Choosing the right type of carrier can significantly impact your shipping costs, service reliability, and supply chain efficiency. When you need to move freight, understanding whether an asset-based carrier or a brokerage carrier best fits your needs is a critical decision that directly affects your bottom line and operational performance.
The difference between these two types of carriers is internal. While they offer many similar transportation management services, they are both structured differently and therefore, handle things a bit differently as well.
However, it is a wise idea to educate yourself on these differences so that you are able to understand the strengths and weaknesses each of them offers. Staying informed and educated on topics such as this is what allows companies to find the best business partners and maintain an efficient, smooth-running supply chain.
In this blog post, we'll break down the differences between asset-based and brokerage carriers, explore the pros and cons of each, and help you determine which option best fits your shipping needs.
What is an Asset-Based Carrier?
An asset-based carrier uses its own equipment, trucks, and warehouses to get the job done. This type of carrier does not need to outsource any additional services, subcontract work, or rent equipment. The resources that these carriers use to ship and store their client's goods are owned solely by them.
This is good news for the shipper as it means they won't be paying any extra to cover equipment rentals as an additional fee.
What is a Brokerage Carrier?
A brokerage carrier, on the other hand, does not own their own equipment. When they need equipment, warehouses, or to arrange other modes of transport, all of that is outsourced to a third-party provider. However, and partly because they outsource, they do tend to be a bit more flexible than an asset-based carrier, in many ways.
A brokerage shipping company typically utilizes a large network of freight capacity providers to route shipments based on individual company needs. Since they don't own their own equipment, they have less of a capital risk involved in the movement. And, unlike with an asset-based carrier, brokerage carriers are able to easily ship intermodal or multimodal freight.
Yes, the two business models are similar, but that is about the extent of their similarities. Third-party logistics companies outsource and negotiate rates but they also file various paperwork, manage inventory tasks, monitor KPIs for clients, etc.
If anything, a brokerage carrier is a miniature 3PL focused solely on the freight movement portion of the supply chain.
Are there Pros and Cons of Working with Either?
Beauty is in the eye of the beholder.
This statement holds water when it comes to comparing asset-based carriers with their brokerage-based counterparts. We mentioned above that the main difference between these two types of carriers is that one owns their own stuff. The other books their freight movement through other owners and operators.
However, in general, working with an asset-based carrier offers a shipper a few pros...
- Improved service commitments: The asset-based carrier maintains its own fleet, hires their own people, and usually provides more robust shipping services. When combined together, this tends to equate to improved service commitments.
- Less downtime: Having your own assets also means being able to adjust to maintenance issues; swap out trucks and reduce shipping downtime.
- Fewer Mistakes: With everything handled in-house, communication lapses decrease. Likewise, this often means that mistakes are reduced.
Working with a non-asset based company also offers a few PROS:
- Flexibility: A non-asset based carrier can route freight to multiple independent or partnering carriers or companies. This tends to offer the shipper improved flexibility – especially with rating and freight charges.
- Improved Personalization: Working with the non-asset carrier can also improve the personalization or customized shipping options for a company. If they wish to work with a specific carrier, this is an option with a brokerage based company.
Which One is the Best Option Asset-Based or Brokerage Carriers?
So, when it comes down to it, which one is the best carrier? Asset-based, or brokerage?
Well, it all really just depends on your business needs.
This is the real trick question, huh? As we said before, beauty is in the eye of the beholder. Determining which company is better is purely up to you and your individual shipping needs. Many companies have established great relationships with asset-based companies due to the assurance that this kind of company provides.
On the flipside, some shippers find it more beneficial to work with brokerage carriers. After all, they often offer more flexibility in who they choose to work with on behalf of their client.
Final Thoughts
Ultimately, the choice between asset-based and brokerage carriers comes down to your specific shipping requirements, volume patterns, and supply chain goals. We hope this blog post has clarified the core differences between these two carrier models and helps you make an informed decision.
However, you don't have to choose just one approach. Redwood's Modern 4PL model gives you access to both asset-based and brokerage capacity through an open ecosystem, allowing you to leverage the strengths of each based on your changing needs. See how we've helped companies optimize their supply chain solutions by combining the best of both models.
If you're ready to explore how a Modern 4PL approach can give you the flexibility and reliability you need, reach out to us at Redwood to discuss your transportation strategy.