If you're researching carriers and third party logistics (3PL) solutions, you may have come across the terms "asset-based" and "non-asset based." Do you know what these terms mean? And do they matter when it comes to selecting a logistics company for handling and delivery of your cargo?
Asset-Based vs. Non-Asset Based Logistics
When you're contracting with a company for handling and delivery of physical materials, it may seem like owning a truck would be a basic requirement. But in the complicated world of modern 3PL, that is no longer the case. Many logistics providers don't own a single vehicle or warehouse.
The logistics industry can be broadly divided into two types: asset-based and non-asset based.
Asset-based 3PLs own some or all of the physical assets needed to store, distribute and deliver materials. This may include trucks and delivery vehicles, warehouses, distribution centers and other building and equipment. When you contract with an asset-based 3PL, they provide both the logistical management and the physical storage, transportation and delivery of your goods.
A non-asset based 3PL doesn't actually own the physical assets required for storage and movement of goods. Instead, they contract with other companies to take physical possession of your packages and move them to their final destination. They may have a network that includes a number of different trucking companies offering local, regional or national service, as well as warehouses and distribution centers where they can contract for temporary storage space and distribution services.
What non-asset based 3PLS offer is not the physical delivery of goods but coordination and management of all of the logistics in the process. This includes finding the right carrier for the route and type of goods being transported, negotiating rates and shipping terms, and arranging for warehousing when needed. They take the burden of logistics management off your plate so you can focus on your core business. Asset-based 3PLs do both—handle the logistics and coordination, and then actually make it happen using their own trucks and other physical assets.
Which is Better: Asset-Based or Non-Asset Based?
There are pros and cons with both approaches. Traditionally, asset-based companies were seen as more stable and reliable: since they have made large capital investments into trucks and other assets, they have a lot of skin in the game and are not likely to disappear overnight. They also have total control over every aspect of the supply chain, since they own all the components. In some cases, they may be able to leverage their ownership of these assets to offer lower costs for their clients. Contracting with an asset-based carrier may provide companies with greater control and visibility into the movement of their goods as well as the comfort of knowing that there is one single company responsible for their safe storage and delivery.
However, non-asset based 3PLs should hardly be considered "fly-by-night" operations. While they are offering purely logistical services rather than actual fulfillment, they are required to hold a $75,000 freight broker surety bond to ensure that shippers are not left high and dry by unscrupulous suppliers. They can also offer significant advantages in terms of flexibility. Since they are not limited to a single fleet with a fixed number of trucks or a specific warehouse location, they have the freedom to scale up and down with the needs of their clients and negotiate contracts with whatever combination of carriers, warehouses and distribution centers best fits the specific needs of a particular job. And while asset-based companies have to focus on maintaining and maximizing the profitability of their assets, a non-asset based 3PL can stay completely focused on the needs of their clients without worrying about equipment maintenance, driver turnover or excess capacity.
Selecting the Right Logistics Company
Both asset-based and non-asset based logistics companies have their strengths and weaknesses, and either may be an excellent choice for management of your supply chain. The important thing is to find a 3PL whose strengths match your needs. Some questions to consider include:
- How much flexibility do you require? Do your shipments tend to be highly regular (same volume and routes), or are your shipping needs more erratic?
- How important is it to you to have a single company responsible for storing and moving your goods?
- Do you require specialized services that only certain kinds of carriers can provide?
- Are you shipping full truckload or less-than-truckload?
- How complicated are your total supply chain needs, and how much of the supply chain do you want your 3PL to manage?
- Which carrier type can offer the best prices for your unique service, route and volume requirements?
Some 3PLs offer a hybrid solution that may be the best of both worlds: a base fleet of company-owned trucks and strategically located warehouses, with the ability to contract out to partners for services outside their standard delivery area or for overflow capacity.
Whatever solution you choose, make sure your goods are packaged and secured properly for their journey. Pantero can help you find the right packing and shipping materials to protect your products in transit.