Logistics industry has seen a paradigm shift to become an integral part of business today. The growth in retail industry, manufacturing, trade and an overall boost in the economy has prompted growth of the Indian logistics space, with requirements ranging from warehousing, forwarding to third-party logistics (3PL) services. This in turn has resulted in the transformation of this sector.
The logistics industry in India has been valued at US$125 billion in 2010 and is expected to grow at a CAGR of over 10% over the next 5 years. Initially most of the domestic and unorganised players in the Indian market focussed on basic requirements like transportation and warehousing. However, increasing demand from customers and growing need for specialised services resulted in the industry to expand to a wide range of services such as cold storage and 3PL.
The 3PL boom in India
The 3PL industry has garnered a lot of attention from existing players in the Indian logistics space in the recent past. With increasing complexities, a large number of corporates are looking at outsourcing their logistics activities. Outsourcing of these business operations enables organisations to focus on core business activities and gain geographical reach. Alongside the existing services offered by 3PL services, a large number of corporates are seeking advice and support in areas of customs clearance, freight forwarding, distribution and reverse logistics. The Indian 3PL market is expected to witness a rapid growth rate of CAGR of around 26% during 2012-2014.
In view of the sectoral opportunities, players like Apollo LogiSolutions are planning to enter into the 3PL logistics space. 3PL business for these players is going to be an asset light model and the support for the assets will be provided via these organisations. These companies want to create hubs on pan-India basis for catering to the 3PL segment within the next few years. Enterprises like Apollo LogiSolutions are looking at organic and inorganic growth.
However, for any company to be successful in offering 3PL services, the focus should be on improving and maintaining service levels and meeting the service expectations of clients. The need is for service providers to position themselves as high-end 3PL service provider, who integrate their systems with those of the client and commit to improve cycle time and delivery performance, thereby increasing customer satisfaction. India’s large geographical diversity needing varied logistics expertise for each region is the biggest challenge that needs to be addressed by 3PL service providers. To overcome this problem, 3PL companies have to make huge investment to set up a logistics network to support the flow of products from the client’s manufacturing plant to the end customers. This can be undertaken by building warehouses and distribution centres at locations required by their clients.
The Indian 3PL industry in India today is at a budding stage. Even though the current 3PL market is relatively small, opportunities for growth in the 3PL segment of the Indian logistics industry is very high with more and more companies realising the need to outsource their logistics functions and focus on their core business. The future looks bright for logistics in India.
Pisipati S S Prasad is the director at Apollo LogiSolutions Limited