Clearing and Forwarding Agent (CFA) and Third-Party Logistics (3PL) are two terms people use interchangeably but are entirely different in logistics. As an eCommerce business, importing and exporting are critical components of your operations, and it's important to understand the difference between freight forwarding and 3PL services to make the right choice for your company. Here is how freight forwarders differ from 3PL providers in logistics explained by our order fulfillment experts.
A CFA agent is a company that primarily manages the storage and transportation of items from one point to another. The agent brings on board carrier service providers such as air freighters, rail freighters, trucking companies, and ocean liners for the client and negotiates with the service provider to obtain the best price for transporting the products.
Additionally, the CFA picks up the stocks from the supplier, distributor, or manufacturer and stores them in their eCommerce fulfillment warehouse or secondary warehouse, awaiting distribution. Finally, a third-party logistics company loads the stocks in the fleet based on the size of the order and delivers them to the customer.
The CFA agent organizes how stocks are transported and what mode of transportation would be faster and cheaper to deliver the items to the designated destination. CFAs may use single or multiple carriers and utilize various transportation modes, including air, rail, marine, and highway. They can manage a full range of services, including tracking inland transportation, negotiating freight charges, booking cargo space, preparing export and shipping paperwork, and filing insurance claims.
One differentiator with freight forwarding is that a CFA does not actually transport your freight—it simply acts as a brokerage between the shipper and the necessary transportation services. CFAs leverage their relationships with carriers to negotiate the best price to transport their client's goods. As a result, their clients can take advantage of options that offer the best balance of cost, speed, and reliability.
Experienced CFAs have extensive knowledge of the necessary documentation requirements, transportation costs, regulations, and banking practices, making your company's export process easier.
If you're looking for a one-stop eCommerce fulfillment company for all your logistics solutions, third-party logistics (3PL) is your ideal choice. A 3PL allows your company to outsource partial or entire logistics processes to enable accessibility of your products in the domestic and international marketplace. In addition, they offer integrated facilities under one roof, taking the logistic burden off your back. For instance, a 3PL company can provide warehousing, inventory management, order fulfillment integration with your shopping cart, picking and packing, freight forwarding, customs brokerage and clearance, shipment tracking, documentation, and more.
The demand for 3PL providers with excellent service continues to surge as the logistics processes become more and more complex. Many small and medium-sized enterprises often find it challenging to keep up with all logistics advancements. For many organizations, it no longer makes business sense to try and keep up. Outsourcing fulfillment logistics to a 3PL provider not only frees up valuable time to focus on your business but also offers lower shipping costs.
Unless you have adequate in-house resources to handle all logistics services listed above, chances are your business can greatly benefit from a 3PL service. You'll notice improved order accuracy and faster shipment. You can also take advantage of a lower capital commitment with the flexibility to scale as needed.
Due to some similar roles played by 3PL providers and freight forwarders, the line between the two can sometimes appear blurred. In a nutshell, freight forwarders provide a broker-type service, enabling your company to get the best possible rates. They also figure out the fastest and most cost-effective combination of carriers. However, CFAs do nothing beyond organizing how your products get from one point to the next. It means that your business will need to organize picking and packing, warehouse storage, and other tasks.
On the other hand, 3PL providers can be full-service that takes care of your entire supply chain, including picking and packing, warehouse storage, shipping, and returns management. Third-party logistics services are also more flexible since you can choose which services you'd like and what you can handle on your own.
When deciding between 3PL services and CFAs, it's essential to evaluate your business needs to pick a service that would be more cost-efficient and makes sense for your company.
Overall, eCommerce sellers looking to scale their business can significantly benefit from a 3PL service provider. Get in touch with us to learn how Rakuten Super Logistics can help scale your business and improve the bottom line by outsourcing the fulfillment process, all while lowering shipping costs and delivering fast and accurate fulfillment. Request a quote today to let us become your fulfillment partner!