Mythbusting: How 3PLs deliver better logistics
3 Common Myths About Asset-Based vs. Non-Asset-Based Freight Companies
It’s easy to fall into the trap of assuming that a third-party logistics provider (3PL) that doesn’t own the shipping assets (trucks, etc.) won’t be able to provide efficient, cost-effective service. But to think this is a mistake. At C&D Logistics, we prove this every day, by delivering superior flexibility, efficiency and value to enhance our customers’ logistics performance.
Below we explore three of the more common myths about non-asset-based 3PLs and how they stack up against asset-based 3PLs.
Myth #1: Non-asset-based 3PLs are not cost effective
Some companies believe that a non-asset-based 3PL won’t be competitive when it comes to price. They think that if you remove the “middle man” from the transaction the cost will come down. Although this seems logical, it’s not accurate. Why? Because shipping is a volume game. A 3PL’s large daily volume in a given lane, whether it’s within a specific market or with a group of carriers, allows them to negotiate much better pricing. If you ship one box and we ship 50, who’s going to get the better deal?
But that’s not all. Just as important is the fact that 3PL companies often re-position assets, resulting in less empty miles and more profit retention for their asset-based partners by filling backhauls. No carrier ever wants to run a truck empty, so backhauls are usually done at a discounted rate, which allows us to pass on cost savings to the shipper.
Verdict: Quality 3PLs are able to leverage large volumes and backhauls to decrease their cost, which allows them to pass on cost savings to their customers.
Myth #2: Non-asset-based 3PLs don’t have direct access to trucks
Using a freight company that has its own assets will give you more control, better access to trucks, flexibility on shipping dates, right? Not really. A good 3PL will give you access to thousands of trucks through various carrier relationships. We may not own the trucks, but if we can access thousands of them, you can bet you’ll have more flexibility and availability than if you work with an asset-based carrier who has 50 or 100 trucks. And by casting their net much wider, 3PLs can also meet requests for a wider range of lanes.
Verdict: Legitimate and experienced 3PLs can give customers quick access to a very large pool of qualified carriers, increasing their flexibility, and in most cases saving them money.
Myth #3: Non-asset-based 3PLs offer less control than asset-based companies
The thinking goes: If you don’t own the trucks, you can’t have control over performance. Just like with our first two myths, a closer look tells us otherwise. Most good 3PLs require their carriers to comply with very strict policies on safety, regulations and performance. For example, experienced freight brokers require carriers to meet the highest safety standards as well as ensuring they all have an active carrier authority and are properly insured. A good 3PL will also closely monitor their carriers’ service performance, including on-time pickup, line haul issues, on-time delivery, and freight claims. If service dips below a certain level, carriers will be deemed NO LOAD, which means they are no longer used.
Verdict: A 3PL has a great deal of control over the quality and performance of the asset-based partners it uses. In fact, because they can select which carriers they use, they are able to ensure they work only with the best in the business.