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Ask Us Anything: What Is a 3PL and Other Common Questions

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Posted On July 26, 2021

When you work in an often behind-the-scenes industry like supply chains and transportation logistics, you get a lot of questions. What in the world is a 3PL? What do you even do? What’s the craziest thing you’ve ever shipped? Will the country run out of toilet paper again?

While we can’t answer that last one (we can’t predict the future) we can answer some common questions we get about working in the shipping industry and partnering with a logistics provider. And if you have any remaining questions, let us know!

What is a 3PL?

Basically, it depends on who you ask. The term 3PL, or third-party logistics partner, can mean different things to different people. At its core, a third-party logistics partner is just that—an outside company that helps coordinate the logistics between shippers and carriers. Some 3PLs stop there, while others offer more services and act as a consultant for their clients.

The best 3PLs are industry experts, and they work to figure out what is best for their clients, finding solutions to their clients’ challenges. Other value-added services, like transportation technology, can also be part of working with a 3PL.

Aren’t all 3PLs just brokers, buying and selling truck space?

The key part of that question is the word “all.” For some logistics partners, yes—their main goal is to buy and sell truck space to make a profit. But not all 3PLs are created equal.

Flat World was created to address a need in the marketplace. Because carriers are companies that need to look out for their own bottom line, shippers sometimes need guidance and support to find the best solutions. Working directly with a carrier might seem easier and less costly, but the carrier will likely recommend the best solutions for the carrier, and not the shipper.

For example, an LTL carrier might try to get 100% of a company’s shipments, which is fine. But that might not be the best solution for the shipper. Perhaps using that carrier for 60% of the shipments is the most cost-effective, while the remaining 40% will be better sent via another carrier. A carrier-agnostic, independent third-party logistics partner will give you an analysis of your specific needs and suggest the optimum solutions.

The best transportation logistics partners act on behalf of the client, working to provide the best options to shippers. And with a transportation management system like Pipeline, shippers can easily review those options and choose what works best for them.

Why are you called Flat World? Do you believe the world is flat?

No—we don’t believe the world is actually flat. We help companies transport goods around the globe every day, so we’re well aware of the Earth’s geography.

The name Flat World comes from a book by Thomas Friedman, titled The World Is Flat: A Brief History of the 21st Century. The book covers how global trade, technology and the growth of markets around the world have leveled the playing field and made business more competitive. That level playing field, Friedman wrote, is like flattening the world into a place where all players have an equal opportunity. Flat World Global Solutions is committed to helping companies build on that opportunity.

Why is everything so slow these days, with some items still unavailable?

In short, the pandemic.

Early shutdowns caused by the pandemic led to backlogs across numerous supply chains, and labor shortages throughout the pandemic (and still occurring today) have only added to the issue. Yes, the country has stopped hoarding toilet paper and can now find it much more easily on store shelves, but whether consumers are acutely aware of it or not, supply chains and transportation companies are still feeling the impacts of the pandemic deeply.

Flat World has been working with our partners to help them prepare for supply chain shortages, backlogs and the unexpected, during the pandemic and beyond.

If we work with a logistics partner, will we be forced to use lower-quality carriers to save money?

You might notice a common theme here, which is: it depends on the logistics partner.

Some third-party logistics coordinators might work this way, looking to cut costs on their clients’ shipping as the first priority. Flat World also considers cost, too, of course. However, we understand that cost is just one aspect of choosing the best carrier and shipping mode, and we work to present numerous options to our clients. If we’re working with a client and uncover an opportunity to switch to a lower-cost carrier without sacrificing time or quality, we’ll bring it to the client’s attention—but the decision remains theirs.

Suggesting replacing carriers with lower-cost (and lower-quality) carriers isn’t a long-term solution for our partners. And what’s not in our clients’ best interest isn’t in ours—so that’s not a strategy we suggest to clients.

Why do we need to use multiple carriers?

In shipping logistics and supply chains, it’s always a good idea to prepare for the unexpected—like the recent FedEx Freight announcement that left more than 1,000 companies scrambling to find shipping alternatives.

But working with multiple carriers can also be a smart strategy in the most normal of situations. For companies serving customers nationwide or internationally, just one carrier likely won’t be able to provide ideal service to all of them. Just like third-party logistics partners, not all carriers are created equal, and every carrier has its own strengths and weaknesses. Some carriers might not deliver to certain areas or be better at handling different types of goods than others.

Working with a mix of carriers allows shippers to execute outbound shipping at a level that’s more beneficial for their unique needs.

Is there an advantage to allowing carriers to price on multiple rate bases?

A rate base is a complex system created by individual carriers. It might seem like a good idea to put them into all one spreadsheet, for example, to compare. But carriers are extremely proficient at understanding their own operating costs, and therefore the prices they charge to their customers.

When shippers try to streamline those rate bases, carriers are less likely to feel confident in their estimates and hedge their bets, leading to higher rates. It’s like playing on a home field versus a field you’ve never been to. The carrier won’t be as knowledgeable about the lanes and will be concerned with losing money in a foreign rate base.

Here’s where transportation technology helps shippers make the best choices. Flat World’s technology pulls all of the various carrier rates into one interface, allowing the carrier to continue to operate inside its comfort zone, and making it easier for our clients to find the best option.

What is the value of rate shopping for parcel and LTL shipments?

Traditionally, parcel shipments had weight-based pricing, while less-than-truckload shipments used class-based pricing. However, in recent years, both have moved toward density-based pricing, which measures the size of the shipment as well as the weight.

Imagine a pallet that’s 48x40x56 inches. The carrier would use its formula to determine that the shipment should be judged to weigh 300 pounds—even though the actual weight of the pallet is only 149 pounds. But if the shipper has assumed that all shipments under 150 pounds should be shipped as parcel and doesn’t realize that the carrier will charge it as 300 pounds because of density, the price will be much higher.

Technology helps yet again in these situations. You should be able to input the dimensions and weight of a shipment to be able to easily and quickly determine the best shipping mode, taking out the guesswork (and room for error).

If you have more questions about working with a logistics partner or improving your supply chain, contact us! We’d love to give you an audit of your current shipping processes and make suggestions on how you can increase efficiency, save on costs and improve your customer experience.