In 2022 alone, business logistics costs grew by nearly 20%, representing 9.1% of America’s gross domestic product. Companies are eager to find a third-party logistics (3PL) provider that balances control with financial efficiency. So which is right for your business: an asset-based 3PL provider or a non-asset-based 3PL provider?
Not sure of the difference? The following guide will help you understand the strengths and weaknesses of both business models so you can make a decision that aligns with your company’s goals.
Asset-Based 3PL Providers
An asset-based 3PL provider is a company that owns and operates its own physical assets. These can include:
- Trucks
- Warehouses
- Distribution centers
- Equipment and software
As a result, asset-based companies are literally better equipped to offer a range of services, from transportation to fulfillment to value-added services. And because the company handles all these operations in-house, business owners have better control over their logistics operations.
The Benefits of Asset-Based 3PL Companies
Why might you consider an asset-based company? These providers offer benefits such as:
- Total control over your logistics operations
- A wide range of service options
- Greater control over coverage and costs
- Consistency and reliability since the company has control over assets
Basically, an asset-based company cuts out the middlemen. The 3PL provider can adjust its operations to fit your unique business needs, giving you greater reliability and more flexibility over your supply chain.
The Disadvantages of Asset-Based 3PL Companies
That said, asset-based 3PL providers do have some drawbacks. For instance, they often come with:
- Higher fixed costs
- Less scalability
- Less geographic coverage
Since an asset-based 3PL provider is relying on its own equipment, you’ll be limited to the company’s geographic distribution network. That can make it challenging for your business to scale. In addition, e-commerce merchants may find it especially difficult to distribute goods to online shoppers using a localized supply chain network.
Non-Asset-Based 3PL Providers
If an asset-based provider uses its own equipment, a non-asset-based 3PL provider does the complete opposite. Rather than owning trucks and warehouses, non-asset-based providers broker arrangements between various other logistics providers.
Non-asset 3PL providers can provide many of the same services as an asset-based company, but their services typically extend to:
- Freight forwarding
- Brokerage
- Consulting
- Management
Because the company partners with a diverse network of logistics providers, there’s also built-in flexibility and scalability.
The Advantages of Non-Asset-Based 3PL Providers
Businesses love non-asset-based providers because they:
- Offer flexible costs
- Provide greater geographic coverage
- Create a shortcut to innovation and customization
- Allow your business to scale
When partnering with a non-asset-based provider, you no longer need to rely on the resources of a single company. Instead, you’ll tap into the best solutions available on the market.
That’s especially great news for growing businesses. It’s also helpful for e-commerce operations in need of a logistics solution that lets them reach customers across a wider geographic area.
The Disadvantages of a Non-Asset-Based 3PL Company
Despite its many advantages, non-asset-based companies also offer drawbacks, including the following:
- Less control over operations and costs
- Quality of services depends on subcontractors
- Companies must work harder to ensure compliance across the network
However, none of these potential drawbacks is insurmountable. The best non-asset-based companies can provide oversight to their subcontractors and network to ensure compliance and reliability.
Choosing Between Asset-Based and Non-Asset-Based 3PL Providers
Each of these service models offers strengths and weaknesses. Which is right for your business? It may help to evaluate your exact needs and goals. For example, if you say “yes” to any of the following, it’s worth investing in a non-asset-based 3PL provider:
- Do I need to scale my business across multiple states?
- Do I need to reach customers/clients across geographic borders?
- Am I looking for the latest innovations in supply chain support?
- Do I prefer flexible costs?
That said, it’s vital to find a 3PL provider that offers reliability and transparency every step of the way. Having this means you can be confident in the quality of your logistics process.
Find a Trusted Partner
Your customers depend on you. That’s why you need a logistics partner you can depend on. By assessing your needs, you’ll be able to determine the type of support that works for your business and how best it serves your valued customers.
