3PL outsourcing to reach US$ 90 Mln by 2012
Outsourcing of Third Party Logistics business (3PL) in India is all set to acquire a size of US$ 90 million by 2012, according to Assocham. The concept introduced in US and Europe is fast catching up the pace to increase the efficiency of domestic corporates through efficient logistic functions, Assocham says.
Presently, 3 PL outsourcing among Indian companies is estimated US$ 60 million as around 55% of Indian companies are outsourcing logistic services like supply chain management (SCM) and warehousing, which used to be between 10-15% 10 years ago. The Assocham has further projected the Indian logistics market size is expected to zoom up a value of US$ 125 billion by mid of 2010, which currently is estimated around US$ 115 billion. This would mean that the logistics business would grow at a faster speed in next one year or so than anticipated earlier.
This is also a very good indicator that logistic industry is in the brink of exciting growth for next 2 years as manufacturing, retail and real estate have started recovering and will return to their buoyancy for striking expansion of logistics, says the Assocham Paper `Building Logistics for Competitive Business’.
“One of the contributing factors for this is Value Added Tax (VAT) which is expected to drive Indian industry towards using more 3PL services”, said DS Rawat, Assocham Secretary General while releasing the paper here today.
Rawat added that future consolidation will attract many companies under the umbrella of 3PL. Value added services are currently the most driving factor which hopes to increases in future. It examines the competitive scenario and highlights opportunities 3PL service providers can utilize in the market. Government support is also instrumental in this growth. Though there remain certain factors which are seriously into consideration to get resolved, the general response towards 3PL service providers is highly positive. 3PL in the future should be seen as a support to corporate growth.
With the expansion of globalization, Indian firms are demanding new logistics capabilities and more complex solutions from their 3PL partner. Greater acceptance of demand driven logistics practices introduces complexities into the supply chain and generate the need for contract logistics providers to deliver more expertise services. More companies are turning towards 3PL to help them in successful management of supply chain processes. 3PL provides illustrate their ability to bring down conventional logistics costs and handle more complicated tasks.
Therefore, customers continue to give their 3PLs more responsibility and input into their business process. Companies are eager to expand into new market which is creating more logistics challenges. This is driving more companies to partner with providers who are already operating in global market. These 3PL providers can provide beneficial for the companies.
The extent of understanding between customers and service providers also depends upon their corporate philosophy, management capability and working style. There should not be any kind of disconnection that impairs communication or transfer of information. This can create problems and tension in the relationship. Keeping the fact aside that in any 3PL relationship one is buyer and another one is the seller, it is important for both to understand the need of each other and reach harmony on matter of mutual importance.
Taking into account the importance of new products and services, it is useful to have a well developed strategy. This strategy should focus on both functional as well as value added services like transportation, warehousing, freight forwarding, IT, inventory management, customer service etc. considering the increasing competitiveness of the 3PL sector, it is likely to see further progress in terms of improved relationships between buyers and sellers of 3PL.