Third-party logistics provider transport companies, or 3PLs, are experts in helping businesses reduce their transportation costs, increase efficiency, and gain more insight into their overall transportation needs. However, that doesn’t mean that every 3PL does business in the same way!
There are several different business models that logistics companies might utilize, and it’s useful for you to know the difference. It will help you sort through the various third-party logistics provider transport companies out there and find those whose practices will best align with your own needs.
1 – The Broker Model
This is the most common way 3PLs operate, and the one most businesses would likely be familiar with. Under the broker model, the 3PL purchases shipment space in bulk from transportation companies, then resells that space at a markup to their own clients.
Does that mean it’s cheaper to do it yourself? Not normally. A large 3PL can afford to buy huge amounts of cargo space at once, leveraging economies of scale to drastically lower their costs. Even with a markup, they can offer the space for less than most individual companies could buy it for directly.
2 – Gainsharing
In the gainsharing model, the 3PL works directly with their customer to cut costs. In effect, they say, “You’re currently paying $100 per unit to ship; we can do it for $80. So, we’ll tack on a $10 fee for our services and everyone wins.” They also often form deals with their customers where the customer is only charged that fee if the 3PL successfully delivers lower costs.
The gainsharing model can potentially result in huge savings, but there is also incentive for the 3PL to cut corners. You’ll need a reliable partner for this to be a good option.
3 – Commission Model
In the commission model, 3PLs are “working for” the shipping companies, and acting as go-betweens connecting them to buyers. From there, it works like any standard commission-based system. The commission model gives you a lot of transparency in the process and often results in the best technological solutions since the 3PL can make use of the shipping companies’ own tech in many cases.
Amstan Logistics Can Revolutionize Your Shipping
If cost savings can be found in your logistics and supply chain management, Amstan Logistics will find them and you will win for it. We love to be part of the solution for better business. Contact us for a consultation!