The landscape of India’s third-party logistics (3PL) sector presents a comprehensive overview encompassing various segments and its overarching market landscape. Key factors propelling this industry’s growth include the surging e-commerce sphere, digital transformation, and ongoing infrastructure enhancements.
Reports indicate a promising trajectory for the Indian 3PL market, with projections of substantial growth in the coming years. For instance, research by Technavio estimates an approximate increase of US$10.74 billion in the 3PL market between 2021-2025, foreseeing a compound annual growth rate (CAGR) of nearly eight percent. Concurrently, Mordor Intelligence anticipates an 11 percent growth during the same period.
Globally, the 3PL market’s value surged from US$1027.71 billion in 2019 to an estimated US$1789.94 billion by 2027, showcasing a notable CAGR of 7.1 percent. In the Asia-Pacific (APAC) region, India’s 3PL sector shows promise, driven by tax reforms, evolving consumer preferences towards online shopping, and concerted efforts by industries and the government to fortify capacity and infrastructure.
Several sectors within India, such as FMCG, manufacturing, retail, and e-commerce, are anticipated to be significant growth catalysts for the 3PL market. These industries increasingly seek specialized logistics assistance and intricate solutions to streamline their supply chain operations.
What constitutes third-party logistics (3PL) providers? Third-party logistics involves manufacturers outsourcing logistics-related tasks crucial to the supply chain, encompassing distribution, management of customs, and overall logistical operations.
A 3PL provider extends tailored services like inventory management, transportation brokerage, warehousing, consolidation, distribution and fulfillment, international logistics management (e.g., air and ocean freight forwarding, customs brokerage), among others.
Crucial Segments of 3PL Support:
- Transportation encompassing railways, roadways, waterways, and airways.
- Service types including dedicated contract carriage, domestic and international transportation management, warehousing and distribution, among others.
- Industries served such as technology, automotive, retail, food and groceries, healthcare, among others.
Rising Demand for Industrial Warehousing driven by 3PL Firms Recent reports indicate a surge in industrial and warehousing areas leased, surpassing 10.1 million sq ft in H1 2021 across major Indian metro cities. This heightened demand is attributed to the burgeoning presence of 3PL firms and the expanding e-commerce sphere.
Projections suggest that larger businesses’ inclination to focus on core activities while subcontracting logistics to 3PL entities has transformed warehousing into a vital business segment. Additionally, Goods and Services Tax (GST) reforms are expected to further augment the expansion of this sub-sector in India.
The Future Outlook for India’s 3PL Market The Indian logistics market is swiftly adapting to technological advancements, infrastructural developments, and government policy reforms aimed at enhancing efficiency. By 2022, the estimated size of the Indian logistics market is expected to reach approximately US$215 billion.
The increasing integration of digital technologies like automation, artificial intelligence, machine learning, data analytics, and IoT is significantly enhancing operational efficiencies. Moreover, the declining costs of technologies like cloud computing, GPS trackers, and IoT sensors are enabling smaller logistics companies to modernize their systems.
Infrastructure modernization initiatives, including dedicated freight corridors, logistics parks, and highways expansion projects like the National Highways Development Project and Bharatmala, are poised to bolster the efficiency of India’s 3PL market.
The 3PL market in India currently operates in a fragmented landscape with multiple players, leading to a highly competitive environment without any dominant entities. Key players in this space include DHL International GmbH, Mahindra Logistics, All Cargo Logistics Limited, Kuehne + Nagel, TVS Logistics Services Limited, among others.
Looking ahead, the 3PL sector in India is expected to witness robust growth, propelled by technological advancements and bolstered infrastructure. Anticipations include the evolution of aggregator models within this sector and an increasing emphasis on green logistics, aligning with corporate strategies aiming for reduced carbon footprints and embracing sustainable practices in line with government-supported initiatives for electric mobility adoption.
India’s Evolving 3PL Landscape: Embracing Technological Advancements and Infrastructural Enhancements
The rapid pace of technological transformation is redefining the logistics landscape in India. Automation, artificial intelligence (AI), machine learning, data analytics, and the Internet of Things (IoT) are playing pivotal roles in enhancing operational efficiency within the 3PL sector. Moreover, the decreasing costs of technologies like cloud computing, GPS trackers, and IoT sensors are facilitating the modernization of logistics systems, even among smaller-scale logistics entities.
Notably, the digitization of payments has witnessed increased adoption, especially after the onset of the COVID-19 pandemic. This shift has significantly reduced the cash handling requirements within the 3PL industry. Pre-pandemic, the prevalence of cash on delivery (COD) transactions posed a challenge for logistics providers, with an estimated cash handling requirement of around US$8 billion.
The landscape of infrastructure development in India, including dedicated freight corridors, logistics parks, and the expansion of highway networks through initiatives like the National Highways Development Project and Bharatmala, is poised to enhance the overall efficiency of the 3PL market.
Connectivity Infrastructure for Third-Party Logistics in India
India’s current 3PL market is characterized by fragmentation and is projected to remain so until 2024, as highlighted by the Technavio report titled “Third-party Logistics Market in India by End-user and Service – Forecast and Analysis 2021-2025.” This points to a highly competitive market without dominant players.
Major players in the Indian 3PL landscape include DHL International GmbH, Mahindra Logistics, All Cargo Logistics Limited, Kuehne + Nagel, TVS Logistics Services Limited, among others.
Future Trajectory of India’s 3PL Sector
The future of India’s 3PL sector appears promising, driven by technological adaptations and strengthened infrastructure. Analysts speculate that in the upcoming years, the sector might witness the evolution of aggregator models.
Moreover, in alignment with India’s aim to achieve zero net emissions across industrial sectors, the emergence of green logistics is expected to gain significance. More companies are anticipated to adopt corporate strategies that prioritize reducing their carbon footprints while integrating sustainable solutions into their operations. Some prominent e-commerce giants have pledged to transition towards electric vehicles, in line with India’s governmental push for increased adoption of electric mobility.
In conclusion, India’s 3PL sector is poised for substantial growth, leveraging technological advancements, and bolstering infrastructure to meet evolving market demands. The sector is projected to witness transformative changes, embracing sustainability and technological innovation to address future logistical challenges effectively.
