Freight Forwarder vs 3PL

Businesses often encounter the terms Freight Forwarder vs 3PL or Third-Party Logistics provider, when dealing with international shipping. 

The freight forwarding market is anticipated to grow significantly in the coming years. According to statista’s estimates, the market size was valued at $176 billion in 2024 and is projected to reach nearly $216 billion by 2029, indicating a substantial increase in demand for freight forwarding services. 

According to IBISWorld, the Third-Party Logistics (3PL) industry in the US has experienced steady growth over the past 5 years (2018 to 2023), with an average annual increase of 2.3%

While both play crucial roles in the supply chain, they serve distinct functions and offer different levels of service.

Freight Forwarder vs 3PL

What is a Freight Forwarder?

A freight forwarder is a company that acts as an intermediary between shippers and transportation carriers. They specialize in arranging and coordinating the transportation of goods from one location to another, often across international borders. 

Freight forwarders handle various aspects of the shipping process, including documentation, customs clearance, insurance, and tracking. 

What Does a Freight Forwarder Do?

Freight forwarders typically provide a wide range of services to assist and stream the shipping process. 

Freight forwarding services involve arranging transportation with carriers, such as airlines, shipping lines, and trucking companies, based on the shipper’s requirements, involving selecting the most suitable mode of transportation, negotiating rates and ensuring timely pickup and delivery. 

Freight forwarders handle the preparation of necessary shipping documents, including customs declarations, bills of lading, commercial invoices, and certificates of origin. They make sure that all documentation is accurate and complete to best avoid any delays and penalties. 

Freight forwarder services also assist with customs procedures, ensuring that shipments comply with import and export regulations. Freight forwarders have expertise in overcoming complex customs regulations and can help expedite the clearance process. 

They also arrange insurance coverage to protect shipments against loss or damage, taking the load off of shippers and mitigating financial risks. 

Freight forwarding providers offer real-time tracking information to monitor the progress of shipments and keep shippers updated on their status, enabling businesses to anticipate delivery times, address any potential issues, and communicate effectively with customers. 

Problem-solving is another addition to freight forwarders in which they are equipped to handle various shipping challenges, such as delays, customs issues, or damage to shipments, where they can act as intermediaries between shippers and carriers to resolve problems efficiently and minimize disruptions to the supply chain.

What is 3PL?

3PL shipping companies offer or provide a comprehensive range of logistics services to businesses. 

They offer a broader scope of services compared to freight forwarders, dealing with transportation, warehousing, inventory management, and value-added services. 

3PLs can act as strategic partners, optimizing the entire supply chain for their clients. 

Key Differences Between a Freight Forwarder vs 3PL

The main difference between 3PL and Freight forwarder lies in the scope of services they offer: 

Core Services

Freight forwarders primarily focus on arranging transportation and handling related documentation and processes. 

3PLs, on the other hand, provide a wider range of logistics services, including transportation, warehousing, inventory management, and value-added services. 

Level of Involvement

Typically, freight forwarders have a limited involvement in the shipper’s supply chain. 

3PLs, however, can take on a more strategic role, managing various aspects of the supply chain on behalf of their clients. 

3PLs often offer more customized solutions tailored to specific client needs, while freight forwarding  may provide a more standardized approach. 

How to Choose Between a Freight Forwarder & a 3PL

The choice between a freight forwarder and a 3PL depends on your specific shipping needs and business objectives. 

If you require a comprehensive range of logistics services, including warehousing, inventory management, and value-added services, a 3PL may be the better option. 

If you prefer to maintain a high level of control over your supply chain, a freight forwarder may be suitable. 

3PL logistics companies can often offer cost-effective solutions through economies of scale and process optimization. However, the specific pricing structures may vary. 

Assess the expertise and experience of both freight forwarders and 3PLs in your industry or region. Consider the ability of the provider to handle your business growth and increasing shipping volumes.