3PL and 4PL Trends in the Indian Market.

3pland4pl

The 3PL market in India is highly fragmented. However, 3 PLs are gaining more and more importance due to the increasing awareness of the Indian firms towards the benefits of outsourcing. By doing so, organisations are able to not only concentrate on their core business operations, but also achieve cost-efficiency and improve delivery performance and in-turn customer satisfaction.

There are various policies implemented by government which are helping in the boom of the industry.  Introduction of Goods and Service Tax (GST) could be the key trigger for growth of 3PL market in India. Another important factor is the opportunity for big ticket investments into the logistics infrastructure. The Government is now betting big on public-private partnership projects (PPPs) for the development of highways, port connectivity, dedicated freight corridors and establishment of free trade warehousing zones (FTWZ).

Apart from this, in a remarkable infrastructure related decision, the government has opened up rail freight operations to private players, thereby creating opportunities for cheaper and faster movement of goods. Transportation by rail is definitely cheaper than by road, as trains are faster and have lower costs per unit distance travelled. Also, the impact of jerks in rail transit is negligible as compared to road transits resulting in increased safety of cargo. This is expected to enable 3PL service providers in offering more cost-effective and quality services to clients, thereby increasing the 3PL usage by all industries.

In addition, with the advent of foreign direct investment (FDI) in the retail sector in India, the logistics market is projected to register its positive effects in the long run. The opening up of the Indian economy to foreign investments is expected to attract more companies into the country, thereby adding momentum to 3PL market growth. The wide-spread information technology awareness and expertise in India is also expected to help 3PL companies in offering several value added services using IT such as Fleet Management Systems, Warehouse Management Systems, and integrated Supply Chain Management systems. We at Spark Logistics Pvt. Ltd. are already providing with our Warehouse Management System, with Warehousing being our core competency in addition to Customs Clearance.

In the 3PL industry, service providers have standardized service offerings. However, providing standardized services in a cheaper way is no longer sufficient for 3PL firms to satisfy the customer’s expectations. With the constant shift in client business model, more customized and value-added services are required. Therefore, it is argued that 3PL firms need to provide more than standardized services. Innovation and new service development are vital for 3PL firms. Increasingly, specialization is the catchword.

However, the task of providing a full outsource solution comprising different services from one service provider is difficult. It is, therefore, not surprising that opportunities are created for 4PL service providers to assist companies in coordinating all the different 3PL activities, which are provided by different service providers. 4PLs represent the next stage of development in logistics service providers.  The typical 4PL would eliminate complexity, share benefits of scale and capital and can drive innovation due to its overall view. In other words, a 4PL manages other 3PLs.

The convergence of technology and the rapid acceleration of e-capabilities have heightened the need for an over-arching integrator for supply of chain spanning activities. 4PL is a non-asset based logistics operator which has chosen to become an outsourcing specialist – assessing the entire supply chain and contracting those best able to provide the required services, all in order to reduce the customer’s investment in inventory.

In between 2020 the Indian logistics industry will experience a steady annual growth of around 8-9 percent and gain potential revenue of about $190-200 billion backed by some leading industries similar to engineering, pharmaceuticals, automotive, food processing and others.

In short, the time is now ripe for Logistics 2.0 to take off in India.

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