Freight Brokers vs. Direct-to-Carrier vs. Managed Transportation: What Should Shippers Use?

As your business grows, shipping and logistics become a lot more complicated. No matter the size of your company, choosing the right process for handling your day-to-day supply chain operations makes a huge difference in the efficiency of the way your products move. With so many ways to move any given shipment, it can be difficult to understand what is the best fit for your business.

Knowing the difference between each service can lead you to make better decisions, improve efficiency, lower transportation costs, and create an overall better experience for both your customers and employees. In this article, we will break down each option and help you figure out which is best for your company’s needs. 

Freight Brokers, Freight Brokerages, or Brokers 

A freight broker acts as the middleman between a shipper that needs to move freight and a carrier that can physically move it. Brokers don’t own trucks or warehouses. Instead, they tap into a carrier network in which they source capacity and negotiate rates on a load-by-load basis. Some brokers boast they have hundreds of thousands of carriers at their disposal, which can mean getting a really competitive rate.

Pros of working with Freight Brokers:

• If you have a lot of variability in your freight in terms of volume and lanes.
• If you have the occasional spot shipment.
• If you want to try and get the cheapest price possible and play the spot market.
• If you have a sudden, unexpected spike in demand. 

However, relying on brokers as your only source of over-the-road transportation can have trade-offs.

Cons of working with Freight Brokers:

• Because brokers add a margin to carrier rates, you’re typically paying a markup on every shipment (and you oftentimes don’t know what that markup is).
• You may miss out on building direct, long-term relationships with carriers. 
• With cargo theft becoming more prominent, you likely won’t know the carrier the broker is using.
• Most importantly, most brokers keep your shipping data inside their own systems, leaving you with little to no visibility on your shipments, long-term spending patterns, and carrier performance.

Direct to Carrier

Another option is to select a national carrier or a few regional carriers to work with to cover your shipments. This way you build direct relationships with the carrier, you aren’t paying any additional middleman or markup.

Pros of working directly with asset-based carriers:

• If you have consistent freight lanes and needs that can be serviced by a few carriers.
• If you are OK aggregating spend across a few carriers in order to get better rates.
• If you want to build direct, long-term relationships with asset-based carriers.
• If you don’t mind going directly to carrier portals to check on tracking and shipment statuses.

Cons of working directly with asset-based carriers:

• If you are smaller or midmarket, you may not have the buying power or get the attention from a national carrier. 
• If you don’t want to pay several invoices each week or don’t have the accounting staff to manage that along with auditing invoices. 
• If you have a lot of different freight types like parcel, flatbed, reefer, or LTL and want a carrier to be able to support all those modes.

The 3PL Provider or a Managed Transportation Provider

A Third-Party Logistics (3PL) or a Managed Transportation Provider takes over larger segments of your supply chain. In addition to handling the movement of freight, a 3PL can sometimes handle warehousing, inventory management, and order fulfillment. 

Pros of working with a 3PL or Managed Transportation provider: 

• If you don’t have the time and dedicated logistics team to manage your transportation internally. 
• If you potentially want a provider to help with other aspects of your supply chain, like warehousing, most 3PLs can support.
• If you want to pay a single provider no matter how many carriers you use. 
• If you want a dedicated account manager or point person to work with, most 3PLs provide this.

Cons of working with a 3PL or Managed Transportation Provider

• 3PL services can have management fees and long-term contracts. When you outsource entirely to a 3PL, they typically will recommend carriers to use, so you can lose some control over the carriers being utilized vs. if you go direct to the carrier.
• Oftentimes 3PLs are using off the shelf systems for their TMS (many 3PLs will use Infios MercuryGate and other platforms). The 3PL is often marking up the license or making it seem like it is their own technology.  

A note about Transportation Management Systems (TMS)

A TMS is a software platform designed to help your team plan, execute, and optimize the movement of goods. A TMS puts your team in the driver’s seat, giving you the ability to manage contracts, look at rates side by side, and track performance by carrier. But not all TMS systems are the same, and as mentioned above, many 3PLs or Managed Transportation Providers will whitelabel a TMS as their own, when it is a product they are licensing and reselling. 

TMS systems have a number of benefits including:

• Carrier Connectivity via EDI or API to have a single spot to manage all your activity.
• Ability to rate shop and compare rates across several carriers.
• Spot quote support for any ad hoc shipments where there isn’t a contracted lane.

At FreightWise, our model most closely aligns with a 3PL or Managed Transportation Provider, but the difference is all of our solutions are built on our own homegrown TMS technology, designed to give you visibility and control. Our solutions were built for SMB and midmarket shippers, so we know the levers to pull to help ensure you get the best rate from LTL, truckload, and parcel carriers. 

With FreightWise, you manage all of your shipping modes, including Less-Than-Truckload (LTL), Truckload, and Parcel, inside a single intuitive platform. You connect directly to your carrier network, run real-time rate comparisons, automate load planning, and manage financial audits.

If your team wants the control of a TMS but lacks the bandwidth for daily logistics administration, FreightWise offers Managed Transportation services that pair technology with our in-house experts to handle procurement, auditing, and settlement, consistently saving customers on average 17% per year.

Take Control of Your Supply Chain

Choosing the right logistics strategy is a big decision. It depends on how much control and visibility your team needs to grow efficiently. When you don’t have visibility into your shipping operations, it’s harder to control costs, track performance, and build strong carrier relationships. A TMS gives your team the tools to make informed decisions, improve efficiency, and better manage transportation costs.

Eager to see how centralized shipping technology can transform your supply chain? Contact FreightWise today to schedule a demo or to explore our Managed Transportation services.