, air freight, and even international logistics connections. Basically, when you use a 3PL, you’re using their connections and abilities to find empty trucks at reasonable prices.
What Else Should You Know About 3PLS?
3PLs exist because they’re able to mark up the cost of moving freight. For example, maybe that truck from Dalton to Augusta usually costs around $1500. The 3PL would quote you $1700, negotiate the cost of the truck with the shipping company, mark that up, and then charge you based on the original quote. So the 3PL might end up paying the trucker $1250, charge you the agreed upon $1700, and collect the $450 spread. Those are made up numbers, but that’s how the business works.
Technically, it’s usually cheaper to book trucks yourself, but that doesn’t mean it isn’t worth paying a 3PL some margin to take care of it for you. In addition to all the connections 3PLs have, they also vet their carriers to ensure that every shipment is insured. If you’re not doing the same due diligence, and you book a shipment with somebody without freight insurance, you could lose a lot of money if they get into a wreck and your throw pillows go up in smoke.
In other words, 3PLs provide peace of mind, they have tons of connections, and you can get a truck ready with a single phone call. 3PLs make things simpler and sometimes cheaper for businesses to ship stuff.
The Main Takeaway (TLDR)?
3PLs are brokers. If you have stuff that needs to be shipped, 3PLs have contacts to get it moved. 3PLs make spread between the cost of the carriers and what they charge you. That means it’s technically cheaper to find a truck yourself, but sometimes that’s not possible, not advisable, or just not worth the hassle. Usually 3PLs even help schedule pickups and deliveries. 3PLs are far from the worst way to spend your business’s money.
