Third party logistics in India growing @ 28%

The qualitative approach by companies towards outsourcing logistics activities and focusing on core comptencies is propelling Indian 3PL market

A recent report published by a research company indicates that the increasing focus on core business activities and improving infrastructure will drive the 3PL in future. During our forecast period (2009-2013) 3PL market in India will witness a CAGR of approx 28%.

It mentions the current market scenario of 3PL services in India can't be compared with that of developed markets like Japan and the US where usage of 3PL services is more than 50% in the overall logistic cost. But Indian market offers immense opportunity as compared to developed markets due to improving infrastructure like highways, ports, bridges and increasing connectivity, along with increasing importance of logistic services.

Reason behind the phenomenal growth of the third party logistics market in India is very easy to understand. Fierce competition, tight margins, and the need for multi-facility, multi-product line, and global operations are just some of the factors that require the companies to modify and optimize business processes, not just in functional areas, but across entire enterprise. Therefore focusing on own core competence, and looking for experts to take care of non-core activities is becoming a trend to cope up with the market competition. For instance, a manufacturing company is better off focusing on its manufacturing operations rather than spending a lot of time and money on distributing its products, which operation could be outsourced to another company. And this is what is happening in companies across industries. Particularly, logistics, especially warehousing and distribution, is one area being outsourced by global firms from third-party logistics providers.

Third Party Logistics has allowed firms to focus on core competencies and reduce the burden of taking care of logistics activities. The main benefit of having a third party logistics service provider is that the firms won’t have to bother about streamlining execution of their supply chain strategies. Key sectors with significant contribution to the logistics market where the firms have begun adopting third party logistics include the automotive, manufacturing, fast-moving consumer goods (FMCG), retail and healthcare sectors. All these sectors have resulted in overall India's 3rd-Party Logistics (3PL) market worth around S$30 billion.

3PL concept in India however has been not so old with companies having own large in-house logistics division spending huge sums of money. Thus to make them apart from the logistics activities is quite difficult. Some companies like reliance have started offering logistics services to other companies who had started their in-house logistics operations couple of years ago.

The 3PL is soaring! The need of the hour is to grab the opportunities by providing unique blend of services.