A logistics service provider, or LSP, is any company you pay to move, store or handle your goods instead of doing it yourself. The term is an umbrella. A trucking company is an LSP. So is a freight broker, a freight forwarder, a warehouse that picks and packs orders, and a 4PL that manages the others. They are different businesses with different legal duties, and picking, packing and shipping parcel orders to your customers is the fulfillment provider's job.
If you sell online and want someone else to ship your orders, you need a fulfillment-type 3PL. If you need a pallet or a container moved from a factory to a warehouse, you need a carrier, a broker or a freight forwarder. The rest of the confusion clears up once you know what each one physically does and who actually moves the goods.
Two different jobs hide inside "logistics"
Logistics covers everything between a product being made and a customer holding it. In practice that splits into two kinds of work:
- Freight. Moving pallets and containers between businesses: factory to port, port to warehouse, warehouse to a retailer's distribution center. It is measured in truckloads and containers.
- Fulfillment. Storing inventory, then picking, packing and shipping individual orders to the people who bought them, one parcel at a time.
When a company calls itself a full-service logistics provider, read its service list. Drayage, truckload, intermodal and ocean freight describe freight work, not Shopify orders going out the door. Receiving, storage, pick and pack, and returns describe fulfillment.
The types of logistics service provider
The quickest way to tell them apart is to ask two questions: who physically touches your goods, and who actually performs the transportation. Who is liable when something is lost or damaged depends on the service each company performed and your contract with it, not on the label it uses.
Type | What it physically does | Who performs the transport? | When an ecommerce brand uses one |
|---|---|---|---|
Carrier | Operates the trucks, planes, ships or postal network that move freight and parcels | It does | Every shipment. UPS, USPS and FedEx carry your parcels. |
Freight broker | Finds a truck for your shipment and earns a margin | The carrier it books | Moving pallets within the US |
Freight forwarder | Consolidates shipments, books ocean, air or truck space, handles documents | Carriers it books, sometimes its own trucks. For domestic truck or rail freight, US law makes it responsible from receipt to destination. | Importing a container from an overseas factory |
Fulfillment 3PL | Receives, stores, picks, packs and hands parcels to a carrier | The parcel carrier it hands orders to | Shipping customer orders every day |
4PL | Manages the carriers, brokers and warehouses on your behalf | The providers it manages | Outsourcing management of a multi-provider supply chain |
Carriers
A carrier is the company whose vehicles actually move the goods. Federal law defines a motor carrier as "a person providing motor vehicle transportation for compensation" and counts motor carriers, water carriers and freight forwarders as carriers (49 U.S.C. §13102). UPS, USPS and FedEx are carriers for parcels. A trucking company is a carrier for freight. A carrier is a logistics service provider, but it is only one kind. Parcel shipping moves the boxes you hand over; storing inventory and packing orders is a separate service. Some carriers sell that as well (FedEx has a fulfillment service), and when you buy it, you are buying fulfillment, not just parcel shipping.
Freight brokers
A broker arranges truck transportation without being the trucking company. The statute defines a broker as a person, "other than a motor carrier," that "sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation" (49 U.S.C. §13102(2)). The FMCSA rule is shorter: a broker "arranges, or offers to arrange, the transportation of property by an authorized motor carrier" (49 CFR §371.2). A broker finds a truck for your pallets and earns the spread between what you pay and what the trucker charges. The carrier it books does the hauling, and the FMCSA's guidance is that loss and damage claims go to the motor carrier, not the broker, though a broker may help you file one. For how that compares with a company that packs your orders, read 3PL vs freight broker.
Freight forwarders
A forwarder consolidates shipments, books space with ocean, air or truck carriers and handles the paperwork; some also run their own trucks. For freight moved inside the US by truck or rail, the definition in 49 U.S.C. §13102(8) applies: the forwarder "assembles and consolidates" shipments, performs "break-bulk and distribution operations," and "assumes responsibility for the transportation from the place of receipt to the place of destination." That last clause is the difference from a broker, and the statute counts that kind of forwarder as a carrier. The definition leaves out forwarders that use air carriers, and international ocean shipping falls under the Federal Maritime Commission, which oversees ocean transportation intermediaries. Those come in two kinds: an ocean freight forwarder books space and handles documents for shipments leaving the US, while an NVOCC (non-vessel-operating common carrier) acts as a carrier toward its customers without operating the ships. What an international forwarder answers for depends on which role it plays and on your contract with it. If you import from a factory overseas, this is the company that gets your container to a US warehouse. For the hand-off between the two, see how freight forwarders and prep centers fit together.
Fulfillment 3PLs and warehouses
A third-party logistics provider in the ecommerce sense is a warehouse that receives your inventory, stores it, picks and packs each order as it comes in, and hands the parcel to a carrier. Returns usually come back to the same building. It doesn't perform the transportation; the carrier does. What it answers for while your goods sit in its building is set by your agreement. This is the category that causes the most confusion, because "3PL" gets used for any outsourced logistics. A company that brokers truckloads and a company that packs your orders can both call themselves 3PLs and have almost nothing in common day to day. For the definition and the model, see what is a 3PL and how third-party logistics works. For the building itself, see what is a fulfillment center.
4PLs
A fourth-party logistics provider manages your other providers. It picks the carriers, brokers, forwarders and warehouses, runs the systems that connect them, and reports to you as a single point of contact. It typically doesn't own trucks or warehouses. Neither "3PL" nor "4PL" appears in the federal definitions above; they are industry terms, not legal categories. At a small brand there is usually little to coordinate: one fulfillment warehouse and the parcel carriers it already works with. The tradeoffs are in 3PL vs 4PL.
Who has to register, and with whom
For-hire truck transportation that falls under federal jurisdiction, such as an interstate move of regulated freight, needs registration with the Federal Motor Carrier Safety Administration for the specific service: motor carrier, freight forwarder or broker (49 U.S.C. §13901). The three are separate types of authority, not one shared authority. Not every move needs one: the FMCSA notes that broker authority isn't required when the underlying transportation is exempt, as with loads of exempt commodities. Broker or carrier authority tells you a company is registered to arrange or haul trucks; it says nothing either way about storing inventory or packing orders.
Which one do you need?
- You ship individual orders to customers. A fulfillment 3PL. Someone has to pick and pack each order and a parcel carrier has to deliver it; the 3PL does the first and books the second.
- You need a pallet or a truckload moved inside the US. A carrier directly, or a freight broker if you would rather someone else find the truck.
- You are importing a container or an air shipment. A freight forwarder or NVOCC to get it from the factory to a US door, then a warehouse to receive it.
- You import and sell direct to consumers. Both. A forwarder for the inbound freight and a fulfillment 3PL for the outbound orders, with the forwarder delivering to the 3PL's dock. Tell the warehouse what is coming and when; receiving goes faster with a packing list and an advance notice.
- You run several warehouses and carriers and want one party to manage them. A 4PL, or a 3PL whose software already does it.
Where Simpl fits
Simpl Fulfillment is a fulfillment-type 3PL. We run one warehouse in Austin, TX, and every order ships from it by UPS, USPS or FedEx, to all 50 states and more than 200 countries. The services are flat-rate eCommerce order fulfillment, Amazon FBA prep, B2B wholesale fulfillment, subscription box fulfillment, kitting and assembly, returns management and crowdfunding fulfillment. We don't broker or forward freight: your forwarder or carrier delivers the pallets to our dock, and we take it from there. If that is the piece you need, tell us about your orders or call (512) 631-8522.