When your supply chain focuses on efficient processes, products reach their destination ahead of schedule while workers are able to cut costs spent on transportation and warehouse overhead. One area where you may find opportunities to increase efficiency involves using transport services. Shipping companies and 3PLs often provide comprehensive services to fill any gaps in your supply chain, while offering logistical solutions to cut down on lost profits. Understanding how transport services work allows you to select the right shipper for the job. Most shippers fall into two distinct categories: asset-based carriers and non-asset-based carriers called brokerages. While both types of services offer transportation solutions, how they operate differs greatly, which may impact your operations.
ASSET-BASED CARRIER VS. BROKER CARRIER
When referring to asset-based and non-asset-based carriers, these terms describe the type of equipment, vehicles, and other physical tools that are owned by the company. It helps to clarify the capabilities the shipping company has available to assist customers. More on this below.
WHAT IS AN ASSET-BASED CARRIER?
An asset-based carrier has its own equipment, trucks, and other tools. Many shippers in this category may also refer to themselves as owner-operators. They do not need to rent equipment or vehicles to ship or store products that will be transported along the supply chain.
An asset-based carrier may provide a range of transportation and warehouse services to customers based on the size and scope of their operations. It may also offer warehousing and distribution services.
A primary advantage to an asset-based carrier is that customers only work with one specific company for the entire logistical process. They understand that their shipment will not be given to any other carriers that may mishandle it. Also, since they own all their equipment, the carriers may help lower overhead costs because they won’t have to rent equipment from other companies.
WHAT IS A NON-ASSET-BASED CARRIER?
A non-asset-based carrier, or a brokerage, does not own its equipment, trucks, or other tools. Instead, it forms strong partnerships with carriers across the country and globally. Then, the broker advertises its partner carrier network to customers. Think of a non-asset-based carrier as a middleman between customers and transportation companies. A broker often provides services that are more customizable to the customer, since it has access to such a large and varied network of carriers.
When it comes to the advantages of a non-asset-based carrier, the top one is flexibility. Whether a customer requires only drayage services, transloading, or expedited freight delivery, the broker may tap into the partner carrier network to find the transport companies that are most capable of completing the job. The broker also can tap into this vast network for time-critical or emergency shipments that pop up at the last minute, so the products get quickly on the road.
DIFFERENCES BETWEEN AN ASSET-BASED CARRIER VS. BROKER
When comparing these two types of shippers, the differences come down to capacity, reliability, flexibility, and control. Asset-based carriers offer customers greater levels of reliability in operations and control over the shipments since they are the only company performing the transportation job. This control and reliability may bring peace of mind to customers who are rest assured that their shipments will be safe and secure.
However, these companies lack flexibility and capacity. An asset-based carrier can only own so many trucks, tools, and other equipment. This issue limits network coverage to certain regions as well as the types of products it may handle.
On the other hand, a broker’s strong points are flexibility and capacity. Its vast carrier network allows it to take on shipments that must travel nationally or globally. It has partner carriers standing by in these regions to provide transportation services. Due to this limitless capacity, customers have greater flexibility on how they ship their products and may find a transport carrier that is experienced in handling their specific products.
A major disadvantage to working with brokerages is that customers lose some control of their shipments to the middleman setup of brokerages. They are unaware of how reliable and trustworthy the partner carriers are that have their shipments. The need to hire a dependable and reliable broker is vital to instill trust in the business arrangement.
SELECTING THE BEST TYPE OF CARRIER
Deciding on the best transportation services for your company depends on your shipping needs. Some factors to consider might include the following:
- Capacity requirements: You’ll have to figure out who the customers are for your products in relation to the locations of your distribution and warehouse operations. Evaluating carrier route coverage may allow you to further understand whether a regional asset-based carrier will work or if you require a brokerage with greater route flexibility.
- Pricing: When it comes to pricing, a company that owns all of its equipment and trucks offers more consistent fees to customers since overhead expenses do not change. However, you may find cost savings with a brokerage that is able to obtain competing bids as these savings are passed to your company.
- Relationships: You should also decide on the type of business relationship with the brokerage or asset-based carrier. Some businesses are fine with letting several companies control their logistical strategies while others only want to work with one company instead of with a middleman.
WSI TRANSPORT SERVICES
If you are still trying to determine if an asset-based carrier or a non-asset-based carrier is right for your shipping needs, instead consider a company that offers both services. At WSI, we are a third-party freight broker that also has asset-based fleets for select markets. We offer capacity and flexibility along with reliable services. Contact WSI to learn more.