What is the Difference Between Logistics and Brokerage

What is the Difference Between Logistics and Brokerage

The transportation industry offers a plethora of ways to be involved in this business. Logistics companies and brokerage service providers are both involved in freight shipping. They both can be involved in a supply chain. However, they still have some differences between them.

To not get confused in the future, we would like to talk about the differences between these services. But first, let’s look at them closer to understand this topic better.

What is a Brokerage Company

A freight broker or freight brokerage company is a person or a business that works as a connection between a shipper and a carrier. Brokers don’t transport the freight. Nor are they responsible for the commodities and the equipment that does the hauling. Brokerage companies do not own transportation assets. Instead, they hire transportation companies and independent contractors.

Each broker, for being able to do business, must register with the Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) and get brokerage authority. They connect with various carriers around the country and can find any equipment for your freight. Brokerage service is convenient because they take care of most of the paperwork and communication for you.

What is a Logistics Company

Logistics company or Logistics Service Provider (LSP) has the same authority as freight brokers if you look them up on the FMCSA website. However, LSPs have more technology, tools, vehicles, and services that brokers don’t. Logistics companies, in general, specialize in a certain transportation niche like a long haul, dry van, reefer shipping, oversized, etc. But, sometimes, they can cover all the needs inside a supply chain.

A logistics company is responsible for the transportation of freight. On rare occasions, they can provide documentation management.

The Main Differences

Now that we have learned about the definitions of broker company and logistics company, we can talk about their differences.

• Logistics company owns transportation assets while brokers don’t.
• Brokers take care of shipping documentation, rates negotiation, and communication with a carrier. With a logistics company, you’ll need to do that yourself or seek an accounting specialist to outsource that routine.
• Brokers know how to find reliable and skillful carriers for any freight, while logistics companies work in one particular field.
• A logistics company can provide warehousing, tracking, and other services in addition to freight shipping.
• Logistics companies can provide international transportation if they possess the required transport (boat, plane, train). Brokers usually work only domestically.