By availing services of 3PL players, companies are able to meet their logistics requirements at competitive prices, thereby cutting down costs

The Indian logistics sector has witnessed massive growth over the last decade, thanks to the increase in movement of goods and traffic. Gone are the days when the logistics sector was restricted only to movement of goods via rail, roads and waterways, today the logistics sector has expanded to various other verticals. Over the years, third-party logistics (3PL) has evolved rapidly and currently 3PL constitutes a major chunk of the country’s logistics sector.

3PL specialises in providing integrated operations and services, which can be customised as per client requirements depending on the market condition. Freight forwarders and courier companies, among others fall under the 3PL category. 3PL has played a vital role in spurring the growth of the sector by providing tailor-made and innovative solutions.

Strengths of 3PLs

Following are some of the strengths of 3PL, which are making these players popular in the country’s logistics sector:

• Versatility: One of the greatest advantages of 3PL is that it provides versatility particularly to small and mid-sized businesses by aligning their resources as per business requirements of these small players. By using 3PL services, small players would be able to gain a competitive edge. It is difficult for a single company to own all the resources required for carrying out logistics activities. When the work is outsourced to a 3PL player, it will deploy the best resources to fulfil the logistics requirements of its client in an efficient manner.

• One-stop solution: Companies constantly search for ways through which its logistics activities can be done more efficiently. In this regard, 3PL players can provide firms a much-needed solution as they leverage superior and latest technology for movement of goods.

• Savings: Another advantage of outsourcing services to a 3PL service provider is that it results in significant amount of savings as the company is not required to pay its own employees for the logistics part of the supply chain management. Labour is one of the most expensive components of any business and by outsourcing services to a 3PL player, companies can save a lot on this front.

• Providing good rates for storage of products: When a company uses services of a 3PL player that is based in a city where one needs to send goods, then an added advantage is the knowledge of the area by the 3PL company. With this knowledge, the 3PL service provider can quote healthy rates for transportation.

According to a CRISIL research report, 3PL segment would witness a significant rise in its revenues in the next few years to touch Rs 16,200 crore in 2013-14 from Rs 4,800 crore in 2008-09.  3PL service providers are also expected to grain significantly from the implementation of Goods and Service Tax (GST) in the country.

However, since companies have to make additional investment for IT integration in order to switch over to 3PL, most small and mid-sized firms shy away from it and currently mostly the big companies use 3PL services. However, the concept is catching up fast in the Indian logistics sector and it is expected that the significance of 3PL would increase in coming months.

Karan Deep Singh, managing director of Akal Transport Company, a mid-sized logistics firm in New Delhi