Freight Forwarder vs NVOCC vs 3PL: Which One Do You Actually Need?

The majority of businesses don't have a problem with shipping first.

They are not able to identify who does what in logistics.

Freight forwarder. NVOCC. 3PL.

Different roles. Overlapping services. Constant confusion.

By knowing the differences between a freight forwarder, NVOCC, and 3PL, businesses can prevent needless logistics expenses, miscoordination, and inefficiencies. 

Quick Differences Between Freight Forwarder, NVOCC & 3PL

This will depend on the logistics responsibilities your business has that you want to outsource. 

Why These Logistics Terms Confuse Businesses

All three are alike on the outside.

They all:

• Move Cargo
• Coordinate Transportation
• Support Logistics Operations
• Work With Carriers And Supply Chain Networks

At times, some companies might also provide their freight forwarder and NVOCC services in addition to 3PL services.

However, they serve different functions in the ministry. 

If the wrong setup is used, the following can occur:

• Higher Logistics Costs
• Shipment Delays
• Poor Cargo Visibility
• Unnecessary Operational Complexity
• Poor Supply Chain Coordination

For this reason, it is crucial to understand the difference before selecting your logistics partner. 

What Is a Freight Forwarder?

A freight forwarder will arrange for goods to be transported from one place to another.

Freight forwarding is concerned with:

• Shipment planning
• Cargo coordination
• Customs documentation
• Carrier communication
• Freight booking
• International shipping management

A freight forwarder is not typically a ship owner, an airline, or a truck company.

Rather, they arrange the transportation of goods by shipping lines, airlines, transport companies, customs brokers, and overseas logistics agents. 

The Ideal Candidates for Freight Forwarders are:

• Importers and Exporters
• Companies that deal with overseas shipping
• Companies that require customs assistance
• Companies wishing for more streamlined shipment coordination

Quick Insight

Businesses engaged in international trade primarily require a freight forwarder and not a logistics outsourcing solution. 

What Is an NVOCC?

An NVOCC (Non-Vessel Operating Common Carrier) is not a freight forwarder.

An NVOCC:

• Acquires space from ocean shipping companies
• Consolidates cargo
• Acts in a manner that is consistent with the reseller of freight space to customers
• Issues a house bill of Lading of its own

In layman's terms, an NVOCC is just a carrier that doesn't own the ship.

Their emphasis is primarily on:

• Ocean freight
• Container movement
• Freight consolidation
• Shipping capacity management

NVOCCs are ideal for:

• Companies with higher levels of ocean shipments
• There was a strong emphasis on companies specializing in container shipping.
• Companies involved in exporting are seeking more competitive ocean freight rates. Businesses need more competitive ocean freight rates. 

What Is a 3PL?

A 3PL (Third-Party Logistics provider) is responsible for more than just the transportation of goods, dealing with a wider supply chain.

A 3PL may handle:

• Warehousing
• Inventory management
• Order fulfilment
• Distribution
• Transportation coordination
• Supply chain management

While freight forwarders are not always part of a company's overall operation, 3PLs are frequently integrated into the company's larger operation.

3PL providers are ideal for:

• E-commerce businesses
• Large-scale distribution operations
• Businesses that require warehousing services.
• Outsourcing in the supply chain by companies. 

Freight Forwarder vs NVOCC vs 3PL

What type of business is in need of which one?

The answer is dependent on the volume of shipments, complexity of operations and logistics needs.

If you prefer to use a Freight Forwarder:

• You are not able to handle international shipping on your own. You require assistance in managing international shipping.

• You wish to have a customs and documentation agent help you.

• Many logistics players have to coordinate.

• You would like easier shipments and no in-house management.

• The majority of importers/exporters are in this category.

Choose an NVOCC if:

• Your business is primarily reliant on sea transport as its primary mode of transport.

• You are a carrier that routinely sends out container cargo.

• You're looking for competitive freight space pricing.

• You process larger quantities of items being shipped. You receive larger numbers of items to ship.

Choose a 3PL if:

• You require warehousing and inventory control. You must have your inventory and warehouses managed.

• You are the type of person who prefers end-to-end logistics outsourcing.

• Your operations include fulfilment and distribution

• Your business is responsible for a massive volume of order movements. 

A Simple Business Scenario

As an importer grows, it may start using a freight forwarder for coordinating shipments and customs clearance.

Eventually, as volume grows, they might also consider using an NVOCC for improved container rates or a 3PL for warehousing and fulfilment services.

In some cases, a wholesale logistics redesignation is not a necessity right now.

In some cases, the best freight forwarding solution will address most shipping problems quickly and effectively. 

The Most Common Mistakes Businesses Make

Assuming All Logistics Providers Are the Same 

There are several different types of freight forwarders, NVOCCs, and 3PLs that address different operational issues.

Choosing Based Only on Price

Inexpensive logistics providers can add up to high-ticket items later in the supply chain, in the form of delays, poor coordination, or unforeseen charges.

Overcomplicating Logistics Too Early 

Not all companies require a 3PL arrangement right away. Many companies go through life and are able to function perfectly with just the right freight forwarder.

Ignoring Scalability

Select logistics support that will scale as the number of shipments and complexity of operations increase. 

What Most Importers & Exporters Actually Need

In most cases, the freight forwarder is the best place to begin for most importers and exporters.

Why?

Because freight forwarders help businesses manage:

• International cargo movement
• Customs coordination
• Shipment documentation
• Carrier communication
• Freight planning
• Without increasing the complexity of logistics

Later, as operations expand, businesses can consider moving on to becoming NVOCC or 3PL providers based on the needs of the supply chain. 

FAQs

1. What is the difference between a Freight Forwarder and an NVOCC?

A freight forwarder is responsible for handling the movement of goods, paperwork, and customs procedures, while an NVOCC specializes in the purchase and sale of ocean freight space. An NVOCC is more of a carrier, while a freight forwarder is a logistics coordinator.

2. Is a freight forwarder the same as a 3PL?

No. Freight forwarders typically provide services for coordinating shipments and moving goods internationally, whereas 3PLs are more versatile in their logistics solutions, which include warehousing, fulfilment, inventory management, and distribution. 

3. Do freight forwarders have their own ships or containers?

No, freight forwarders are not the owners of the aircraft or the ship. They arrange the movement of goods through the use of third-party carriers and logistics networks. 

4. When is a 3PL a good option for a business?

The 3PL should be used by a business that requires the warehousing, inventory management, fulfilment, and distribution services, along with transportation and other supply chain support. 

5. Is it possible to have freight forwarding service, NVOCC, and 3PL services in a single company?

Yes. Logistics firms offer various services in a single package. But companies should still be aware of the services they are really required for.

6. Which is the most suitable option for importers/exporters?

Freight forwarders are typically the most convenient choice for most importers and exporters since they facilitate coordination of shipments, customs clearance, cargo planning, and international shipping with efficiency.  

Select the Logistics That Fit Your Business

More logistics doesn't necessarily mean more business for companies.

They require the proper logistics organization.

From freight forwarding to ocean freight coordination and extended supply chain assistance, the right setup minimizes delays, enhances visibility of shipments, and facilitates seamless international shipping.

SJ Logistics India Pvt Ltd ensures freight forwarding is a hassle-free and simplified process for businesses by coordinating with them in a transparent, practical, and dependable manner, depending on the operational needs.

The right logistics setup should make things easier, not more difficult.