What is the difference between logistics and freight forwarding?
Many shippers wonder whether a freight forwarder is the same as a logistics company, such as a third-party logistics provider (3PL). Although both terms denote crucial players in the shipping sector, there are key differences between logistics and freight forwarding companies that you should be aware of if you plan on shipping cargo anywhere.
Understanding the distinction will help eliminate any possibilities for confusion when communicating with industry professionals about your shipments. Continue reading to learn the differences between logistics and freight forwarding.
- What is a 3PL logistics company?
- What is a freight forwarding company?
- 3PL advantages/disadvantages
- Freight forwarder advantages/disadvantages
- Differences between logistics and freight forwarding
- Logistics vs freight forwarders – how to choose?
What is a logistics company (3PL)?
Logistics companies are businesses that offer logistics outsourcing support. This usually includes warehouse activities such as storage, supply chain management, picking, packing, and fulfilling orders. Essentially, logistics companies help with transport of the goods and other activities needed to fulfil the entire supply chain.
Besides organising transport, logistics companies also offer a range of supplementary services, including IT systems integration, inventory management, reporting, reverse logistics and more.
Businesses can save considerable time and resources by delegating their logistics operations to 3PLs since it allows them to focus on their own industry and priorities without the need to hire and train in-house logistics experts.
While most 3PLs can provide “complete” logistics services, these can be scaled and customised according to the needs of the customer.
Read more about:
- Tailored logistics solutions
- Warehousing for businesses
- Shipping and distribution services
- Pallet and cargo warehousing
What is a freight forwarding company?
A freight forwarding company coordinates the transport of shipments from one location to another, using one or more carriers and shipping methods. For example, for an intercontinental delivery, a freight forwarder may arrange for products to be moved from a factory to a port by truck, to be transported by ship to the destination port, and then moved by another vehicle to the recipient.
Due to the operational complexities involved, freight forwarding companies act as intermediaries between shippers and international logistics providers. They will often be able to negotiate special rates with shipping lines and carriers, which individual shippers would not be in a position to do because they don’t have the network and industry connections.
When goods are in transit, freight forwarders usually take care of almost all essential paperwork, including customs documentation, bill of lading, letter of invoice, import/export declarations, and insurance forms. They also provide additional services such as warehousing. These advantages are the reason why many businesses rely on them for international freight shipping.
Choose the best freight forwarders here.
Is freight forwarding the same as logistics?
Freight forwarding as an activity is a sector of logistics, which also includes other areas.
When it comes to the difference between the types of companies, freight forwarders may seem the same as logistics companies, since they collaborate with each other, but they are not synonyms.
They both have a common goal of transporting goods, but it is important to understand the differences between the roles of logistics and freight forwarding companies in the shipping industry. Knowing the difference between logistics and freight forwarding can be the decisive factor between good and bad decisions.
Let’s now have a look at the pros and cons of both companies.
Freight forwarding vs 3PL: pros and cons
Logistics company advantages
- Outsourcing to 3PLs can be more cost-effective than in-house logistics management
- Logistics company platforms offer real-time tracking, API integration and more
- 3PLs provide services such as warehousing and inventory management
Logistics company disadvantages
- The shipper loses some control over the logistics process, which can cause issues
- Some 3PLs may not be able to provide dedicated support since they handle many orders
- Not always suitable for highly-regulated industries or very specific needs (e.g. refrigerated delivery)
Freight forwarding vs 3PL: pros and cons
Freight forwarding advantages
- They can arrange intermodal shipping easily thanks to their wide logistics network
- Freight forwarders normally handle customs and other shipping documents
- They facilitate correct labelling to ensure successful delivery
Freight forwarding disadvantages
- Freight forwarders may charge inflated rates for their services
- You may still need logistics support for other parts of your supply chain operations that freight forwarders do not cover
- The freight industry is not regulated in some parts of the world, which increases risk
- International shipping documents
- Freight customs procedures
- Freight transport insurance
- How to track freight shipments
So, what is the difference between logistics and freight forwarding companies?
The main difference between logistics (3PL) and freight forwarders is that 3PLs manage all aspects of logistics, while freight forwarders are primarily concerned with the actual transport.
Depending on your particular needs, a logistics company might be a better choice than a freight forwarder or vice versa. You will need to consider how the difference between logistics and freight forwarders will be relevant to your business.
Read more comparisons:
- Difference between cargo vs freight
- Difference between carriers vs couriers
- Difference between carriers vs freight forwarders
- Difference between freight forwarders vs freight brokers
Logistics providers vs freight forwarders: How to choose
As we have seen, freight forwarding often seems to be the same as logistics, but this is not quite the case. Logistics is a term that refers to not just the transport of goods but also warehousing, distribution, and many other activities. When you are talking about freight forwarding, you are automatically referring to just one portion of those activities – the ones that refer to the transport of goods from place A to B. The freight forwarder is the company that you would hire to organise that transport.
When it comes to choosing between logistics vs freight forwarding providers, it is important to note both companies are specialised in shipping, so you will need to sum up their differences and see how one or the other could benefit your business.
Here at Eurosender, we work with renowned logistics and shipping companies around the world. We offer a range of freight services and can create tailored solutions to serve even the most complex shipping needs.
Interested in learning more about pallet and freight shipping? Check all our articles about pallet deliveries.